This article is written by Vinayak Gupta of Dr Ram Manohar Lohia National Law University, Lucknow. In this article, the author has talked about antitrust laws that guide the international market and their impacts globally.
In a democratic form of government, authorities work to protect its citizens from the exploitation of any kind. The protection of citizens from the prevailing exploitation could range from protection from thieves, foreign enemies, or from big enterprises exploiting them. To protect citizens from being exploited, the government introduces various laws. In order to protect citizens from the exploitation of unfair practices of big enterprises, governments of various countries introduced different Antitrust laws that are applicable in their respective countries.
The role of antitrust laws is not limited only till protecting the consumers or citizens but it’s horizon also expands to provide a level playing field to all the enterprises and companies in the free market, be it a small enterprise or a big enterprise. There’s always a balance which the government wants to strike between big and small companies and for reducing this gap antitrust laws are brought into existence. If not for antitrust laws the giant companies may go on getting bigger and bigger and absolve smaller companies creating a monopoly in the market.
What used to happen before the introduction of antitrust laws was that a giant conglomerate would go on consolidating smaller companies into one entity by buying them out, thereby leaving no scope for new companies to operate in the market. This created a state of total monopoly. The government got worried that the concentration of wealth and power would go into the hands of the owners of these big conglomerates, thereby making them too powerful. One of the other major drawbacks of this arrangement was that there was no scope left in the industry for invention and growth due to no competition.
Different nations have opted for different antitrust laws to regulate the business of big companies. This article will take a look at some of these laws introduced by different countries and overlook their relationships with each other for the smooth functioning of the laws and corporations all over the globe.
What are antitrust laws?
To understand what are antitrust laws we would have to go back to the question of why. Why do antitrust laws exist and prevent companies from expanding their businesses? One aspect behind establishing this area of law is to check that big companies do not start to abuse the power they have gathered in time. Another aspect of introducing these laws is to protect the citizens from the bad decisions made by these companies. The objective of antitrust law is to protect consumers and startups from the predatory practices of big organizations.
The motive behind introducing antitrust laws is to promote competition in the market so that consumers don’t have to rely on the only option they have and they can get to choose from other options. For instance, if there is only one grocery shop on a remote island, the consumers would have no choice but to buy groceries from that shop. Now after studying the market and demand in the market, another person starts up a grocery shop in that remote island thereby facilitating consumers to have a choice. Now what happens is that the older and the bigger grocery shop owner adopts unfair means to capture the business of the new grocery shop and absolve its business. This is where antitrust laws come into the play to ensure that the older and bigger grocery shop of that remote island does not opt for any conspiracy to maintain its monopoly in the market thereby absolving its potential competition business. This was just a small and narrow example to explain what antitrust laws are. The scope of antitrust law expands to the whole of the market and is not just bound by the harm done to a particular business or consumer.
Major antitrust laws around the world
Antitrust laws happened to originate in 1890 in the U.S.A. While there was a doctrine of restraint of trade in the common law which is considered a precursor to modern antitrust laws, it was the Sherman act of 1890 in U. S. A. which gave the essence of the modern-day definition of antitrust law. Antitrust laws like other laws are a developing concept that is evolving with time and with the changes in the industry. Antitrust laws of different countries have evolved differently based on the different notions and ideas of the government of that country. There are now more than 120 countries that have antitrust laws in place.
Some of the major antitrust laws which are enforced in their respective jurisdictions are of countries like- India, the United States of America, China, England, and European Union.
The antitrust laws in India are governed by Competition Act, 2002 and a draft of the amendment of this act is currently in the process. This act established the Competition Commission of India which regulates the competition in the market and acts as anti-trust watchdogs for smaller organizations and consumers. Competition Commission of India has solved almost 650 cases since its inception in 2009. Through the MoU’s signed with various countries, the Competition Commission of India could penalize or altogether order to shut down operations which manipulates the Indian free market in any way undesired.
United States of America
The United States of America has had antitrust laws longer than any other country. The first Antitrust laws in the United States of America had been introduced in 1890 by the name Sherman Act, 1890. The antitrust laws of the U.S.A. are not guided by a single act unlike in India though the objective of all the acts is the same. The antitrust laws in the U. S. A. consist of 2-3 major acts which regulate the business in the free market.
The major antitrust laws act in the U. S. A are:
- The Sherman Antitrust Act of 1890
- The Clayton Act of 1914
- The Federal Trade Commission Act of 1914
The U.S antitrust laws are based on the notion of achieving the goal of consumer welfare and efficiency standards. While, on the other hand, any other country’s antitrust law which might be based upon the goal of some social cause for example in South Africa, the antitrust laws are based upon bringing more black South Africans into the economy.
The antitrust law in China goes by the name of Anti-Monopoly Law. This law came into effect on 01 August 2008 in the People’s Republic of China. This law extends to all of China except its two special administrative regions of Hong Kong and Macau. There are other laws too such as Anti-Unfair Competition Law, Price Law, Bidding Law, Contract Law, and Foreign Trade Law which can be put under the definition of antitrust laws.
