Saturday, July 28, 2007
Posted by D. Daniel Sokol
Pradeep Mehta of CUTS reports on what one suggestion did to an otherwise sleepy meeting at the most recent UNCTAD Intergovernmental Group of Experts
Every year, UNCTAD deliberates on Competition Law and Policy under an Intergovernmental Group of Experts (IGE) platform. But, it is more often a conference of nearly 100 competition learners and practitioners. Other than that, many make long and formal speeches, from which one has to dig out expert knowledge. However, many sessions are focused on special topics, and those are really illuminating.
Usually these meetings are non-controversial, but at the one held in mid-July, the Czech Republic stirred up a storm, by proposing that a special fund for competition policy and law capacity-building be created out of fines imposed in antitrust cases to be deployed in poor countries.
The Czechs argued that the possibility of improving a companys image in this manner could be attractive to competition offenders and would thus be beneficial for developing countries.
The UCP is expected to contribute significantly to poverty alleviation and increase the competitiveness of developing countries, said the Czech delegate at the meeting. The UPC would also have an educational effect, as the infringer could contribute to a fund designed to support competition systems in developing countries. The proposed UCP might also provide a basis for further discussions on links between the strengthening of competition and providing support to developing countries in finding practical solutions for their most pressing problems.
The Zambian delegate supported it, but there were a few opponents, who raised some concerns, which included the USA.
The Turkish delegate said: While the UCP might be a good way of raising funds for projects in developing countries, the opportunity to choose investment in developing countries rather than paying fines might become an incentive for violation and even encourage enterprises to engage in anti-competitive practices more often than they would have in the absence of such a programme. However, Turkey will be willing to participate in the programme.
It was necessary to apply a number of caveats to the proposal from the viewpoint of its contribution to effective deterrence, whether it might distort investment incentives, and it aid policy implications. The Czech Republic might first test its implementation at the national level before it could be considered for application to other countries, noted the US delegate associating his concerns with other similar views.
France expressed concerns regarding possible extraterritorial application of the law, the consequences relating to sanctioning mechanisms, institutional machinery and appeal procedures, and verification of use of the proceeds of the UCP.
The UK delegate had the last word, in wisely summarizing their views, that they did not have the opportunity to study the interesting proposal in detail, and that it should be a subject of broader consultations involving various relevant government agencies, such as finance, development and foreign affairs.
It was heard in the corridors that it was in fact the US, which had first suggested such a fund a few years ago. In US itself, quite often unclaimed fines are put into a trust account to pursue education and research on competition law issues.