A bi-monthly, internationally circulated e-newsletter of the CUTS-Centre for International Trade, Economics & Environment (CUTS-CITEE), which has been designed to disseminate information about the “7 UP Project”, in addition to reporting interesting newsitems, which have been reported across the globe on competition and other related issues.
The 7-Up Project is a 2 year research and advocacy programme being conducted by the Centre with the support of DFID, UK for a comparative study of competition regimes of seven developing countries of the Commonwealth.
EDITOR’S NOTE
The 7-Up Project is well into its second phase now. The first phase culmination meeting, held in Goa, India on 7-8 September gave a significant boost to the progress of the project. On one hand we decided to have another round of national reference group (NRG) meetings in all the project countries and on the other, we decided to have two mid-term review meetings which were not planned initially. The second NRG meetings are already over in most of the countries, while for two, 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 review meeting of the partners and the advisers was organised in Geneva in October, which helped us in taking a stock of the progress made since Goa meeting and also to take certain important decisions for moving further. Another mid-term review meeting is slated to be held in December at Jaipur, India.
The intervening period also witnessed a spurt in the debate and discussion on competition policy in several international fora, especially with reference to a multilateral competition policy. To be specific, the issue was discussed at length in the following events:
- International symposium on ‘Competition Policy and Consumer Interest’ organised by CUTS with the support of IDRC (International Development Research Centre) in Geneva on 12-13 October and attended by representatives of consumer organisations across the world as well as from the missions to WTO in Geneva;
- the OECD global forum on competition policy held at Paris on 16-17 October;
- the UNCTAD Expert Group Meeting on ‘Consumer Interest, Competition, Competitiveness and Development’ held at Geneva on 17–19 October; and
- the Panel Discussion on Trade and Competition Policy organised by CUTS and CI (Consumers International) at Doha on 12th November.
In all these events, concerns were expressed on the growing cross-border anti-competitive practices, in tandem with the speed of globalisation over the last few years. The news of a hefty fine imposed by the European Commission on eight pharmaceutical companies for an international price-fixing conspiracy on vitamins, is just a reminder. Anyway, in all these events, it was recognised that there is an urgent need for an international framework for competition policy as the competition challenges posed by the ensuing globalisation, are hard enough to be tackled by any single country unilaterally. However, experts are divided on whether, such a multilateral framework should be put in place within the ambit of the WTO or some other forum or a completely new forum!
Nevertheless, the WTO is moving ahead alongwith its agenda on competition. The Ministerial Declaration made at Doha agreed to launch negotiations for a competition agreement after the fifth ministerial. There are definitely pros and cons of everything and we can debate for years as to what should be the appropriate forum for a multilateral competition policy, while the big corporations will continue to exploit the smaller economies and hapless consumers. Going by the experience of past several decades on the issue, it will be extremely difficult to have a multilateral arrangement on competition in any other existing forum or a completely new forum. Neither any serious attempt is being made in this regard elsewhere, except in the WTO. The spirit of binding commitment within the WTO will make such agreement more effective than a freestanding one or within some other forum. Moreover, it is likely to bring some balance in the WTO approach, which is heavily biased in favour of producers, especially the TNCs and does address the consumer concerns appropriately. Considering these, having a multilateral competition arrangement within WTO framework may not be a bad idea after all!
Happy reading!
The 7-Up Team at CUTS
PROJECT PROGRESS
The months of September and October marked the beginning of 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, Pakistan, Sri Lanka, Kenya, South Africa, 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. Some foundation, for structuring Phase II, was laid at the Phase-I culmination meeting of the Project that was held in Goa, India on 7-8th September.
The following is a brief report of the progress made by the Project during the months of September and October 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 at CUTS.
The country researchers collected this requisite information from the Competition Authority as well as from other sources and are in the process of incorporating this information in the country reports.
The additional information that has been collected is also being used by the core researcher of the Project for the purpose of revision of the synthesis of the country reports prepared by him. This information would facilitate comparative analysis of the country reports and the data would then be put in the form of tables.
Phase-II Questionnaires
The most important activity that was completed during this period was the finalisation of questionnaires for the field survey to be done in Phase II. The questionnaire is essentially an awareness survey among the stakeholders and some in-depth survey of the Competition Authority.
Preliminary discussion on this questionnaire as well as on the action plan for Phase-II was done at the Phase-I culmination meeting. The draft of these documents was prepared at CUTS and was sent to the partners and the Advisory Consultants Team of the Project for comments and suggestions. These were then finalised and sent to the researchers and partners for carrying out the field surveys.
