Identifier
Created
Classification
Origin
08BRUSSELS1662
2008-10-28 15:56:00
UNCLASSIFIED
USEU Brussels
Cable title:
U.S.-EU COMPETITION CONSULTATIONS EMPHASIZE AREAS
how-toVZCZCXRO6861 PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHPOD RUEHROV DE RUEHBS #1662/01 3021556 ZNR UUUUU ZZH P 281556Z OCT 08 FM USEU BRUSSELS TO RUEHC/SECSTATE WASHDC PRIORITY RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY INFO RUCNMEU/EU INTEREST COLLECTIVE PRIORITY RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
UNCLAS SECTION 01 OF 03 BRUSSELS 001662
SIPDIS
PLEASE PASS TO FTC - KOVACIC, PARISI
DOJ FOR C. HARROP
STATE FOR EUR/ERA, EEB
SENSITIVE BUT UNCLASSIFIED - ENTIRE TEXT
NOT FOR INTERNET DISTRIBUTION
E.O. 12958: N/A
TAGS: ECIN ECON EINV ETRD ENRG EUN
SUBJECT: U.S.-EU COMPETITION CONSULTATIONS EMPHASIZE AREAS
OF CONVERGENCE
UNCLAS SECTION 01 OF 03 BRUSSELS 001662
SIPDIS
PLEASE PASS TO FTC - KOVACIC, PARISI
DOJ FOR C. HARROP
STATE FOR EUR/ERA, EEB
SENSITIVE BUT UNCLASSIFIED - ENTIRE TEXT
NOT FOR INTERNET DISTRIBUTION
E.O. 12958: N/A
TAGS: ECIN ECON EINV ETRD ENRG EUN
SUBJECT: U.S.-EU COMPETITION CONSULTATIONS EMPHASIZE AREAS
OF CONVERGENCE
1. (SBU) SUMMARY: In October 20 annual consultations on
competition policy, U.S. and EU officials emphasized areas of
convergence on anti-trust policy and opportunities for
cooperation and information sharing. A joint FTC-DoJ
delegation represented the U.S. at the Brussels talks, while
the EU side was led by European Commissioner for Competition
Neelie Kroes. Officals discussed abuse of dominance
application, mergers, energy policy, aviation, private damage
actions, and other sectors. The two sides noted divergence
in tests on proportionality, the impact of resale price
maintenance (rpm) on consumers, and approaches on direct
settlement. The session concluded with an impassioned call
from Competition Director General Philip Lowe to bring China
into the International Competition Network (ICN) via a joint
U.S. - EU effort. END SUMMARY
WE ARE AT A CLOSE CONVERGENCE
--------------
2. (SBU) In cordial annual U.S.-EU competition policy talks
held in Brussels October 20, U.S. and EU competition policy
officials emphasized areas of convergence on a number of
anti-trust and merger policy issues and explored
opportunities for cooperation and information sharing. The
joint Federal Trade Commission (FTC) - Department of Justice
(DOJ) delegation was led by FTC Chairman William Kovacic and
DoJ Assistant Attorney General Tom Barnett. Competition
Commissioner Neelie Kroes chaired the EU group, supported by
Director General at DG Competition Philip Lowe.
3. (SBU) Following opening exchanges by Kovacic and Kroes
that focused on mutual agreement and continued dialogue, the
delegations shared views on abuse of dominance applications.
For the U.S., Barnett noted internal divergence (between the
FTC and DoJ) on the recent DoJ USG report on addressing
unilateral conduct by firms, with the FTC unable to sign on
to the report for process reasons. Kovacic agreed and said
the reason for the internal split was an inability to gain
consensus among FTC commissioners on the report, which will
now be resubmitted and reviewed.
4. (SBU) On the report itself, Barnett said USG goals were
consistent with those of the Commission: to set up
competition rules encouraging economic growth and to promote
consumer welfare. He said the report looks at specific types
of conduct and recommends conduct-based disproportionality
tests to determine whether harm outweighs benefits. Kovacic
said the FTC mostly concurred and favored a "light approach,"
and suggested the greatest danger regarding abuse of
dominance was to intervene too much rather than too little.
