7Update Enewsletter Volume-2 No.2

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 second round NRG meetings are already over in most of the countries, while for India, 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 mid-term review meeting of the partners and the advisers was organised in Jaipur on December 16, which helped us in taking stock of the progress made since Geneva meeting on 12th October 2001 and also to take certain important decisions for moving further.

The intervening period witnessed one of the worst phases in the global economy. When the global economy is already hit by a recession, the terrorist attack in the US and the Afghan War in its aftermath has made the situation worse. At this time of crisis, the oil cartel: OPEC tried to push up the prices of oil through a cut in production, which could prove lethal to the world economy. However, the OPEC members were not fully successful in their design thanks to non-cooperation of non-members like Russia, who did not respond well to OPEC’s call for cutting down oil production.

The behaviour of OPEC has been a cause of concern for quite a long time across the globe. But at a time when a number of private international cartels have been busted and the companies fined heavily by different competition authorities, people may ask why the oil cartel is exempt from competition and price-fixing rules? In the US efforts have been made to discipline OPEC but they could not succeed.

There is no doubt that OPEC is the most hardcore and damaging cartel, but we must accept the fact that it is different from other private international business cartels. Hence, the competition laws that are in force in several jurisdictions may not be enforceable on OPEC. Neither it would be desirable for an anti-trust law of a particular country like US to be used for breaking OPEC.

Thus the matter of OPEC price-fixing is left in the realm of political negotiations and pressures. The Ministerial Declaration adopted in the Fourth Ministerial Conference of the WTO at Doha is of particular interest in this regard. The proposal on competition policy in the declaration provides explicitly for “provisions on hardcore cartels.” If the members of the WTO really get into an agreement on competition with such a provision, the oil importing countries may be able to raise the issue of OPEC at the WTO. If global oil prices are freed, the developing countries are likely to gain more as an inflated oil bill is a major impediment to their development. Consumers the world over will have the last laugh of course!

Happy reading!

Pradeep S Mehta


The months of November and December were essentially a period of transition from Phase-I to 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, Kenya, Pakistan, South Africa, Sri Lanka, 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. A mid-term review meeting was organised to take stock of progress and to recast the action plan for the remaining months of the project.

The following is a brief report of the progress made by the Project during the months of November and December 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 by CUTS.

Field Survey on Awareness: An important activity that was completed during this period is a field survey of stakeholders to get an idea of level of awareness among them on several competition issues. This survey also helped the partners to choose their case studies for Phase-II especially the third one. A preliminary analysis of the survey findings was done and discussed in the 2nd NRG meetings. The country researchers would make further analysis of these questionnaires and a comparative analysis would, then, be made by the core researcher of the Project.

Mid term Review Meeting: The mid term review meeting was organised on 16th December in Jaipur, India. The primary objective of the meeting was to take stock of the Phase-I reports and to plan the methodology of case studies to be taken up during phase-II.The synthesis report as revised by the core researcher was presented in the meeting. The meeting was also utilised to recast the plan for the rest of the project period in general and next quarter in particular.

2nd NRG Meetings: Phase-II of the Project also involves organising stakeholders’ meetings in the project-countries. Most of the project-countries organised their NRG meetings in the first week of November, with the exception of South Africa, India and Pakistan. The meeting was held on 31st October in Kenya, 2nd November in Sri Lanka and 8th November in Lusaka. South Africa NRG was held on 26th November and Pakistan’s meeting was held on 8th December. Indian NRG would be organised on January 11, 2002.


Controversial EU takeover regime may be reformed

Mario Monti, the European competition commissioner, is to present wide-ranging proposals to reform the European Union’s controversial anti-trust regime for mergers and acquisitions. The proposals come amid growing criticism by US and European companies of the current rules. One idea is to allow companies to request a “cooling off” period of about two weeks in the crucial phase of European authorities’ takeover investigations.

In a 111-page set of plans on merger regulation, to be presented to the European Commission on Tuesday, Mr Monti will also open the debate on whether Brussels should move closer to the US system by adopting the same test to judge whether a deal is anti-competitive.

