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The 7-Up project
is well into its
second phase now. The second round NRG meetings are already over in
most of the countries, while for India, the preparations are on. In
the meanwhile the country researchers were busy revising their
reports, once on the basis of the comments received from the Goa
meeting and then on the basis of comments from the second NRG
meetings. A mid-term review meeting of the partners and the advisers
was organised in Jaipur on December 16, which helped us in taking
stock of the progress made since Geneva meeting on 12th
October 2001 and also to take certain important decisions for moving
further.
The intervening period witnessed one of the worst
phases in the global economy. When the global economy is already hit
by a recession, the terrorist attack in the US and the Afghan War in
its aftermath has made the situation worse. At this time of crisis,
the oil cartel: OPEC tried to push up the prices of oil through a cut
in production, which could prove lethal to the world economy. However,
the OPEC members were not fully successful in their design thanks to
non-cooperation of non-members like Russia, who did not respond well
to OPEC’s call for cutting down oil production.
The behaviour of OPEC has been a cause of concern
for quite a long time across the globe. But at a time when a number of
private international cartels have been busted and the companies fined
heavily by different competition authorities, people may ask why the
oil cartel is exempt from competition and price-fixing rules? In the
US efforts have been made to discipline OPEC but they could not
succeed.
There is no doubt that OPEC is the most hardcore
and damaging cartel, but we must accept the fact that it is different
from other private international business cartels. Hence, the
competition laws that are in force in several jurisdictions may not be
enforceable on OPEC. Neither it would be desirable for an anti-trust
law of a particular country like US to be used for breaking OPEC.
Thus
the matter of OPEC price-fixing is left in the realm of political
negotiations and pressures. The Ministerial Declaration adopted in the
Fourth Ministerial Conference of the WTO at Doha is of particular
interest in this regard. The proposal on competition policy in the
declaration provides explicitly for “provisions on hardcore
cartels.” If the members of the WTO really get into an agreement on
competition with such a provision, the oil importing countries may be
able to raise the issue of OPEC at the WTO. If global oil prices are
freed, the developing countries are likely to gain more as an inflated
oil bill is a major impediment to their development. Consumers the
world over will have the last laugh of course!
Happy
reading!
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The months of November and December were
essentially a period of transition from Phase-I to Phase-II of the 7-Up
Project, as
it is popularly known. The project entitled “Comparative Study of
Competition Regimes in Select Developing Countries of the
Commonwealth” is being implemented by CUTS, Jaipur with the support
of DFID, UK. The countries selected for the study are India, Kenya,
Pakistan, South Africa, Sri Lanka, Tanzania and Zambia.
During these two months, preliminary activities
relating to Phase-II of the Project were completed and efforts were
made to review some activities of Phase-I of the Project for an even
better output. A mid-term review meeting was organised to take stock
of progress and to recast the action plan for the remaining months of
the project.
The following is a brief report of the progress
made by the Project during the months of November and December 2001.
Phase-I: Country Report: During
the process of reviewing of Phase-I activities, it was felt that if
certain additional information could be incorporated in the Phase-I
country reports, the reports would become more comprehensive and
complete documents in themselves. For this purpose, specific
recommendations were made to the country-researchers regarding the
additional information that could be included in their respective
country reports. This was done by the core researcher of the Project
as well as by CUTS.
Field Survey on Awareness: An
important activity that was completed during this period is a field
survey of stakeholders to get an idea of level of awareness among them
on several competition issues. This survey also helped the partners to
choose their case studies for Phase-II especially the third one.
A preliminary analysis of the survey findings was done and
discussed in the 2nd NRG meetings. The country researchers
would make further analysis of these questionnaires and a comparative
analysis would, then, be made by the core researcher of the Project.
Mid term Review Meeting:
The mid term review meeting was organised on 16th December
in Jaipur, India. The primary objective of the meeting was to take
stock of the Phase-I reports and to plan the methodology of case
studies to be taken up during phase-II.The synthesis report as revised
by the core researcher was presented in the meeting. The meeting was
also utilised to recast the plan for the rest of the project period in
general and next quarter in particular.
2nd NRG Meetings: Phase-II of the Project also involves organising
stakeholders’ meetings in the project-countries. Most of the
project-countries organised their NRG meetings in the first week of
November, with the exception of South Africa, India and Pakistan. The
meeting was held on 31st October in Kenya, 2nd
November in Sri Lanka and 8th November in Lusaka. South
Africa NRG was held on 26th November and Pakistan’s
meeting was held on 8th December. Indian NRG would be
organised on January 11, 2002.