5. (SBU) Kroes responded that there was division in the
Commission as well, even within DG Competition as well as
among various legal services regarding many competition
issues, including unilateral conduct, but said they find ways
to bridge gaps and move forward. She said the EU was in
"close convergence" with USG practice on abuse of dominance
and said the Commission in the process of examining member
state comments before issuing its final report. Both Lowe
and Kroes said the Commmission did not quite understand the
disproportionality test, suggesting the EU effects-based
approach was more appropriate for Europe, and put U.S. and EU
divergence on the issue down to culture. Lowe said the
debate was a bit asymmetric given that the U.S. had not yet
seen the Commission's report, and he looked forward to
further exchanges on the matter.
TREMENDOUS ADVANCES IN MERGERS
--------------
6. (SBU) Kroes then said the Commission will publish, in the
next few days, a remedies notice regarding mergers and said
the EU's approach to merger remedies is very similar to that
of the U.S. Commission competition officials pointed to
mergers as one of the most fruitful areas of U.S. - EU
cooperation in recent years and said the EU has drawn much
from USG views and procedures in crafting its review.
Kovacic said the Commission has made "tremendous advances" in
mergers and looked forward to continued conversation and
joint research.
7. (SBU) The two sides expressed strong interest in
proceeding with merger retrospective studies once a timetable
could be agreed. Memos will be exchanged in January, with
BRUSSELS 00001662 002 OF 003
the U.S. focusing on North America and the EU on the UK and
Germany. Differences remain, however, regarding specific
cases. The EU said Phillips-LG may be doable, but
Thomson-Reuters was a bit sensitive. Kovacic put
Google-Doubleclick forward as a long-term case. Barnett said
U.S. and EU staffs would continue to discuss these studies.
8. (SBU) Regarding staff exchanges, Barnett expressed strong
interest, but said that DoJ was restricted in its ability,
due to clearance concerns, to bring a foreign national on to
staff. Kovacic, however, said FTC would be delighted to
participate, and the Commission suggested that a European
seconded to the FTC could visit DoJ.
SECTORAL ISSUES
--------------
9. (SBU) On aviation, Barnett noted the U.S.-EU agreement on
Open Skies as a very positive development. He updated the
Commission on a number of anti-trust immunities for alliances
and said the Sky Team application for immunity, which had
been withdrawn due to DoJ and Department of Transportation
concerns, had been resubmitted to more specifically address
those concerns, which related mostly to domestic spillover,
but would likely be approved. He said a decision on the
Northwest-Delta merger was close and would be announced in
the next several weeks. Barnett said there were still
concerns about AA-BA regarding Heathrow slots and said USSG
and EU staffs were discussing. Kroes said cooperation on
aviation has been excellent and said she was less skeptical
on AA-BA.
10. (SBU) Kroes also called attention to the breakthrough on
repealing the anti-trust line exemption for shipping and said
despite some small divergence in the shipping sector with the
U.S., she was "very pleased with our joint cooperation".
Kovacic congratulated Kroes on the repeal, but said U.S.
prospects for same were essentially dead for now, although
the FTC will not give up hope for its chances in the longer
term.
11. (SBU) Final political decisions on the EU's 3rd energy
liberalization package will be reached in the first half of
2009, Kroes reported. She said the European Parliament's
views on energy competition were very close to those of the
Commission and said intensive negotiaitons with Council, as
well as with Parliament, were now taking place. She said the
final legislation would address unbundling of energy
suppliers from transmission networks, separation of networks,
and local ownership. Kovacic said energy policy is one of
the most significant issues for the USG, and highlighted a
new Congressional mandate prohibiting manipulation of market
prices for petrol products. He said the FTC was in the
process of considering rules to implement the mandate. He
added, however, that the FTC was chary of supplemental
legislation that would prohibit price gouging, concerned it
could lead to price controls and ceilings and a subsequent
reduction of supply. Lowe agreed and said the Parliament had
also weighed in on commodity and fuel prices and said the
issue would not disappear in the short term.