Several companies have criticised the commission for blocking mergers on anti-trust grounds without giving them enough time to present concessions. The tight deadlines imposed by EU rules were a major factor in the blocking of General Electric’s Dollars 43bn (Euros 48m) takeover bid for Honeywell in July – which triggered a major transatlantic row between US and EU regulators.

In a desperate attempt to have the GE-Honeywell deal approved, the two US industrial groups presented a series of concessions five days before the decision, which were rejected by Mr Monti because they were too late and insufficient.

In the Financial Times today, the heads of the French electrical group Schneider and of the Swedish packaging giant Tetra-Laval – which both had mergers recently blocked by Brussels – say the procedures are “highly opaque and unpredictable”.

Under the current system, companies have until the end of the third month of the commission’s four-month inquiry into a deal to present concessions to allay the regulators’ fears. Companies and lawyers complain that this leaves them little time to discuss the concessions with the regulators and alter them if needed.

“The last month of an EU inquiry is just hell, you just can’t negotiate with your back against the wall,” said a competition lawyer yesterday.

Under the Monti proposals, companies will have the chance to “stop the clock” for 10-15 working days to discuss and modify concessions. The document also opens a debate on the key test to decide whether a merger should be blocked. The commission currently uses the “dominance test” which states that deals that create or strengthen a company’s dominant position in a market should be prohibited.

The US authorities use a different yardstick and block deals that lead to a “substantial lessening of competition”. In practice, the two tests are fairly similar but companies involved in mergers scrutinised in the US and EU have complained the divergence leads to legal uncertainty and increased costs.

“The commission believes the time is right to initiate a thorough debate on the respective merits of the two tests for merger control,” the paper says.

Mr Monti’s paper is part of the commission’s periodic reviews of European merger control and will be the basis for changes to rules after all interested parties have expressed their opinion on the plans.The paper also proposes ways to make it easier for companies to notify deals to the authorities in Brussels.

(Financial Times, December 7, 2001)


The recent efforts by OPEC to cut down global oil production and pushing up prices have caught the attention of people. When the global economy is in shambles, especially after the terrorist attack in the US and the Afghan War in its aftermath, OPEC’s attempt to take advantage of the situation is indeed unfortunate. There was an interesting exchange of letters by two readers of the Financial Times:

Oil exempt from competition regulations

Perhaps one of your readers or editorial staff can explain to me (and, I suspect, to many others) why the oil cartel continues jointly and openly to exert control over its product availability and price without falling foul of the competition and price-fixing rules and regulations? In recent times we have seen the competition authorities blocking businesses that are considering, for example, a merger; or businesses that are seen to be fixing product prices between them.

None of these is “oil related” so the book of anti-competitive behaviour must make an interesting read. I should like to obtain a copy to help me in my understanding of what political influence determines what is deemed as “reasonable competitive” behaviour.

(Ron Hosking, 1361 Osteras, Norway; Dec 7, 2001)

Legal action against oil cartel failed

Mr Ron Hosking (Letters, December 7) asks why the oil cartel is apparently exempt from competition and price-fixing rules. I am aware of only one attempt to enforce these rules by legal action against the cartel, and it failed.

In 1979 the International Association of Machinists and Aerospace Workers, a US trade union, brought a treble damages antitrust action against the Organisation of Petroleum Exporting Countries and each of its member states in a federal court. The union claimed that its members had to pay higher prices for petrol as a result of OPEC’s price-fixing activities. OPEC could not be served with process and was dismissed from the action. Its member states were served but chose not to enter an appearance.

The case proceeded against the OPEC member states under 1976 US legislation (the Foreign Sovereign Immunities Act) allowing states to be sued over their commercial acts. Under the FSIA, the nature and not the purpose of the state action determines whether it is commercial. The union argued that marketing and price-fixing of a commodity were plainly commercial in nature. This argument certainly accords with the trend of decisions under the FSIA and similar legislation in other countries, including the UK.

The federal judiciary, however, held that oil raised particular issues, and dismissed the action. The District Court referred to the principle of international law granting a sovereign state the sole power to control its natural resources. Both this court and the Circuit Court, on appeal, were impressed by the fact of oil revenues being the only significant source of income to OPEC states and declared that consequently their sovereignty could not be separated from their role as oil producers.