Under the Anti-Monopoly Law, there are two regulatory bodies established to regulate the market from unfair activities. They are the Anti-Monopoly Committee and Anti-Monopoly Enforcement Agency. The role of the Anti-Monopoly Committee is to make and pass legislation and policies for the regulation while the role of the Anti-Monopoly Enforcement Agency is to implement and enforce those legislations on the companies in the market.
European Union (EU)
The antitrust laws in the European Union go by the name of European Union competition law. It is the law that is applied to almost 25 nations that come under the European Union. Most of the EU competition laws are derived from Articles 101 to 109 of the Treaty on the Functioning of the European Union.
The European Commission and the national competition authorities in all EU Member States cooperate with each other through the European Competition Network.
International regulation failure on competition law
Almost all the countries have gone global where trading is concerned. In modern times economies of countries are totally based on each other through the export and import of goods. At the same time national competition laws of almost all the countries, which did not have competition law until recent years, have proliferated and strengthened, thereby leading to conflict of interest between the nations. Due to the multiplication of antitrust laws in the countries that did not have antitrust laws, it is now a common phenomenon for antitrust laws to be violated in several countries simultaneously.
While international trade has increased dramatically since 1990, the enforcement of competition law has remained primarily a domestic exercise due to the failure of international regulation on competition law. One of the significant examples of international regulation failure on competition law is the World Trade Organisation. The WTO Working Group on the Interaction between Trade and Competition Policy was active from 1997 through 2003 has been inactive since 2004. There has not been any solid ‘International antitrust law’ regulator after the failure of WTO.
Development of effective international cooperation
After the failure of WTO on competition laws, international trade did not stop. International trade kept ongoing and in fact, international trade grew leaps and bound. To fill the void for international cooperation regarding antitrust laws, countries started entering into MoUs with other nations. The countries started to enter into MoU agreement in the nature of bilateral (EU- US agreement 1991), multilateral (International Competition Network (ICN), Organisation for Economic Co-operation and Development (OECD)), and regional type of free trade agreements. This evolution after the WTO was a big development in effective cooperation in international antitrust laws. Some organizations were also born after the dilution of WTO Working Group on the Interaction between Trade and Competition Policy like ICN and OECD that dealt with the competition laws but they only created soft laws for antitrust laws. It means that their orders do not have binding effects on the countries and are more like a recommendation.
International Competition Network
A noteworthy development in effective international cooperation of antitrust laws is the setting up of ICN. On October 25, 2001, top antitrust officials from 14 jurisdictions – Australia, Canada, European Union, France, Germany, Israel, Italy, Japan, Korea, Mexico, South Africa, United Kingdom, United States, and Zambia – launched the ICN at a meeting in New York City. Now ICN consists of 120 participating nations. ICN is the product of recommendations made by the International Competition Policy Advisory Committee (ICPAC), a group formed in 1997.
ICN is a unique body as it is the only body that is exclusively devoted to competition law enforcement with its members ranging from national and multinational competition authorities. As described on the official website of ICN, The ICN provides competition authorities with a specialized yet informal venue for maintaining regular contacts and addressing practical competition concerns. This allows for a dynamic dialogue that serves to build consensus and convergence towards sound competition policy principles across the global antitrust community.
To achieve the aim of convergence of sound policies and superior approaches of substance, procedure, and administration of competition law ICN seeks to increase the understanding of various competition systems prevailing in various countries including similarities and differences in their competition system. ICN also builds consensus about superior practice.
Economic co-operation and development
Economic Co-operation and Development (OECD) has a dedicated competition division in the organization which works on recommendations in order to harmonize competition policies worldwide but also in order to enhance international cooperation.
OECD releases the global competition trend on the yearly basis that helps in policy-making for domestic competition committees and contributes largely to improve competition law and policies all around the world. For almost 60 years the OECD and its Competition Committee have taken a leading role in shaping the framework for international co-operation among competition agencies. OECD and its competition committee work extensively on developing effective international cooperation too.
Antitrust policies in global market
The antitrust policies have acquired a big role in the global market due to continuous international trade, mergers, and acquisitions which are growing as the interdependence of economies grows on each other. A nation’s domestic anti-competition committees are not limited only to its border nor the policies made by these committees are seen as the sole preserve of national government.
There are various treaties and Memorandum of Understandings signed by the nations which derive antitrust policies in the global market. Different countries have different perspectives in mind when they create antitrust policies of their jurisdiction. Like for instance, there has been a trend of making antitrust laws more economic in the U. S. A. The enforcement of the policies are based upon the question of what is gonna protect the consumer. In some other developing nations, the goal of the committee might be more inclined towards social causes. The smooth functioning of the antitrust policies means the convergence of these laws at some point or the other. The signing of the MoUs helps in convergence and cooperation of competition committees which helps in the smooth functioning of companies in the two countries.
Though there has been a lot of progress in the two decades at promoting international cooperation and the formation of antitrust policies in the global market, there are still jurisdictional gaps that remain to be filled. Much useful work has been done by global organizations like ICN, OECD UNCTAD, and various MoU’s signed by the countries but the world still lacks a hard binding mechanism to ensure transparent and non-discriminatory application of competition law by all countries.
