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Forget fast food or reality-based TV shows, America’s most successful export is probably antitrust law. Today, more than 90 countries have antitrust regimes whose genesis can be traced to American notions about competition. Just ten years ago, most of these laws weren’t even on the books. The United States for years steadfastly opposed any codification of global antitrust rules, preferring to emphasize one-on-one dealings between the U.S. agencies and their foreign counterparts. By contrast, the European Union has pressed hard for antitrust negotiations in the World Trade Organization. Last fall, though, the United States signaled a shift in its attitude toward global antitrust. Joel Klein, then assistant attorney general for antitrust at the Department of Justice, and Mario Monti, the European Commissioner for Competition in Brussels, both endorsed a multilateral antitrust initiative called the Global Competition Initiative. It’s a timely move. As trade barriers drop, mergers mushroom, and cartels become global, nearly every significant transaction or antitrust investigation has international implications. The European Commission, for example, recently announced an in-depth antitrust review of General Electric Company’s $45 billion bid for Honeywell International Inc. — a transaction between two U.S. companies. Similarly, it opened an investigation into pricing practices of the leading recording companies, following a similar investigation by the Federal Trade Commission. Companies have little choice but to satisfy filing requirements and submit to antitrust review around the world. This fragmented enforcement, in addition to raising the cost of transactions, adds new layers of risk and uncertainty. Klein’s support for the GCI came in his last weeks in office as assistant attorney general, but few expect President George Bush’s antitrust team to switch direction. So hopes are riding high that the GCI will provide some needed coherence to the patchwork of current regulations. The Americans and Europeans agree that the GCI should not be a bricks and mortar institution with enforcement responsibilities, but several key issues remain open: � What should its substantive priorities be? � Should it be a loose forum for the exchange of information and ideas? Or should it go one step further and seek to develop consensus or rules or best practices? � Should it be open to all jurisdictions — or should it be selective (and if so, based on what criteria)? � How should it differ from other international bodies already working on competition policy, such as the Organization for Economic Cooperation and Development, the United Nations Conference on Trade and Development, and the WTO? � And what accommodation, if any, should be made for private-sector participation? The business community is understandably concerned about the burden of overlapping antitrust reviews. Mergers and acquisitions are one of the few areas in which competition authorities usually require notifications, business activity must be suspended during the review process, and the actions of one competition authority can stop the transaction globally. This proliferation of antitrust merger review has spawned a host of issues, including risks of conflict, impact on transactional costs, and a higher probability that mergers will be blocked based on flawed antitrust analysis. RISK OF CONFLICT Actual conflicts between countries over enforcement policies are rare. The greatest potential risk is disagreement between the U.S. and European antitrust authorities. The reasons: There’s a high volume of commercial activity between the two, both the E.C. and U.S. have relatively mature antitrust enforcement, and both have broad enforcement jurisdiction. There is, however, a very bright note: The chance of a major blow-up is remote, given the extraordinary bilateral cooperation in competition matters between Europe and the United States. Both sides appear to be on the same page when it comes to analyzing proposed transactions and resolving conflicts. TRANSACTION COSTS The costs of filing in numerous jurisdictions are substantial. Unfortunately, GCI’s ability to lessen this burden is limited. Unless countries unilaterally scale back their filing requirements, regionalize their merger review process, or develop a system of deferral to other countries, we are unlikely to see a major reduction in regulatory overlap. Though any individual country is unlikely to give up its newly adopted merger regulations, the GCI could encourage each government to limit its review to the transactions likeliest to threaten competition in its country. Countries with overly broad jurisdictional tests should be encouraged to focus their analyses on what realistically might affect competition. For example, some nations look to the company’s worldwide, rather than its national, revenue in their notification requirement. The problem with a worldwide revenue standard is that virtually any international company must satisfy filing requirements even if the transaction has a negligible competitive effect in that country. And the thresholds can vary wildly under this standard: In Poland, for example, it’s $23 million, while in Argentina it’s $2.5 billion. The GCI could also foster regionalization as pioneered by the E.C.’s one-stop-shopping model. As the E.C. expands eastward, it is expected to bring numerous fledgling competition authorities in Eastern Europe into its fold. Consolidation of merger enforcement also could occur if other countries with close economic ties develop regional merger regimes. This might occur, for example, in South America — either under the auspices of Mercosur (an existing common market created by six South American countries) or another existing inter-American institution. ANTITRUST ANALYSIS Most crucially, the GCI can promote antitrust policies premised on sound economic theory, aimed at producing efficiency and innovation. Indeed, this has been the principal success of the U.S.-E.C. cooperation. As the new competition authorities begin to flesh out their enforcement policies, they will invariably go through the same sorts of growing pains that American and European enforcers experienced when building theirs. So it’s critical that they begin as soon as possible. Sound antitrust enforcement based on economic principles will not only reduce the temptation to over-regulate, but will foster more competitive industries and open markets. More than anything, indecision and the specter of the imposition of economically irrational conditions on mergers increase the cost of global antitrust review. The quickest and surest route to convergence is to have the U.S. and E.C. authorities jointly examine specific cases. They did just that with both the MCI WorldCom, Inc./Sprint Corporation and the Alcoa Inc./Reynolds Metals Company deals. As a result, despite the complexity of these cases and the two authorities’ theoretical differences in merger doctrines, the outcome of the U.S. and the E.C. reviews were substantially identical. The GCI could accelerate and broaden this sort of convergence by exploring multilateral mechanisms to discuss active merger cases. Antitrust regulators around the world should aim for ways to communicate with their foreign counterparts as easily as the U.S. and E.C. do today. Of course, this sort of activity will require the cooperation and consent of the merging parties. But just as the business community has embraced the transatlantic dialogue because it reduces transaction costs and leads to better outcomes, it also should look favorably on wider international cooperation. Don’t expect miracles from even a fully successful Global Competition Initiative. But its potential for useful improvements is enormous. By bringing more countries under the tent to pursue a well-planned program, the GCI can be a vehicle for solid, albeit incremental, progress toward more coherent global antitrust enforcement. Thomas Mueller and Charles Stark are antitrust partners at Wilmer, Cutler & Pickering in Washington, D.C. E-mails: [email protected]; [email protected]

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