RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/W/100
24 September 1998
(98-3693)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM BRAZIL
The following communication, dated 18 September 1998, has been received from the
Permanent Mission of Brazil with the request that it be circulated to Members.
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Abstract
This contribution from Brazil is divided into three parts.  The first one offers a brief
introduction on the growing importance of competition policy throughout the world and on why it
should be addressed from an international perspective.  The second part presents and discusses two
different suggestions as to how that internationa l approach to competition could be effectively and
profitably accomplished.  The first suggestion advocates a strengthening of communication andcooperation between national competition authorities, proposing the institutionalization of channels
between agencies to facilitate the discussion of common cases, and a movement towards a progressive
harmonization of pre-merger notification forms and procedures.  The second suggestion refers to the
extension of traditional GATT/WTO principles, such as transparency and national treatment, to the
antitrust sphere.  Two examples are offered as to how that extension could be accomplished,illustrated by concrete actions of Brazilian antitrust authorities.  The last part contains an inquiry into
the advantages of dealing with competition inside the structure of the WTO, concluding that it does
make rational sense to address the issue inside the framework of the international trade regime.
I. INTRODUCTION
The progressive reduction of trade barriers and the advances of globalization have brought the
issue of competition policy to the forefront of the international trade debate.  In fact, as classic state-
imposed barriers to trade, of both the tariff and non-tariff kinds, decreased to the lowest levels in
modern times, other restraints and impediments to trade caused by the actions of private agents
became more evident and their detrimental impacts on trade more noteworthy.  It is enough to think of
international cartels dividing up regions of the world to raise prices and reduce competition or of
vertical agreements restricting the activities of non-member suppliers (national and foreign) to
acknowledge the potential deleterious impacts that private anti-competitive practices can have ontrade.
The growing attention and concern with this matter are therefore not surprising, and certainly
welcome, particularly in the case of countries such as Brazil, which has long been an integral part of
the trade liberalization effort within the GATT-WTO system and which is rapidly consolidating a
modern competition policy regime.
Advances in the competition policy sphere have  in fact constituted a veritable worldwide
trend, with more countries than ever having enacted or being in the process of adopting competition
laws.  According to the 1997 UNCTAD World Inve stment Report, more than seventy nations now
have competition laws, in contrast with less than forty in the 1980s.  At the same time, activities of
private firms are becoming increasingly globalized, meaning that their practices and their mergers willWT/WGTCP/W/100
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tend to affect more jurisdictions at the same time. These tendencies clearly make this a particularly
strategic moment to address the issue from an international point of view.
Having recognized the importance of the subject, this paper will, as an initial proposal for
discussion by the Working Group, briefly explore two possible ways competition policy could
realistically and effectively be approached in the international forum of the WTO.  Finally, as aconclusion, this paper will address the reasons why it seems to be more efficient and more effective
for this effort to take place within the structure of WTO.
II. PROPOSALS
1. One approach to the relationship between antitr ust and trade in the international arena which
is worth exploring in more depth is the strengthening of communication and cooperation between
competition authorities of different countries, the gains from which, in terms of know-how and
experience, can clearly be very significant.
Two factors should be considered in order to understand why international cooperation must
become a priority:
(i) different from the jurisprudence of the sixties and seventies, there are more
and more cases which not only present the same characteristics in several
markets;  they constitute, in reality, cross-border mergers or generalized
conducts.  Therefore, the potential for inconsistent decisions among different
national agencies is high.
(ii) the frequency of cross-border transactions poses the problem of transaction
costs that firms incur when they have to comply with so many applications
and bureaucratic timetables.  Efforts to harmonize particular requirements
(e.g., for merger review) could be useful even without a more profound
convergence in the legislation.
These considerations immediately suggest two di mensions for international cooperation in the
antitrust sphere.
In what refers to cooperation relative to generalized conduct of private actors with
international impacts, developments are correctly fi rst being attempted in relation to some of the most
clear-cut, indisputable and universally-condemned categories of anti-competitive behavior.  Such is
the case, for instance, of the cooperation in curb ing hard-core cartels.  It should therefore be
considered as an important item in the agenda of the Working Group.
In fact, practically all jurisdictions which have enacted competition laws have provisions
against such practices, and their detrimental impacts over competition are, in general, relatively easy
to assess.  In this sense, and given the increasingly global nature of private actions, establishing
channels or at least formats for inter-agency communication, for instance, about the status of a case
being brought simultaneously before several jurisdictions could prove considerably helpful for each of
the anti-trust authorities involved.  In any case, how ever, it is evident that the actual recourse to such
mechanisms of communication would be the choice of each individual agency in each particular case.
One clear benefit of discussing and attempting some sort of agreement within the WTO
structure is that it would bring the issue of cooperation in the antitrust domain to the agenda of
countries around the world, at the same time raising its potential advantages.  As will be explored in
the last part of this paper, the stimulating effect of having such issues taken on by an elaborate regimesuch as the international trade system cannot be over-estimated.WT/WGTCP/W/100
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The second antitrust dimension that suggests itself for international cooperation, as mentioned
above, is the treatment of mergers and acquisitions.
