Does globalization require a change in antitrust policy?
Issues and Background
Every contract, combination in the form of trust or otherwise, or
restraint of trade or commerce among the several States, or with foreign nations, is declared to
National boundaries have disappeared for major business transactions,
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:
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.
- it did not specify the activities that were prohibited, and
- no government agency was specifically charged with investigating and enforcing the
laws (other than a general statement assigning this task to the U.S. attorneys).
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.
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.
- 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
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.
- Antitrust Policy
This site, originally created by Luke Froeb, at Vanderbilt University, provides a wealth of
information on U.S. antitrust policy. Economic analysis, case studies, and news items are
provided that deal with mergers, price fixing, vertical restraints, and other antitrust issues.
While there's little here that directly deals with globalization, it's a superb resource on U.S.
antitrust law and enforcement from an economics perspective.
- Canadian Antitrust Law
This site provides a good discussion of international
- 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"
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
- 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
- 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.