DIFFERENCES OVER RESALE PRICE MAINTENANCE
--------------
12. (SBU) The two sides expressed strong divergence over the
area of Resale Price Maintenance agreements (RPMs).
Commission officials said their research shows that RPMs
generally lead to price increases and that it is difficult to
find a "robust" demonstration of harm related to RPMs and
vertical restraints. Lowe stressed UK cases in particular
that clearly showed the negative effects of RPMs and said RPM
in general is not a very convincing mechanism to attain
efficiencies. FTC officials strongly disagreed, and said
that removing RPMs would lead to a change in price as well as
a change in demand. The two sides agreed to disagree but to
continue discussion of vertical restraint mechanisms in the
hopes of finding grounds for collaboration.
13. (SBU) Lowe also outlined the launching of white and green
papers covering direct settlement and a private damage
actions system ahead of adoption of a directive "possible" by
2010. Lowe agreed that the U.S. and EU diverged a bit on
this issue as well, with the EU stressing strong rigorous
public enforcement and collective redress. He said the
BRUSSELS 00001662 003 OF 003
Commission was keen to avoid any directive that would lead to
a litigious culture similar to that in the U.S. Lowe added
that the Commission was focusing on the issue of harm.
Barnett said he was very supportive of the initiative and
said he shared Lowe's concerns on excessive litigation, but
he cautioned that "pursuit of every possible harm could be a
bad thing for consumers" at the end of the day.
CHINA AND THE ICN
--------------
14. (SBU) At the conclusion of the consultations, Lowe gave
an impassioned plea for joint U.S.-EU action to get China
into the International Competition Network (ICN). He said
the focus should be on pressuring the Taiwanese to change
their nameplate (as they have at the UN and WTO) to enable
China to participate. To not do so, Lowe warned, "would
result in the weakening of the world's competition system by
not having them in." Barnett agreed and said the ICN would
be the best forum in which to engage China on competition
issues, but that we had to be very careful with this
difficult issue.
COMMENT
--------------
15. (SBU) The conclusion of another round of successful
annual U.S.-EU competition policy consultations, supports our
view that U.S.-EU divergences over competition policy are
more over implementation than over legal findings, and in any
case are less than those portrayed in the media. END
COMMENT.
16. (SBU) FTC Chair Kovacic has not reviewed this message.
SILVERBERG
.
SIPDIS
PLEASE PASS TO FTC - KOVACIC, PARISI
DOJ FOR C. HARROP
STATE FOR EUR/ERA, EEB
SENSITIVE BUT UNCLASSIFIED - ENTIRE TEXT
NOT FOR INTERNET DISTRIBUTION
E.O. 12958: N/A
TAGS: ECIN ECON EINV ETRD ENRG EUN
SUBJECT: U.S.-EU COMPETITION CONSULTATIONS EMPHASIZE AREAS
OF CONVERGENCE
1. (SBU) SUMMARY: In October 20 annual consultations on
competition policy, U.S. and EU officials emphasized areas of
convergence on anti-trust policy and opportunities for
cooperation and information sharing. A joint FTC-DoJ
delegation represented the U.S. at the Brussels talks, while
the EU side was led by European Commissioner for Competition
Neelie Kroes. Officals discussed abuse of dominance
application, mergers, energy policy, aviation, private damage
actions, and other sectors. The two sides noted divergence
in tests on proportionality, the impact of resale price
maintenance (rpm) on consumers, and approaches on direct
settlement. The session concluded with an impassioned call
from Competition Director General Philip Lowe to bring China
into the International Competition Network (ICN) via a joint
U.S. - EU effort. END SUMMARY
WE ARE AT A CLOSE CONVERGENCE
--------------
2. (SBU) In cordial annual U.S.-EU competition policy talks
held in Brussels October 20, U.S. and EU competition policy
officials emphasized areas of convergence on a number of
anti-trust and merger policy issues and explored
opportunities for cooperation and information sharing. The
joint Federal Trade Commission (FTC) - Department of Justice
(DOJ) delegation was led by FTC Chairman William Kovacic and
DoJ Assistant Attorney General Tom Barnett. Competition
Commissioner Neelie Kroes chaired the EU group, supported by
Director General at DG Competition Philip Lowe.