It is in fact quite evident that, as more and more of such deals have multinational impacts, the
transaction costs to private agents of complying with the different requirements of every affected
national competition agency increase quite considerably, with detrimental effects to competition.  Thediscussion has then been aiming at producing a model of a common merger notification and report
form which could be used by countries in part or as a whole or even only as a general reference on the
matter.
Obviously, it is possible that, with time and as long as national agencies perceive gains in
resorting to the model form, there could be a progressive harmonization, if not in format, at least in
the content of the information required by each jurisdiction, thereby reducing costs to enterprises.
Another potential benefit, possibly further in the future, would be a reduction of the
differences in the delays involved in merger approvals in various jurisdictions.  This would definitely
be a crucial development in terms of reducing the length of the uncertainty, and all the costs
associated with it, which private agents face to day by having a single international transaction
submitted to agencies with very different decision-taking lags.
Once again, even the mere debate and adoption of a model form or of common requirements
as a simple reference could contribute to stimulate awareness as to the costs created to private actors
as well as to the potential advantages of reaching some degree of similarity in terms of the content of
the information required, thereby opening the way for future advances in that direction.
Examples of encouraging advances in this direction can also be found in the context of
competition policy within Mercosur.  Signed in December of 1996, and still to be regulated andratified by the national legislatures, the Fortaleza Protocol provides for cooperation mechanisms
among the national competition agencies, as well as the adoption of a timetable for the
implementation of a merger review system within the regional block.
Taking cooperation still one step further, the competition agencies of Brazil and Argentina
have agreed on a common work plan, involving the exchange of staff, organization of seminars andworkshops and, most important, the discussion of common cases and the participation of observers in
the sessions of both institutions.
Equally important are the initiatives of cooperation among private sector antitrust
professionals of Brazil and Argentina and other countries, which could result in the formation of non-
governmental organizations concentrated on the consolidation and development of the culture of
competition.
2. A second  important approach to the relations hip between competition policy and trade would
be to extend general WTO principles to the antitrust domain.  Such a development would be very
meaningful as such principles have been universally accepted as fundamental to a fair and efficient
international economic environment.  Meant as a starting point for further discussions, this paper will
not attempt to exhaust the analysis of this topic.  It will rather explore only two of the several WTO
principles, merely as a preliminary exercise on the proposed extension of their application tocompetition policy.
Contracting Parties to the WTO, for instance, could pledge to respect the basic principle of
transparency in relation to competition policy, just as they already do in reference to regulations
affecting trade.  It is in fact evident that acces s to the appropriate competition laws, regulations and
jurisprudence of each contracting party is crucial for private actors to be able to determine how they
should behave.WT/WGTCP/W/100
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More complex is the issue of the application of the transparency principle to antitrust
adjudication procedures.  The parties involved in any claim clearly need to have access to all the
relevant documentation and to the respective proceedings to be able to properly defend themselves.
But access to such information and proceedings for third parties can also have a very welcome
educational effect, in a competition advocacy sense.  That, obviously, besides the general benefit, longrecognized by open judicial courtrooms around the world, of having society follow the application of
its own laws.
It is important to stress, on the other hand, that competition authorities often deal with
particularly sensitive information, involving commercial or industrial secrets and strategic plans,
which the private actors involved have a right to wish  to keep confidential.  Besides, this guarantee is
important for the efficient functioning of the antitrust agency itself, as insecurity as to the use of secret
data would be an enormous disincentive for firms to provide them in the first place.
Obviously, the application of the transparency principle to antitrust must take this peculiar
circumstance into account and allow each country to strike its own delicate balance between
confidentiality and publicity of the actions and procedures of the antitrust authority.  The development
of useful mechanisms to allow for the appropriate treatment of confidential information among
competition authorities should constitute an important item of the agenda of international cooperation.
A consequence of the previous principle, which probably would require some extra
consideration in the case of competition policy, is respect for the due process of law.  It would be a
considerable advance if every contracting party formally took on the challenge and the commitment to
respect their due process provisions in dealing with antitrust cases.  The impact in terms of security
and confidence on the part of private agents, as well as the reduction in all the costs associated withthe lack thereof, could only be positive.
Another difficult issue in respect to due process, one which the Judiciary of countries all over
the world certainly face, but which becomes particularly acute in the case of competition policy, is the
balance between security and celerity in the decision-making process.  In fact, economic conditions in
the world today evolve with an ever more astonish ing speed.  A too slow antitrust decision can be, in
many cases, just as useless, in practical terms, as no decision at all.  In this case, it would be important
for contracting parties to take on the commitment of attempting to reach swift but simultaneously
solid and sound decisions with full respect to due process properly guaranteed.
