Implications of

globalisation for

competition

From the OECD Competition Division:

• John Davies

• Antonio Capobianco

• Sean Ennis

New Approaches to Economic Challenges

Seminar on Project C6, 24 March 2014

1

Overview

As business becomes ever more globalised and more jurisdictions have competition laws, competition agencies need to co-operate more effectively on cross-border cases, to avoid inconsistent decisions and long investigations and achieve more effective enforcement.

2

Competition law protects consumers

3

Competition law promotes productivity

Simeonidis (Review of Economics and Statistics 2008):

Industries with legal cartels Industries without cartels

Restrictive Practices Act (UK) 1956

Cartels illegal Unaffected

Labour productivity growth 20-30% higher

than in unaffected sample

“The econometric results from a comparison of the two groups of industries provide strong evidence of a negative effect of collusion on labor productivity growth.” 4

There are more competition laws than

before (which is a good thing!)

Source: OECD

0

20

40

60

80

100

120

140

Competition Law Competition Authority

Jurisdictions with Competition Law and Competition Authority

5

…and more cross-border cases…

Source: DG Competition, OECD calculations

0

50

100

150

200

1.  Mergers between companies headquartered in the same EU member state.

2. Mergers between companies headquartered in more than one EU member state.

3. Mergers involving at least one company based outside the EU, and with effects inthe EU.

EU cross-border merger filings between 1991 and 2012

6

…reflecting global economic trends…

Source: Dealogic Global M&A Database, OECD calculations

2,070 2,481

3,128

4,485

5,402

6,643

5,692

4,613

3,964

4,739

6,109

7,046

8,836

8,583

5,807

7,478

8,746

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Number of cross-border M&A deals: 1995 - 2011

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…leading to more cross-border

co-operation – among some

Source: OECD/ICN survey 2012

…but only 13 countries had co-operated more than 5 times, and 26 had never co-operated

0

20

40

60

80

100

120

140

Cartel Merger Abuse of Dominance

2007 2011Cases involving cross-border co-operation over five years

8

…but also more scope for disagreement

Why, TIME asked Welch, should a European be able to shape a merger between two American companies? "That's the law," replied Welch. "That really is just the way the world works." We'd all better get used to it.

“The Anatomy of the GE-Honeywell

Disaster”

Source: Time, 2001 9

Eurotunnel/SeaFrance deal 2013

Cleared by Autorité de la Concurrence, effectively blocked by UK Competition Commission Minister Cuvillier called for an emergency meeting with the UK's transport minister, Norman Baker to “arbitrate between the decisions of the two competition authorities”. UK Competition Commission: “The UK has an independent competition regime designed to exclude government involvement in decision-making. […] It’s difficult to see what the role or purpose of such a meeting would be.” 10

The ‘deal of the millennium’: Glencore/Xstrata • 04/2012: Deal proposed: $90bn • 07/2012: Australia and US clear without conditions • 11/2012: European Commission clears, if parties sell stake in Nystar (zinc producer) • 01/2013: South Africa clears, with some undertakings • 04/2013: China MOFCOM clears, if parties sell Las Bambas copper mine in Peru

11

As globalisation continues and the

world economy rebalances…

Sh

are

of

wo

rld

GD

P

Source: OECD data and projections

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2014 2030

Others

India

China

Japan

EU

USA

12

…more ticks needed, for approval…

13

Consider a ‘borderline’ merger. The advisors to the deal believe the chance of merger clearance is 50%

Number of countries involved

Likelihood of overall clearance (without co-

ordination between agencies) 1 50% 2 25% 3 12.5% 4 6.25% 5 3%

Global mergers less likely to be approved than domestic mergers?

… and co-operation is more complex

• As the number of agencies involved grows and the number of cross border cases increases, the current system may prove insufficient or inefficient.

– Cases may involve agencies which do not have a co-operation agreement

– Also, these co-operation agreements may be different in scope and provide for different co-operation tools

# of authorities

Interfaces of co-operation

1 0

2 1

5 10

10 45

20 190

30 435

40 780

50 1,225

100 4,950

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• Revising OECD’s key instrument, with direct involvement of Key Partners.

• Three main issues:

– Modernization of notification procedures

– Improving the ability of agencies to exchange confidential information • Information gateway

• Waivers

• Safeguard

– Abolition of conciliation

Revision of 1995 Recommendation

15

Longer term

• Increase the number of countries involved in international enforcement co-operation

• Improve legal basis and facilitate the exchange of information

• Explore new means of enhanced co-operation? Eg: – Multilateral instruments e.g. one-stop shop for leniency

markers

– Developing international standards for formal comity

– Mutual recognition of other agencies’ decisions

– Non-binding deference to one ‘lead authority’

16

Thank you

DAF/COMP(2014)4/REV1

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