The field survey was begun and the partners were able to get a few questionnaires filled up before the preliminary review meeting of the Project which was held in Geneva on 12th October. More questionnaires are being filled by the concerned stakeholders and would be discussed at the 2nd NRG meeting of the project countries to be organised in November. The country researchers would also make a brief analysis of these questionnaires for their respective country and a comparative analysis would then be made by the core researcher of the Project.
Preliminary Mid Term Review Meeting
In order to take stock of the progress made by the researchers on Phase-II questionnaires and on revision of Phase-I country reports, a mid term review meeting was organised on 12th October in Geneva. The meeting was attended by the country researchers and partners.
The meeting helped the partners to discuss the problems they were facing while conducting the field survey and also helped them to decide the case studies they would take up during Phase-II of the Project. Several important suggestions regarding completion of Phase-I and proceeding ahead with Phase-II emerged at the meeting. These suggestions have been considered and the work plan for the coming months has been prepared accordingly.
2nd NRG Meeting
Phase-II of the Project also involves organising of NRG meetings in the project countries. Most of the project countries organised their NRG meeting in the fist week of November, with the exception of South Africa, India and Pakistan. South Africa NRG is decided to be held on 26th November and India and Pakistan would organise it in the first week of December.
The meeting was held on 31st October in Kenya, on 2nd November in Sri Lanka and on 8th November in Lusaka. The NRG meetings discussed the Phase-I country reports, Phase-II questionnaires and the three case studies to be taken up during Phase-II of the Project. The meetings were able to decide the third case study, which was left open in the action plan for the country partners to decide in consensus with the members of the NRG. These meetings were also attended by the CUTS staff.
The meetings were quite successful and reports of the proceedings would be sent by the partners soon. A particular format for preparing the reports of these NRG meetings was sent to partners and researchers for ensuring uniformity in the reports.
MAJOR NEWS
Good for Gates, not for consumers
Microsoft has walked away from its dust-up with the US Department of Justice (DOJ) relatively unscathed. The US Attorney-General, Mr. John Ashcroft, has described the settlement of the three year anti-trust case against the software titan as a “historical settlement” that would bring “effective relief to the market and ensure that consumers will have more choices in meeting their computer needs.”
And the Microsoft boss, Mr. Bill Gates, has said that the settlement is “fair and reasonable and, most important is in the best interests of consumers and the economy.” He has added, somewhat snidely: “We recognise that the success of our products has created concerns.
This settlement addresses those concerns in a fair and reasonable manner, while still enabling Microsoft to continue innovating and pushing technology forward.” The question is: The settlement may be good for the beleaguered US economy – but would you describe it as “in the best interests of consumers” if you aren’t Mr. Bill Gates.
The answer, in balance, is no.
In order to understand why the settlement is not significantly in alignment with consumer interests, we’ll have to back-track a bit and list the issues involved in the DoJ’s case against Microsoft.
Basically, the department’s contention was that Microsoft had used its domination of the operating systems market to keep competition out. It did this in various ways. For instance, it licensed its OS at reduced rates to leading computer manufacturers, including Dell and Compaq, on the condition that they exclusively installed MS software.
The Redmond outfit wasn’t very delicate in its arm-twisting either. As IBM would tell you, the Big Blue lost several million dollars in sales when it declined to stop the sale of its own OS and software packages – and Microsoft withheld critical details relating to Windows 95….till 15 minutes prior to launch!
And then again, in addition to giving away its Internet Explorer free, Microsoft ‘bundled’ the browser into its Windows, leaving manufacturers without any choice but to pre-load it. Those who preferred to use Navigator were given a bad time with IE being triggered automatically as the default browser for a variety of functions.
Under the settlement, the cornerstone of the DOJ’s case against Microsoft remains intact: it does not prevent Microsoft from tying software like its browser, e-mail client and media player with its OS. This is the bad news for consumers.
What the settlement does require, however, is that Microsoft provide software developers with APIs used by its middleware to inter-operate with its operating systems, allowing developers to make competing products that can run on the integrated functions that Microsoft builds into its own middleware.
The above, of course, is not the only positive feature of the settlement. The other good features include:
- A prohibition against retaliatory action by Microsoft against PC manufacturers and software publishers who develop competing software;
- A requirement that Microsoft licence its operating systems to PC manufacturers on uniform terms for five years.
- A ban on the company from entering into exclusive agreements; and
- The creation of a panel of three independent monitors who will work on-site at Microsoft to oversee its conduct.
And that, as industry observers have observed, is about the best that can be expected of the Bush Administration, which is known to be more pro-business than the preceding one.
EU Busts Vitamin Companies’ Cartel
The European Commission fined eight chemical and pharmaceutical companies a record-setting 855.2 million euros ($755.1 million) in a vitamin price-fixing scheme that lasted nearly a decade.
