Final Report - World Trade Organization

Whereas some authorities handled some of the cases
very seriously (regardless of whether they were
successful at the end), others have not acted at all or
only with limited interest or in just few of the cases.
Although several problems are caused by the special
nature of such cases, sometimes the authorities’ own
lack of action or interest is also an important factor
to take into account. This is of course due to a variety
of circumstances, but nevertheless gives some
valuable insight. We will also discuss some issues
that have not been dealt with by the competition
authorities but have an important bearing on
developing countries.
7.1 Sources and Types of Cases
The types of anti-competitive practices with
international dimensions are similar as they are for
purely domestic cases. The difference only lies in
the cross-border (international) dimension of the anticompetitive
behaviour. A number of areas where
enterprise behaviour is perceived to give rise to
competition concerns with international dimensions
are discussed here. These issues can broadly be
classified into four groups:
l
l
l
l
Exercising market power in global or export
markets.
The anti-competitive practices that fall under this
category are international cartels, export cartels
and related arrangements, international merger
or merger with international spill-over, abuses of
dominance in overseas markets, cross-border
predatory pricing and price discrimination.
Barriers to import competition.
Import cartels, vertical market restraints creating
import barriers, private standard setting activities,
abuse of monopsonistic dominance etc. may fall
under this category.
Foreign direct investment.
Intellectual property rights.
7.2 Exercising Market Power in Global or
Export Markets
7.2.1 International cartels
There is a long history of price fixing cartels in which
multinational companies carve up the world into areas
of control. Recently there has been a sharp increase
in global cartel activity. Simultaneously, enforcement
agencies have slapped multi-million dollar fines against
vitamin companies, food additive makers, steel
manufacturers etc. To date only a handful of countries
have taken action to penalise transgressing companies
or to recover compensation. No developing country,
except Brazil, has taken any action on these cartels.
A World Bank study has shown that in 1997,
developing countries imported $81.1bn of goods from
industries in which price-fixing conspiracies have
been discovered during the 1990s. These imports
represented 6.7 percent of imports and 1.2 percent
of GDP in developing countries. There might have
been several other price-fixing conspiracies, which
remained undiscovered. Moreover, all these cartels
are made up of producers, who are mostly from
industrialised OECD countries.
The vitamins cartel alone has cost the developing
countries about $3bn in the 1990s. The additional cost
that India had to incur due to this cartel is estimated
to be $25mn in 1990s. These are absolute figures. If
analysed on a PPP (purchasing power basis) the
impact is five times as high for India, or $125mn.
Some other important international cartels that hit
the developing countries very hard are those in heavy
electrical equipments, steel and aluminium. The first
two of them were never prosecuted, but their
existence and their agreements were exposed by the
US House of Representatives and at the OECD.
Neither of the first two operated in the US but the
products concerned were very important for
developing countries. The aluminium cartel was set
up with the active support of the US and the EU
governments and it operated worldwide. Steel being
one of the basic goods for different industries, most
developing countries, without indigenous capacity,
had to suffer because of high prices.
Heavy electrical equipment is another item that
almost all developing countries require, to install
electricity generation plants to meet their growing
energy demand. But higher prices of heavy electrical
equipments due to cartelisation have significantly
raised the cost of installing electricity generating
plants and thereby making energy more expensive.
Available records suggest that among the 7-Up
countries, India, Pakistan, South Africa and Zambia
were victims of bid rigging by the heavy electrical
equipment cartel members.
The cartel members used their excess profits to
engage in predatory pricing against newcomers,
particularly from developing countries. For example,
predatory pricing drove the independent local
manufacturers in Brazil to bankruptcy. However, on
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