Another important WTO principle which could ve ry properly be extended to competition
policy is the national treatment principle.  This basic requirement of fairness would require that
countries assure all foreign firms the same rights and obligations before its domestic competition
legislation, authorities and proceedings as are warranted to domestic firms.
An important part of the actual implementation of the above-mentioned principles could be
done by the national competition agencies themse lves.  CADE (Administra tive Council for Economic
Defense, the autonomous agency responsible for the analysis and adjudication of competition cases in
Brazil), for instance, has been taking these challenges head on, having recently adopted a new Code of
Internal Rules and Procedures and being in the process of creating an internal Code of Ethics.Difficult but crucial issues such as transparency and confidentiality, and solid but timely decisions,
were addressed, taking into account contributions provided by practising lawyers, academics, foreign
agencies and the community at large, through open fora and debate sessions as well as CADE's
permanent home-page on the internet.  This home-page, besides current debates such as the ones
mentioned above, includes past decisions, data on antitrust cases and decisions, papers on specificcompetition topics and CADE's Annual Report.
Also, in order to enhance transparency, SDE (the Secretariat for Economic Law of the
Ministry of Justice, responsible for the investigation of competition cases to be submitted to CADE)WT/WGTCP/W/100
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has, since 1996, adopted the initiative of publishing in the official gazette ("Diário Oficial") every
notification involving mergers and acquisitions, allowing for public knowledge and manifestation
about the case.  Such procedures also provide important elements for any further investigative action.
SDE is also in the process of discussing with  renowned specialists a reform of its internal
investigative procedures in order to improve their effectiveness and transparency.
Along the same lines, SEAE (Secretariat for Economic Monitoring of the Ministry of
Finance, responsible for preparing economic opinions  on competition cases) holds hearings with the
participation of the representatives of CADE and SD E, at which parties to a transaction expose their
views and motives related to particular mergers, allowing for a joint and faster treatment of simpler
cases.  Summaries of SEAE's opinions and initiatives related to competition, as well as the
Secretariat's annual report, are available on the internet.
The Brazilian experience in this matter demonstrates the potential concrete gains to be
achieved by the commitment to respect and implement the principles discussed above, at the same
time it reinforces the importance that such principles be adopted or supported in some form by the
WTO.
III. CONCLUSION
One final aspect worth exploring is the reason why dealing with competition policy within the
scope of the WTO would contribute to reduce transaction costs in a variety of different fronts.
Participation in a larger and already institutionalized regime would in fact offer a considerably larger
access to information, widely considered one of the most important impediments to international
agreements and transactions.
This inclusion of the topic of competition policy within the framework of the WTO would
also permit the utilization of the whole logistical infrastructure of the organization, in terms of
negotiation expertise, personnel and transaction formats, with the advantage of having the background
of a whole working regime - all features that would reduce transaction costs quite significantly.
Moreover, the linking of  competition policy with a larger framework, with a fairly well known  and
consolidated set of rules and processes, with definitions, principles and crucial concepts clarified overtime, can increase the likelihood of common understanding and interpretation of the provisions
adopted, clarifying meaning, decreasing uncertainty and thereby increasing the chances of
compliance.
There is yet one final but very important advantage in addressing competition within the
WTO.  The organization produces information which does more than just provide a picture of the
situation of specific countries or background data and analysis on general trends and developments.
Reports, studies and analyses often actively stress the benefits of freer trade and of the multilateralsystem, drawing attention to the damaging effects of protectionism.  That this is so is evidently not
surprising, but it illustrates a point also emphasized by international relations' theorists that the
information provided by international institutions can not only respond to the needs of Member states,
but also try to interact with those needs, or at least the perception thereof .
Within the GATT/WTO regime, Member countries are constantly being reminded of the
advantages of the multilateral system in terms of helping them reach their own welfare-increasing
objectives and are encouraged to seek further advances in the same direction.  Such type of
information, as well as the promoter role often actively taken by the WTO, can contribute to affect the
way a state sees a certain area, its own needs therein, and what it calculates are its incentives for
engaging in new agreements or transactions.
This information capability - and the accumulated experience of the WTO in this respect -
could be very helpful in terms of spreading the culture of competition.  By providing data on theWT/WGTCP/W/100
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benefits derived from a freer competition environm ent, by actively promoting new advances in that
direction and by stimulating cooperation, the international trade/antitrust regime could have an
important role of stimulating the development or reform of legislation and procedures in tune with the
general principles referred to in this paper, as well as the cooperative initiatives with regard to
antitrust aspects and trade blocks mentioned above.  All of them advances with considerable welfareincreasing potential.
In any case, the mere fact that the WTO addresses the issue would highlight it in the
international agenda, leading contracting parties to ponder and debate and producing, as a minimum
side effect, the recognition of the increasing impor tance of competition policy in the world today, as
well as of the advantages that could be obtained by a multilateral treatment of the subject in terms of
allowing each country to reach their own economic and social goals.
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