The largest fine was given to Roche Holding’s F Hoffmann-La Roche, which was seen as the “prime mover and main beneficiary” of the price-fixing scheme, the European Union’s ruling body has said. Germany’s BASF received the second-largest fine of 296.2 million euros.
The Commission said that a striking feature of the infringements was the central role played by Roche and BASF, the two main vitamin producers, in virtually each and every cartel, while other players were involved in only a limited number of vitamin products. Both Roche and BASF said they may appeal the hefty fines levied against their companies.
In a statement, Roche said it has “fully cooperated with the Commission since these practices came to light”. Such efforts include its implementation of a special corporate training programme to “reinforce its commitment to conducting business in full compliance with all local and international laws”, as well as a special monitoring team in its corporate internal audit department. Roche also said its fine is covered by provisions made in 1999.
BASF, meanwhile, called the fine “inappropriately high” and said it plans to closely examine the reasons behind the penalty decision. The company said it will decide within two months whether to appeal.
Other companies fined by the EC included Japan’s Daichii Pharmaceutical (23.4 million euros), Takeda Chemical Industries (37.1 million euros) and Eisai Co (13.2 million euros), as well as Germany’s Merck (9.2 million euros), France’s Aventis (5 million euros) and Belgium’s Solvay (9.1 million euros).
“This is the most damaging series of cartels the Commission has ever investigated due to the sheer range of vitamins covered which are found in a multitude of products from cereals, biscuits and drinks to animal feed, pharmaceuticals and cosmetics,” EU competition commissioner Mario Monti said in a prepared statement. “The companies’ collusive behaviour enabled them to charge higher prices than if the full forces of competition had been at play, damaging consumers and allowing the companies to pocket illicit profits,” he said.
The US justice department was the first to crack the worldwide vitamin cartel, levying a $500-million fine against Roche in 1999, the largest ever in a criminal prosecution of any kind. BASF paid a $225-million fine in the case. Other companies fined in the US case included Merck, Takeda, Eisai and Daiichi. Following the opening of the EU probe in May 1999, the EC said it found that 13 European and non-European companies participated in cartels aimed at eliminating competition.
EVENTS
Symposium on “Competition Policy and Consumer Interest in Global Economy”, Geneva, 12-13th October 2001
CUTS Centre for International Trade, Economics & Environment organised a two-day expert level meeting on “Competition Policy and Consumer Interest in Global Economy”, in Geneva, on 12-13th October, with the support of International Development Research Centre, Canada.
The purpose of the meeting was to conduct a dialogue among various stakeholders on the issue of competition policy. Representatives of the Government, industry, NGOs and academia from different parts of the world participated in the meeting. A brief report available on http://cuts-international.org/press-oct-nov01.htm#cartels
Panel Discussion on “Trade and Competition Policy”, 12th November 2001, Doha
Consumers International and CUTS Centre for International Trade, Economics & Environment organised a panel discussion on “Trade and Competition Policy” on 12th November in Doha, on the sidelines of the 4th WTO Ministerial Conference.
The purpose of this meeting was to discuss and debate the interaction between trade and competition policy including the desirability of a separate agreement or arrangement on competition within the multilateral trading system under the WTO, to tackle the growing cross-border competition abuses in the era of globalisation. A brief report available on
http://cuts-international.org/press-oct-nov01.htm#Consumers would competition
FORTHCOMING EVENTS
‘Investment for Development’ Launch Meeting, 13-14 December 2001, Jaipur, India
CUTS Centre for International Trade, Economics & Environment is conducting a two year research and advocacy project titled “Investment for Development” to create awareness and build capacity on investment regimes and international investment issues in selected developing and transition economies. The Project is being supported by the Department for International Development (DFID), UK. The countries selected for the Project are: India, Bangladesh, Brazil, Hungary, South Africa, Tanzania and Zambia.
The Launch Meeting of the Project will be held in Jaipur, India on 13-14 December 2001.
Mid-term Review Meeting of the 7-Up Project, 16th December 2001, Jaipur, India
The mid term review meeting of the 7-Up Project will be held on 16th December 2001 in Jaipur, India. This meeting of the Project partners and researchers would help to get a closer look at the progress of the work in the context of Phase II of the Project and the first phase of the Project would be completely over with this meeting.
CONTACT US
CUTS Centre For International Trade, Economics & Environment (CITEE)
D–217, Bhaskar Marg, Bani Park,
Jaipur 302 016, India,
Ph: +91(0)141-228 2821-3
Fx: +91(0)141-228 2485
Email: cuts@cuts.org