South-Western College Publishing - Economics  

Policy Debate: Does globalization require a change in antitrust policy?

Issues and Background

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.
~Sherman Antitrust Act
National boundaries have disappeared for major business transactions, and the legal systems have no choice but to catch up.
~Diane P. Wood, "United States Antitrust Law in the Global Market," Global Legal Studies Journal, vol. 1, no. 2, 1994.

The Sherman Antitrust Act of 1890 was the first U.S. antitrust law and still serves as the foundation of subsequent U.S. antitrust law. Under this act, actions that restrained trade were declared to be illegal. The Sherman Act, however, was not initially used very often to break up monopolies for two primary reasons:

  • it did not specify the activities that were prohibited, and
  • no government agency was specifically charged with investigating and enforcing the antitrust laws (other than a general statement assigning this task to the U.S. attorneys).
These two shortcomings were rectified with the passage of both the Clayton Act and the Federal Trade Commission Act in 1914. The Clayton Act specified activities that were violations of antitrust law and the Federal Trade Commission Act established the Federal Trade Commission as an agency charged with investigating antitrust violations and enforcing antitrust laws.

In the early years of U.S. antitrust enforcement, most antitrust cases involved domestic firms that sold most of their goods in the domestic economy. Lower transportation costs, information costs, and the development of international and regional free trade agreements have resulted in a dramatic expansion in international trade in recent years. In an increasingly global economy, the task of antitrust enforcement becomes more complex.

One problem that antitrust laws have to deal with in a global economy is the possibility that firms may move their headquarters and production facilities to foreign countries and ship their goods back to the domestic economy in an attempt to evade domestic antitrust law. The U.S. has dealt with this issue by using a doctrine of "extraterritoriality." Under this doctrine, it is held that domestic antitrust laws can be applied to foreign firms if they engage in unfair trade practices that have adverse effects on domestic consumers. In recent years, the European Community and several other countries have accepted the U.S. position on this issue. To enforce this doctrine, however, the cooperation of foreign antitrust agencies is needed in gathering evidence of the alleged violations. The U.S. Department of Justice has been very active in negotiating mutual cooperation agreements with the antitrust authorities in other countries to alleviate this problem.

A second problem is that antitrust laws and enforcement policies differ substantially across countries. This confronts firms with a relatively uncertain environment in which they may be faced with different antitrust laws in each country in which they sell their commodities. Mergers between two firms must be approved by the antitrust agencies of all of the countries in which the merged company does business or the firm risks the possibility of future antitrust litigation. One problem in such cases is the possibility that antitrust authorities may use such cases as an attempt to protect domestic industries from foreign competition. In a recent case, the Boeing/McDonnell Douglas merger was approved by the U.S. antitrust authorities but the European Community antitrust agency held that it would substantially lessen competition. While the merger was eventually allowed, this case is an example of problems that are likely to become more common as antitrust enforcement is more actively pursued in more countries.

Much of the current debate on the effect of globalization and antitrust involves the question of whether standardized antitrust laws should be adopted in all countries. More standardization would provide firms with lower transaction costs and a more predictable environment, but would reduce national autonomy in establishing antitrust policies.


Primary Resources and Data

  • Antitrust Division of the U.S. Department of Justice
    The Antitrust Division of the U.S. Department of Justice (in cooperation with the Federal Trade Commission) is charged with investigating possible cases of antitrust violation, analyzing merger applications, conducting studies on competition and antitrust policy, and prosecuting violations of antitrust law. This division is also charged with formulating cooperative agreements with other national and international antitrust agencies. The text of cooperative antitrust agreements with Australia, Brazil, Canada, Germany, the European Communities, Israel, Japan, and Mexico may be found at this site. A variety of links to antitrust resource on the internet may also be found here.

  • Federal Trade Commission
    The Federal Trade Commission (FTC), in cooperation with the Antitrust Division of the Department of Justice, is charged with enforcing U.S. antitrust laws. This web site contains information on recent antitrust cases, press releases, speeches, and other information relating to U.S. antitrust policy. While at this site, be sure to examine the mission statement of the Bureau of Competition, the FTC's antitrust division.

  • Antitrust Division of the U.S. Department of Justice, "Antitrust Enforcement Guidelines"
    This 1995 document describes the guidelines issued by the Department of Justice and the Federal Trade Commission in enforcing antitrust law involving international firms. (It also provides a useful overview of U.S. antitrust law.)

  • The Antitrust Case Browser
    Anthony Becker of Saint Olaf College provides this site that contains summaries of U.S. antitrust cases, U.S. Supreme Court antitrust decisions, and links to a variety of U.S. and international antitrust related web sites. In addition, this site contains the complete text of the Sherman Antitrust Act, and slightly edited and abridged versions of the Clayton Antitrust Act and the Federal Trade Commission Act.

  • U.S. Antitrust Law
    This page, provided by the Cornell University Law School, contains the complete text of current U.S. antitrust law.

  • Competition/Antitrust Law
    This site provides a good discussion of Canadian and international antitrust issues.