Due to lack of clear mechanism guiding anti-competition laws of countries, there have been instances when the two nations due to conflict of interest relating to their antitrust laws could not come to a formidable conclusion thereby generating a lot of heat before the case being settled. One example of this is the U.S.A and EU authorities face off in the merger of General Electric and Honeywell. In this the U. S. A. authorities had cleared the merger of the companies but the EU sought to prohibit the merger on grounds of their antitrust laws.
Effect of antitrust laws around the world
Edward A. Snyder said in a conference at Yale SOM that almost 96% of the world economy has been covered by antitrust laws since 1950. It is only obvious that antitrust laws would affect the world because almost every merger & acquisition and international business are guided by antitrust laws. The antitrust laws have various effects around the world.
One of the greatest effects that antitrust laws around the world have had is innovation in the business. Due to the motive of creating rigorous competition in the market, antitrust laws around the world have facilitated increasing innovation in the business. Antitrust laws indirectly have forced big organizations to sustain in the market not by buying the smaller companies and rivals but by continuous innovations that would convince the consumer to do business with them. The ultimate effect of this is lower prices, better quality, and more choice for consumers
around the world.
Leads to economic development
There’s a direct impact of adopting antitrust law on economic prosperity, development and growth. Competition policy acts as a building block of the economy and it is evident from the fact that many developing nations are adopting competition laws. Antitrust laws support Economic Development as they support fundamental ingredients to economic growth, namely competitive markets and a sound legal system. These two ingredients are very important for the economic development of the nation. These are not the only effects of antitrust laws around the world. Antitrust laws continuously strive for making the free market accessible to everyone.
A path towards international harmonization
In recent times there has been an increasing interest in transnational antitrust enforcement and it is attributed to the fact that economies have gone global. International harmonization is needed more than ever now because almost 96% of the economies have antitrust laws of their own. In absence of international harmonization, there may be a sharp increase in the conflict of interest between nations who would want to apply their antitrust laws in the matter involved.
The big question that arises here is how to ameliorate the differences generated by different perspectives of different agencies. One answer to this question can be the development of any supranational law. But this still looks like a far fetched concept where antitrust laws are considered.
On the brighter side, the number of bilateral and multilateral antitrust cooperation agreements among the jurisdictions of the countries and the number of new international initiatives have increased markedly in recent years. Bilateral and multilateral antitrust cooperation agreements are instruments that help the jurisdictions and competition committees of countries to expand ties with one another and to improve opportunities for cooperation and coordination in antitrust enforcement matters. Formal and informal bilateral arrangements have helped to introduce, deepen, and regularize the structure of the enforcement cooperation that now occurs, while the contents of the agreements have gone through several generations.
Some of the examples of bilateral cooperations of the countries are-
- The United States is a party to bilateral antitrust cooperation arrangements with seven jurisdictions that are Australia, Brazil, Canada, the European Union, Germany, Israel, and Japan.
- EU is a party to bilateral antitrust cooperation arrangements with 91 jurisdictions.
- India is a party to bilateral agreements with 8 countries namely EU, Russia, China, U.S.A., Australia, Canada, South Africa and Brazil.
Besides bilateral agreements signed between countries OECD and ICN also plays a very significant role in international harmonization of antitrust laws.
Antitrust laws are laws that are generally out of the understanding of common man due to their unique nature. It might be because of the fact that antitrust laws do not have an impact on the common man directly. Attributing to this nature of antitrust law they are considered a whole new ball game.
Though they don’t have an impact on the common man directly, they play a significant role in regulating big companies and businesses. There’s a dearth of any supranational body guiding antitrust of the nations that do business with each other but there’s no dearth of antitrust enforcement bodies in the respective jurisdictions. It is yet to see if in time to come as the businesses are going international will we get to any supranational body guiding the antitrust laws of nations when conflict arises.
Antitrust laws are also the economy booster because they play a significant role in hunting down cartels which could have a negative impact on the economy. We would have to see how far the scope of antitrust laws will have to be increased in order to bring down more of these cartels and provide a level playing field to newcomers.
- Hylton, K., & Deng, F. (2007). ANTITRUST AROUND THE WORLD: AN EMPIRICAL ANALYSIS OF THE SCOPE OF COMPETITION LAWS AND THEIR EFFECTS. Antitrust Law Journal, 74(2), 271-341. Retrieved August 5, 2020, from www.jstor.org/stable/27897550
- Baker, Donald I. (1974) “Antitrust and World Trade: Tempest in an International Teapot, “Cornell International Law Journal: Vol. 8: Iss.1, Article 2.Available at:http://scholarship.law.cornell.edu/cilj/vol8/iss1/2
- T.J. Muris, Creating a Culture of Competition: The Essential Role of Competition Advocacy, Remarks before the International Competition Network (Sept. 2002), available at http://www.ftc.gov/speeches/muris/020928naples.htm.
- Wood, Diane P. (1994) “United States Antitrust Law in the Global Market,” Indiana Journal of Global Legal Studies: Vol. 1: Iss. 2, Article 7. Available at: https://www.repository.law.indiana.edu/ijgls/vol1/iss2/7
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