[ARCHIVED CONTENT] International competition policy

The Government is committed to improving co-operation between UK competition authorities and their counterparts abroad in order to further the international effort to fight anti-competitive practices, especially hard core international cartels. To this end DTI is actively involved in efforts to build a framework for improved co-operation between competition authorities.

An exchange of notes between the UK and US Governments dated 30 April and 1 May 2001 deleted the provisions excluding criminal prosecutions in competition cases from the UK/US Mutual Legal Assistance Treaty (MLAT).

The MLAT governs the ways in which the UK and the US co-operate on legal matters. Amongst other things, it provides a framework for co-operation in obtaining and exchanging information between the authorities in each country relating to criminal prosecutions (e.g. serving warrants and interviewing witnesses).

Eliminating the exclusion of anti-trust cases from the MLAT means that future requests for information made by the US in pursing criminal competition cases under the Criminal Justice (International Co-operation) Act 1990 will be handled through the mechanisms established by it.

The types of assistance that the UK could provide to the US authorities following a request involving a competition case are: use of the UK courts to take testimony from witnesses; the service of documents; and assistance in the imposition of fines.

As with all other cases considered under the MLAT, requests are vetted by the Home Office and will not be granted if they involve the extraterritorial application of powers by the US. The MLAT does not require UK government officials to provide evidence if existing laws prevent this. In addition, the MLAT does not govern extradition. It also provides certain safeguards over the use to which the information provided can be put.

This peer review considers how the UK measures up to its Public Service Agreement target of having “the most effective competition regime in the OECD”.

The measure of success, the Competition Regime Performance Index (CRPI), was calculated from the responses to a survey of over 100 experts (lawyers, economists, officials -except those from the UK- and representatives of company and consumer organisations). The CRPI places the UK competition regime in the top half of its peer group. However, the two well-established competition regimes of Germany and the USA rank ahead of the UK. These regimes are seen by the respondents from these two countries as being markedly more effective than the EU competition regime. The UK regime is also seen to be more effective than the EU but not by a wide margin.

Regime	Assessment relative to the EU
Germany, USA	Markedly more effective
UK	Slightly more effective
Other OECD peer group countries	Similarly or less effective

The peer group was sampled from OECD countries including the UK, USA, Germany, Australia, France, Italy, Ireland, Netherlands, Spain, Sweden and Switzerland. Members of the peer group are all experts in the field of competition policy.

Peers were asked to assess a variety of factors in respect of their “own” regime, the EU regime and, where possible, the UK regime to achieve comparability between countries. The EU regime was used as a common benchmark. This was achieved by applying a common score across respondents to the EU and then adjusting the score given for their “own” regime, and where relevant the UK, by the same amount as the difference between their EU score and the “benchmark” score. In this way comparability between countries is achieved.

The overall ranking places the UK behind the US and German regimes but ahead of several other regimes within the OECD and the EU regime. Behind this overall ranking lie a range of detailed factors contributing to effectiveness. The most important of these factors include:

The UK position in respect of these factors, and between mergers and other parts of its competition policy regime, is variable.

The UK regime receives a positive assessment relative to the EU regime in respect of competition activities other than mergers. Given that the old UK cartel regime was practically non-existent and arguably not very effective, the positive assessment reflects the way the UK regime tackles monopolies, in particular complex monopolies. The UK non-merger regime relative to that of the EU scores highly on:

The system of non-merger enquiries is well established and the timetables are generally adhered to. The system is considered to be less politically independent for merger enquiries. In addition, respondents provided favourable feedback on:

the UK authorities were considered to be slower in decision-making than their EU counterparts.

The review highlights a number of factors that are worth noting with respect to general and institutional features of the UK competition regime.

UK respondents regarded the UK competition authorities as significantly less politically independent than respondents of other countries about their own regimes. Whilst political support for competition policy was as high in the UK as other leading OECD countries, significantly less public support was felt to exist in the UK. Only 10% of UK respondents felt competition policy was important to the UK public. Respondents welcomed the Merger Reform proposals from the DTI, which are arguably long overdue. The survey results suggest that the proposals and statements made in the “Government Response to the Consultation on Merger Reform” (October 2000) document address the issues of concern to the peer group.

The survey directly suggests some actions/initiatives that would considerably enhance the effectiveness of the UK competition regime in the eyes of the peer group.

The implementation of the proposed reform of UK merger control would enhance the status and effectiveness of the overall UK regime. This applies very much to the cornerstone of the planned reform which is designed to ensure political independence; and to replace the public interest test in favour of a competition test.

Consideration should be given to the introduction of criminal sanctions for violations of the cartel provisions of the 1998 Competition Act. The deterrent effect of criminal sanctions is widely supported in the peer group, particularly for respondents from the UK and the USA.

Measures should be taken to enhance the status and role of competition policy in the eyes of the public. There appears to be a significant difference in the perceptions of the peer group of the relevance of competition policy to the general public in the UK when compared to the US and Germany. The survey does not allow for a serious examination of the reasons behind these findings. The high profile of US antitrust policy is more easily explainable in terms of the history of high profile cases fought out in court; however, the reasons for the status of positive assessment of German competition policy in the eyes of the public is less obvious.

Strengthening the role of the OFT through various initiatives seems to be a general conclusion that can be drawn from a number of responses. For example, the reform of the UK merger regime will strengthen the role of the OFT and the Director General of Fair Trading. Suggested measures to increase the visibility and transparency of the UK regime suggest a more pro-active role for the OFT.

In addition to these positive recommendations, the survey suggests that the UK regime can build upon its perceived strengths (as well as weaknesses). The non-merger regime is considered to have the following strengths:

Finally, the survey results indicate that the UK regime should keep the monopoly provisions and remedial powers of the Fair Trading Act 1973.

The increased globalisation of markets and companies has prompted the question of what the response to globalisation should be for competition policy. This is already being considered in a number of international organisations including the World Trade Organisation and the Organisation for Economic Co-operation and Development. As the importance of some of the government imposed barriers to market access, such as tariffs, has diminished, attention has focused on other issues, in this case the effectiveness of national competition policies in tackling the anti-competitive behaviour of firms.

Consumer and Competition Policy Directorate (CCP) are responsible for developing UK policy on trade and competition issues in conjunction with other interested DTI Directorates and other Government Departments.

In February 2000 the DTI published a report undertaken by AC Neilson into international price comparisons. The primary aim of this research project was to compare retail price differences of specific items across four countries - the UK, Germany, France and the US - for a diverse range of consumer goods.

The research showed that any exercise attempting to make genuine, like-for-like international price comparisons faces numerous difficulties, particularly when comparing European countries with the US. In practice, the international availability of exactly matched items is actually quite low, with frequent differences across countries in terms of product specifications, pack sizes, packaging and so on.

The research set out to report on 100 items total, but in the end it was only possible to report a total of 56 items, based on the use of over 10,500 price points. In comparing retail prices for the UK against all three countries, the majority of items (45) successfully surveyed proved not to be significantly different. For 8 items the UK was most expensive. For 3 it was least expensive.

Please note that any comments on the methodology of this report should be addressed to Fiona Holdsworth or Linda Simon at AC Nielson.

The DTI in co-operation with the Swedish government, through the Swedish Ministry for Foreign Affairs (SMFA), commissioned the Economist Intelligence Unit to survey the price of a range of like-for-like, internationally traded, branded consumer goods across five countries (France, Germany, Sweden, the UK and the US). A report was published in April 2001.