Mario Monti, the European competition commissioner,
is to present wide-ranging proposals to reform the European Union's
controversial anti-trust regime for mergers and acquisitions. The
proposals come amid growing criticism by US and European companies of
the current rules. One idea is to allow companies to request a
"cooling off" period of about two weeks in the crucial phase
of European authorities' takeover investigations.
In a 111-page set of plans on merger regulation, to
be presented to the European Commission on Tuesday, Mr Monti will also
open the debate on whether Brussels should move closer to the US
system by adopting the same test to judge whether a deal is
anti-competitive.
Several companies have criticised the commission
for blocking mergers on anti-trust grounds without giving them enough
time to present concessions. The tight deadlines imposed by EU rules
were a major factor in the blocking of General Electric's Dollars 43bn
(Euros 48m) takeover bid for Honeywell in July - which triggered a
major transatlantic row between US and EU regulators.
In a desperate attempt to have the GE-Honeywell
deal approved, the two US industrial groups presented a series of
concessions five days before the decision, which were rejected by Mr
Monti because they were too late and insufficient.
In the Financial Times today, the heads of the
French electrical group Schneider and of the Swedish packaging giant
Tetra-Laval - which both had mergers recently blocked by Brussels -
say the procedures are "highly opaque and unpredictable".
Under the current system, companies have until the
end of the third month of the commission's four-month inquiry into a
deal to present concessions to allay the regulators' fears. Companies
and lawyers complain that this leaves them little time to discuss the
concessions with the regulators and alter them if needed.
"The last month of an EU inquiry is just hell,
you just can't negotiate with your back against the wall," said a
competition lawyer yesterday.
Under the Monti proposals, companies will have the
chance to "stop the clock" for 10-15 working days to discuss
and modify concessions. The document also opens a debate on the key
test to decide whether a merger should be blocked. The commission
currently uses the "dominance test" which states that deals
that create or strengthen a company's dominant position in a market
should be prohibited.
The US authorities use a different yardstick and
block deals that lead to a "substantial lessening of
competition". In practice, the two tests are fairly similar but
companies involved in mergers scrutinised in the US and EU have
complained the divergence leads to legal uncertainty and increased
costs.
"The commission believes the time is right to
initiate a thorough debate on the respective merits of the two tests
for merger control," the paper says.
Mr Monti's paper is part of the commission's
periodic reviews of European merger control and will be the basis for
changes to rules after all interested parties have expressed their
opinion on the plans.The paper also proposes ways to make it easier
for companies to notify deals to the authorities in Brussels.
(Financial
Times, December 7, 2001)
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The
recent efforts by OPEC to cut down global oil production and pushing
up prices have caught the attention of people. When the global economy
is in shambles, especially after the terrorist attack in the US and
the Afghan War in its aftermath, OPEC’s attempt to take advantage of
the situation is indeed unfortunate. There was an interesting exchange
of letters by two readers of the Financial Times:
Perhaps one of your readers or editorial staff can
explain to me (and, I suspect, to many others) why the oil cartel
continues jointly and openly to exert control over its product
availability and price without falling foul of the competition and
price-fixing rules and regulations? In recent times we have seen the
competition authorities blocking businesses that are considering, for
example, a merger; or businesses that are seen to be fixing product
prices between them.
None
of these is "oil related" so the book of anti-competitive
behaviour must make an interesting read. I should like to obtain a
copy to help me in my understanding of what political influence
determines what is deemed as "reasonable competitive"
behaviour.
(Ron
Hosking, 1361 Osteras, Norway; Dec 7, 2001)
Mr Ron Hosking (Letters, December 7) asks why the
oil cartel is apparently exempt from competition and price-fixing
rules. I am aware of only one attempt to enforce these rules by legal
action against the cartel, and it failed.
In 1979 the International Association of Machinists
and Aerospace Workers, a US trade union, brought a treble damages
antitrust action against the Organisation of Petroleum Exporting
Countries and each of its member states in a federal court. The union
claimed that its members had to pay higher prices for petrol as a
result of OPEC's price-fixing activities. OPEC could not be served
with process and was dismissed from the action. Its member states were
served but chose not to enter an appearance.
The case proceeded against the OPEC member states
under 1976 US legislation (the Foreign Sovereign Immunities Act)
allowing states to be sued over their commercial acts. Under the FSIA,
the nature and not the purpose of the state action determines whether
it is commercial. The union argued that marketing and price-fixing of
a commodity were plainly commercial in nature. This argument certainly
accords with the trend of decisions under the FSIA and similar
legislation in other countries, including the UK.