3. (SBU) Following opening exchanges by Kovacic and Kroes
that focused on mutual agreement and continued dialogue, the
delegations shared views on abuse of dominance applications.
For the U.S., Barnett noted internal divergence (between the
FTC and DoJ) on the recent DoJ USG report on addressing
unilateral conduct by firms, with the FTC unable to sign on
to the report for process reasons. Kovacic agreed and said
the reason for the internal split was an inability to gain
consensus among FTC commissioners on the report, which will
now be resubmitted and reviewed.
4. (SBU) On the report itself, Barnett said USG goals were
consistent with those of the Commission: to set up
competition rules encouraging economic growth and to promote
consumer welfare. He said the report looks at specific types
of conduct and recommends conduct-based disproportionality
tests to determine whether harm outweighs benefits. Kovacic
said the FTC mostly concurred and favored a "light approach,"
and suggested the greatest danger regarding abuse of
dominance was to intervene too much rather than too little.
5. (SBU) Kroes responded that there was division in the
Commission as well, even within DG Competition as well as
among various legal services regarding many competition
issues, including unilateral conduct, but said they find ways
to bridge gaps and move forward. She said the EU was in
"close convergence" with USG practice on abuse of dominance
and said the Commission in the process of examining member
state comments before issuing its final report. Both Lowe
and Kroes said the Commmission did not quite understand the
disproportionality test, suggesting the EU effects-based
approach was more appropriate for Europe, and put U.S. and EU
divergence on the issue down to culture. Lowe said the
debate was a bit asymmetric given that the U.S. had not yet
seen the Commission's report, and he looked forward to
further exchanges on the matter.
TREMENDOUS ADVANCES IN MERGERS
--------------
6. (SBU) Kroes then said the Commission will publish, in the
next few days, a remedies notice regarding mergers and said
the EU's approach to merger remedies is very similar to that
of the U.S. Commission competition officials pointed to
mergers as one of the most fruitful areas of U.S. - EU
cooperation in recent years and said the EU has drawn much
from USG views and procedures in crafting its review.
Kovacic said the Commission has made "tremendous advances" in
mergers and looked forward to continued conversation and
joint research.
7. (SBU) The two sides expressed strong interest in
proceeding with merger retrospective studies once a timetable
could be agreed. Memos will be exchanged in January, with
BRUSSELS 00001662 002 OF 003
the U.S. focusing on North America and the EU on the UK and
Germany. Differences remain, however, regarding specific
cases. The EU said Phillips-LG may be doable, but
Thomson-Reuters was a bit sensitive. Kovacic put
Google-Doubleclick forward as a long-term case. Barnett said
U.S. and EU staffs would continue to discuss these studies.
8. (SBU) Regarding staff exchanges, Barnett expressed strong
interest, but said that DoJ was restricted in its ability,
due to clearance concerns, to bring a foreign national on to
staff. Kovacic, however, said FTC would be delighted to
participate, and the Commission suggested that a European
seconded to the FTC could visit DoJ.
