International Competition Regime: New Game. New Rules?

In a recent judgment given by the Australian Federal Court, Singapore Airlines Ltd v Australian Competition and Consumer Commission ([2009] FCAFC 136 (2 October 2009)), once again the tension between increasingly globalised commercial practices on the one hand and domestic antitrust laws on the other is becoming evident. The Australian Court was required to decide whether the alleged unlawful price fixing which took place in the international markets – outside of the physical boundaries of Australia – violated Australian antitrust laws, and if so, whether the parties could be prosecuted by Australian authorities.

The Australian Court decided that international anti-competitive activity which takes place wholly outside of Australia may still influence the Australian market, and thus Australian law may possibly apply. It should be noted that this approach is by no means unique or new, as other domestic antitrust authorities are empowered by law to prosecute international anti-competitive activity.[1] But when examining the above-mentioned tension between the two conflicting forces, domestic regulation and an international problem, a more complex picture is revealed.

On the one hand, it is true that due to the lack of an international governing body or antitrust prosecution authority, the Australian authorities do not have much choice but to try and regulate international anti-competitive activity which affects Australian markets.  On the other hand, such an approach is not without consequences. Leaving the prosecution of international anti-competitive conduct to local antitrust authorities is both inefficient and somewhat inappropriate. First, domestic regulation of international anti-competitive conduct is often focused on domestic interests rather than on the interests of the international community as a whole. It may therefore endorse commercial practices that although beneficial to the local market, are harmful for others (the example of export cartels is one often given in this regard). Furthermore, domestic authorities may find it extremely difficult to investigate anti-competitive activity which occurs in several countries.

Secondly, it is problematic to argue that international enforcement by any single State is appropriate, especially when, for example, such action may be considered as a violation of another state’s sovereignty[2] (or as some describe it, “overregulation”[3]). One State’s standards concerning what is wrong and what is right may not coincide with those of another, and as one prominent author once said: “No one has elected the United States or the European Union [or Australia in this case, AK] to be enforcer for the world”.[4]

Arguably, this is a “lose-lose” situation in which both alternatives may bring about difficulties. The obvious solution to this problem is at least theoretically simple, and can be found in the shape of international regulation. The reality however shows that starting from 1948, almost all attempts made towards the international regulation of this field have either completely failed[5] or ended as non-binding “recommendations”.[6] A broader review of this situation reveals an even sadder picture, as despite efforts made by the European Union, this topic is currently not even being discussed. At the WTO Cancun Ministerial Conference and later at the Doha’s “July decision” this issue was completely removed from the international negotiations table.[7]

The existence of bilateral cooperation agreements indeed helps, but by no means solves the entire problem. International co-operation agreements between domestic competition authorities usually involve the exchange of information, informal connections and as reported by the OECD,[8] “surprise investigations” and raids in recent years. However, it should be noted that the main objective of these agreements is usually the protection of domestic markets, i.e. each State is still concerned only with its own local markets and the State’s operation is usually limited to its own market’s best interests. “International thinking” and governance are therefore still missing from the process.

“I found out that if you are going to win games, you had better be ready to adapt”

– Scotty Bowman, Hockey Legend

The international community is rightfully rushing toward financial globalization; despite popular critiques, there is no doubt that the opening of markets, the increase in cross-border investments and the ensuing financial integration have all brought about great prosperity, including for developing countries (India and China are two incredible examples). But it appears that in the race forward, the introduction of some of the rules which are so necessary for the sustainability of this new globalised environment has been forgotten. The new world requires new rules, and until a proper international policy is established, it seems that the field of international antitrust law will remain some sort of a “wild west”, where each town sets its own laws and hangs its own criminals.

In order to treat an international problem, the world’s nations should establish an international supra-governmental body to develop international policies and conduct international enforcement. That may seem politically unlikely for the moment, but as the exposure of states to international markets increases, the need for proper regulation is becoming more imminent. Hopefully, a proper international action will follow.

[2] Weinrauch, Roland. Competition Law in the WTO: The Rationale for a Framework Agreement (Graz:

Neuer Wissenschafts-Verlag, 2004) [Weinrauch] at 76.

[3] Andrew T. Guzman, “Public Choice And Regulatory Competition” (2002) 90 Geo. L.J. 971 at 973.

[4] Eleanor M. Fox, “International Antitrust and the Doha Dome” (2003) 43 Virginia Journal of International

Law 911 at 924.

[5] See attempts made within the WTO framework.

[6] See attempts made within the UN or OECD frameworks.

[7] WTO, Doha Work Programme: Decision Adopted by the General Council on 1 August 2004, WT/L/579,

August 2004, online: WTO

<http://www.wto.org/english/tratop_e/dda_e/draft_text_gc_dg_31july04_e.htm>

[8] OECD, Hard Core Cartels: Third report on the implementation of the 1998 Council Recommendation

(Paris: OECD 2005) online: OECD <http://www.oecd.org/dataoecd/58/1/35863307.pdf > at 31.

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