Finally, and conclusively, the circuit court applied the act of state doctrine, under which courts simply decline to decide matters that they consider politically sensitive, particularly in the area of foreign affairs. This left the matter of OPEC price-fixing in the realm of political negotiations and pressures. It is hard to imagine any court or competition authority being eager to view it otherwise today.

(Michael Singer, Senior Research Fellow, School of Law, King’s College, London WC2R 2LS, UK; Dec 14, 2001)

Editor of ReguLetter adds

Even in recent times, a US federal judge ruling in a price-fixing lawsuit filed against OPEC by an Albama service station barred the oil cartel from controlling West Asia crude-oil production.

The judge certified the case as a nationwide class-action lawsuit and ruled on March 21 2001 that OPEC had violated US antitrust laws by controlling production to fix oil prices. The judge then barred OPEC from doing virtually anything to set or enforce production quotas among member nations.

However, experts in international law believed that the order was virtually unenforceable. A US court doesn’t have the power to tell OPEC what to do.

Neither it would be desirable for an anti-trust law of a particular country like the US to be used for breaking OPEC. Thus the matter of OPEC price-fixing is left in the realm of political negotiations and pressures.

The Ministerial Declaration adopted in the Fourth Ministerial Conference of the WTO at Doha is of particular interest in this regard. The proposal on competition policy in the declaration provides explicitly for “provisions on hardcore cartels.”

If the members of the WTO really get into an agreement on competition with such a provision, the oil importing countries may be able to raise the issue of OPEC at the WTO. If global oil prices are freed, the developing countries are likely to gain more as an inflated oil bill is a major impediment to their development.


Launch Meeting: Investment for Development, 13-14th December, Jaipur, India

CUTS Centre for International Trade, Economics and Environment (CUTS-CITEE) is conducting a two-year fact finding and advocacy project named “Investment for Development” (IFD). The project aims to create awareness and build capacity on investment regimes and international investment issues in developing and transition economies. The project is supported by DFID, UK and is being conducted by CUTS with the collaboration of UNCTAD. Seven countries have been selected for the project: Bangladesh, Brazil, Hungary, India, Tanzania, South Africa and Zambia. National level research and advocacy will be done by partner organisations in theses selected countries.

The project was launched at an international event in Jaipur on 13th & 14th December 2001. The Launch Meeting brought together all those who will be working on the two-year project along with international experts to debate on aims and scope of the project, current investment issues and discuss future project activities.

On the first day, international experts discussed key issues for developing countries in relation to investment, which were investment and development, civil society concerns and investment environment. On the second day, international experts discussed international investment agreements, national investment policy and performance & the project methodology. In the session on national investment policy and performance, the project partners presented their country research results that came out so far.


National Seminar on “Competition, Investment & Regulation: Role in Economic Growth”, 11-12th January 2002, Jaipur, India

CUTS Centre for International Trade, Economics & Environment (CUTS-CITEE), Jaipur, India, is organising the seminar in collaboration with National Council of Applied Economic Research (NCAER), New Delhi, India, on 24-25th December in Jaipur, India.

The Seminar aims at generating and enhancing understanding on competition and regulatory issues and their interface with investment. It is structured in such a way that it deepens the understanding on domestic as well as recent developments at the international level, in the aftermath of the Doha Declaration. The Seminar will involve the participation of different stakeholders of the country – consumer organisations, competition and regulatory authorities, policy makers, business, trade unions, academia and media.

The Seminar would comprise of three Plenary sessions, where the first session would deliberate the new competition law of India and the prospects and implications of a multilateral competition policy. The second session would look at the competition & consumer concerns in regulatory reforms in India vis-à-vis the power and the telecom sector. The third plenary would focus at investment policy context in India as well as at the WTO.

International Meet on “Competition Law and Policy in a Global Context”
18th March 2002, Cape Town, South Africa,

International Bar Association (IBA) in collaboration with South African Competition Authorities is organising this programme. It is part of the IBA Global Forum on Competition Policy’s initiatives.

Competition experts from all over the world will participate in the event. The programme will focus on comparative merger control analysis, competition policy in developing countries and competition compliance issues. It will also have a special session on competition law enforcement in South Africa.

IBA also intends to utilise this opportunity to begin to disseminate the message of the International Competition Network and to attract stakeholders’ interest in its work.


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