SECTORAL ISSUES
--------------
9. (SBU) On aviation, Barnett noted the U.S.-EU agreement on
Open Skies as a very positive development. He updated the
Commission on a number of anti-trust immunities for alliances
and said the Sky Team application for immunity, which had
been withdrawn due to DoJ and Department of Transportation
concerns, had been resubmitted to more specifically address
those concerns, which related mostly to domestic spillover,
but would likely be approved. He said a decision on the
Northwest-Delta merger was close and would be announced in
the next several weeks. Barnett said there were still
concerns about AA-BA regarding Heathrow slots and said USSG
and EU staffs were discussing. Kroes said cooperation on
aviation has been excellent and said she was less skeptical
on AA-BA.
10. (SBU) Kroes also called attention to the breakthrough on
repealing the anti-trust line exemption for shipping and said
despite some small divergence in the shipping sector with the
U.S., she was "very pleased with our joint cooperation".
Kovacic congratulated Kroes on the repeal, but said U.S.
prospects for same were essentially dead for now, although
the FTC will not give up hope for its chances in the longer
term.
11. (SBU) Final political decisions on the EU's 3rd energy
liberalization package will be reached in the first half of
2009, Kroes reported. She said the European Parliament's
views on energy competition were very close to those of the
Commission and said intensive negotiaitons with Council, as
well as with Parliament, were now taking place. She said the
final legislation would address unbundling of energy
suppliers from transmission networks, separation of networks,
and local ownership. Kovacic said energy policy is one of
the most significant issues for the USG, and highlighted a
new Congressional mandate prohibiting manipulation of market
prices for petrol products. He said the FTC was in the
process of considering rules to implement the mandate. He
added, however, that the FTC was chary of supplemental
legislation that would prohibit price gouging, concerned it
could lead to price controls and ceilings and a subsequent
reduction of supply. Lowe agreed and said the Parliament had
also weighed in on commodity and fuel prices and said the
issue would not disappear in the short term.
DIFFERENCES OVER RESALE PRICE MAINTENANCE
--------------
12. (SBU) The two sides expressed strong divergence over the
area of Resale Price Maintenance agreements (RPMs).
Commission officials said their research shows that RPMs
generally lead to price increases and that it is difficult to
find a "robust" demonstration of harm related to RPMs and
vertical restraints. Lowe stressed UK cases in particular
that clearly showed the negative effects of RPMs and said RPM
in general is not a very convincing mechanism to attain
efficiencies. FTC officials strongly disagreed, and said
that removing RPMs would lead to a change in price as well as
a change in demand. The two sides agreed to disagree but to
continue discussion of vertical restraint mechanisms in the
hopes of finding grounds for collaboration.
13. (SBU) Lowe also outlined the launching of white and green
papers covering direct settlement and a private damage
actions system ahead of adoption of a directive "possible" by
2010. Lowe agreed that the U.S. and EU diverged a bit on
this issue as well, with the EU stressing strong rigorous
public enforcement and collective redress. He said the
BRUSSELS 00001662 003 OF 003
Commission was keen to avoid any directive that would lead to
a litigious culture similar to that in the U.S. Lowe added
that the Commission was focusing on the issue of harm.
Barnett said he was very supportive of the initiative and
said he shared Lowe's concerns on excessive litigation, but
he cautioned that "pursuit of every possible harm could be a
bad thing for consumers" at the end of the day.
CHINA AND THE ICN
--------------
14. (SBU) At the conclusion of the consultations, Lowe gave
an impassioned plea for joint U.S.-EU action to get China
into the International Competition Network (ICN). He said
the focus should be on pressuring the Taiwanese to change
their nameplate (as they have at the UN and WTO) to enable
China to participate. To not do so, Lowe warned, "would
result in the weakening of the world's competition system by
not having them in." Barnett agreed and said the ICN would
be the best forum in which to engage China on competition
issues, but that we had to be very careful with this
difficult issue.
COMMENT
--------------
15. (SBU) The conclusion of another round of successful
annual U.S.-EU competition policy consultations, supports our
view that U.S.-EU divergences over competition policy are
more over implementation than over legal findings, and in any
case are less than those portrayed in the media. END
COMMENT.
16. (SBU) FTC Chair Kovacic has not reviewed this message.
SILVERBERG
.