  • International Competition Policy Advisory Committee Hearing (April 22, 1999)
    This site contains transcript of a hearing on the effects of globalization on antitrust policy. The discussion contained in this document provides a nice overview of the impact of globalization on antitrust law and the associated problems.

  • Pritchard Law Webs: Internet Law Library, "Antitrust and Monopoly Law"
    This web site contains links to an extensive collection of web sites containing antitrust related material.

  • Peter Morici, "Antitrust in the Global Trading System: Reconciling U.S., Japanese and European Approaches"
    In this April 2000 Executive Summary of an Economic Strategy Institute publication, Peter Morici contrasts the differing antitrust approaches of the U.S., the EU, and Japan. He notes that it will be difficult to formulate a WTO Competition Policies Agreement given these diverse perspectives. This document provides a useful overview of these alternative approaches to antitrust policy. (This document must be viewed with Microsoft Word, or a compatible browser plugin.)


Different Perspectives in the Debate

  • William J. Kolasky, Jr. "Antitrust Enforcement Guidelines for Strategic Alliances"
    In his testimony before the FTC's hearings on joint ventures, William J. Kolasky argues that the globalization of the economy results in the growth of joint ventures and strategic alliances between firms from different countries. Kolasky suggests that antitrust guidelines should be developed to provide a predictable framework within which firms can develop such alliances.

  • Barbara Casassus, "The Interface Between Trade and Competition Policy"
    In this March 5, 1998 article, Barbara Casassus summarizes the arguments raised at a February seminar that brought together about 150 representatives from several countries to discuss trade and antitrust policies. Arguments for and against greater international coordination of antitrust policy are presented in this document.

  • Joel I. Klein, "A Note of Caution with Respect to a WTO Agenda on Competition Policy", and
    Joel I. Klein, "Anticipating the Millennium: International Antitrust Enforcement at the End of the Twentieth Century"
    Joel I. Klein, Assistant Attorney General at the Antitrust Division of the U.S. Department of Justice, discusses the U.S. government's position on the effect of globalization on antitrust enforcement in these two speeches. He argues that, while there is a need for greater international cooperation among national and international antitrust authorities, a global competition policy is not desirable.

  • National Center for Policy Analysis, "Does Globalization Require Countries to Harmonize Antitrust Policies?"
    In this June 26, 2001 online document, the National Center for Policy Analysis discusses some recent cases of antitrust disputes involving the U.S., the European Commission, and bodies. It is suggested that there is a need for greater policy coordination.

  • Christine A. Varney, "The Federal Trade Commission and International Antitrust"
    In this speech, Christine A. Varney, a Commissioner at the Federal Trade Commission, discusses the need for greater cooperation among antitrust authorities, but questions the need for a global competition policy. Varney also provides a detailed discussion of the state of cooperative antitrust efforts involving the EU at the time the speech was delivered.

  • International Competition Policy Advisory Committee, "Final Report"
    This February 28, 2000 report provides recommendations concerning the future direction of antitrust policy in a global economy. It is suggested that there be greater emphasis on the use of transparent antitrust enforcement policy. The report also recommends that antitrust authorities in all developed economies work together to define best practices in antitrust enforcement. Increased harmonization of antitrust policy and increased cooperation among antitrust enforecement agencies is encouraged.

  • Robert Pitofsky, "International Antitrust - An FTC Perspective"
    In this speech, Robert Pitofsky, the Chairman of the Federal Trade Commission, discusses the need for greater international coordination of merger review and antitrust policy.

  • William F. Shughart II, "The Government's War on Mergers: The Fatal Conceit of Antitrust Policy"
    In this October 22, 1998 Cato Institute article, William F. Shugart II argues that antitrust policy does not necessarily benefit consumers. He suggests that antitrust action is often brought as a result of pressure from competitors who are concerned about the potential effects of large enterprises on product prices and not from concerns over the effect of economic concentration on consumers. He suggests that antitrust policy, while designed to protect consumers from monopoly prices, may instead help to maintain higher market prices by preventing the realization of economies of scale.The Adobe Acrobat viewer plugin is required to view this document. You may download this viewer by clicking here.

  • Makan Delrahim, "Facing the Challenge of Globalization: Coordination and Cooperation between Antitrust Enforcement Agencies in the U.S. and E.U."
    In this October 22, 2004 speech, Makan Delrahim examines the effect of globalization on antitrust enforcement. He notes that there has been an increase in the number of countries enforcing antitrust law in the last few decades. Delrahim considers several alternative methods of coordinating antitrust enforcement in an increasingly global context. He notes that the antitrust policy of the E.U. has been converging towards that of the U.S. in recent years, leading to increased coordination and cooperation in antitrust enforcement.

  • American Antitrust Institute
    The American Antitrust Institute is a nonprofit organization that encourages more active enforcement of antitrust law. The website of this organization contains links to online antitrust resources, information about antitrust law and policy, a discussion of current and recent antitrust cases, and a discussion of issues associated with international competition resources.

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