The federal judiciary, however, held that oil
raised particular issues, and dismissed the action. The District Court
referred to the principle of international law granting a sovereign
state the sole power to control its natural resources. Both this court
and the Circuit Court, on appeal, were impressed by the fact of oil
revenues being the only significant source of income to OPEC states
and declared that consequently their sovereignty could not be
separated from their role as oil producers.
Finally,
and conclusively, the circuit court applied the act of state doctrine,
under which courts simply decline to decide matters that they consider
politically sensitive, particularly in the area of foreign affairs.
This left the matter of OPEC price-fixing in the realm of political
negotiations and pressures. It is hard to imagine any court or
competition authority being eager to view it otherwise today.
(Michael
Singer, Senior Research Fellow, School of Law, King's College, London
WC2R 2LS, UK; Dec 14, 2001)
Even
in recent times, a US federal judge ruling in a price-fixing lawsuit
filed against OPEC by an Albama service station barred the oil cartel
from controlling West Asia crude-oil production.
The
judge certified the case as a nationwide class-action lawsuit and
ruled on March 21 2001 that OPEC had violated US antitrust laws by
controlling production to fix oil prices. The judge then barred OPEC
from doing virtually anything to set or enforce production quotas
among member nations.
However,
experts in international law believed that the order was virtually
unenforceable. A US court doesn’t have the power to tell OPEC what
to do.
Neither
it would be desirable for an anti-trust law of a particular country
like the US to be used for breaking OPEC. Thus the matter of OPEC
price-fixing is left in the realm of political negotiations and
pressures.
The Ministerial Declaration adopted in the Fourth
Ministerial Conference of the WTO at Doha is of particular interest in
this regard. The proposal on competition policy in the declaration
provides explicitly for “provisions on hardcore cartels.”
If the members of the WTO really get into an
agreement on competition with such a provision, the oil importing
countries may be able to raise the issue of OPEC at the WTO. If global
oil prices are freed, the developing countries are likely to gain more
as an inflated oil bill is a major impediment to their development.
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CUTS Centre for International Trade, Economics and
Environment (CUTS-CITEE) is conducting a two-year fact finding and
advocacy project named “Investment for Development” (IFD). The
project aims to create awareness and build capacity on investment
regimes and international investment issues in developing and
transition economies. The project is supported by DFID, UK and is
being conducted by CUTS with the collaboration of UNCTAD. Seven
countries have been selected for the project: Bangladesh, Brazil,
Hungary, India, Tanzania, South Africa and Zambia. National level
research and advocacy will be done by partner organisations in theses
selected countries.
The project was launched at an international event
in Jaipur on 13th & 14th December 2001. The Launch Meeting brought
together all those who will be working on the two-year project along
with international experts to debate on aims and scope of the project,
current investment issues and discuss future project activities.
On the first day, international experts discussed
key issues for developing countries in relation to investment,
which were investment and development, civil society concerns and
investment environment. On the second day, international experts
discussed international investment agreements, national investment
policy and performance & the project methodology. In the session
on national investment policy and performance, the project partners
presented their country research results that came out so far.
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CUTS
Centre for International Trade, Economics & Environment
(CUTS-CITEE), Jaipur, India, is organising the seminar in
collaboration with National Council of Applied Economic Research (NCAER),
New Delhi, India, on 24-25th December in Jaipur, India.
The
Seminar aims at generating and enhancing understanding on competition
and regulatory issues and their interface with investment. It is
structured in such a way that it deepens the understanding on domestic
as well as recent developments at the international level, in the
aftermath of the Doha Declaration. The Seminar will involve the
participation of different stakeholders of the country – consumer
organisations, competition and regulatory authorities, policy makers,
business, trade unions, academia and media.
The
Seminar would comprise of three Plenary sessions, where the first
session would deliberate the new competition law of India and the
prospects and implications of a multilateral competition policy. The
second session would look at the competition & consumer concerns
in regulatory reforms in India vis-à-vis the power and the telecom
sector. The third plenary would focus at investment policy context in
India as well as at the WTO.
18th
March 2002, Cape Town, South Africa,
International
Bar Association (IBA) in collaboration with South African Competition
Authorities is organising this programme. It is part of the IBA Global
Forum on Competition Policy’s initiatives.
Competition
experts from all over the world will participate in the event. The
programme will focus on comparative merger control analysis,
competition policy in developing countries and competition compliance
issues. It will also have a special session on competition law
enforcement in South Africa.
IBA also
intends to utilise this opportunity to begin to disseminate the
message of the International Competition Network and to attract
stakeholders’ interest in its work.
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