Let International Competition Negotiations Sleep a While Longer: Focus on Tools and Capacity
Are the Competition Rules in the WTO TRIPS Agreement Adequate?
Journal of International Economic Law
Let International Competition Negotiations Sleep a While Longer: Focus on Tools and Capacity
Frederick M. Abbott 0
0 F. M. Abbott (&) Edward Ball Eminent Scholar Professor of International Law, Florida State University College of Law , Tallahassee , USA
The idea of a multilateral agreement on competition law is essentially as old as multilateralism itself.1 Among other efforts, Wolfgang Fikentscher and the Max Planck Institute in Munich developed a concrete set of proposals in the early 1990s,2 and the WTO briefly took up the idea of multilateral norms as part of the Singapore Agenda.3 My experience over the past several years working with the United
Nations Development Program (UNDP) leads me to conclude that focus on the
development of multilateral competition norms – as such – should remain dormant
at least for the medium-term future.4 Incorporation of competition rules in bilateral,
regional and plurilateral agreements between low- and middle-income countries
(LMICs) and high-income country (HICs) is premature and may be
counterproductive. More productive enterprise involves improving the tools that competition
authorities employ, while bolstering the capacity of competition authorities in
LMICs to deploy them. Regional cooperation agreements directed toward pooling
of resources may be useful in this regard.
UNDP is encouraging the use of competition law in LMICs to improve access
and affordability of health products, primarily pharmaceuticals.5 As an expert
advisor to the program, I have assisted in organizing and participated in the conduct
of capacity strengthening consultations in Asia, Africa and the Latin America
bringing together competition authorities, health regulators and intellectual property
office personnel directed toward collectively building capacity and assisting with
the implementation of national strategies.6 Based on discussions during these
capacity strengthening consultations and other meetings, there is a broad consensus
among the participating government representatives that high-prices for medicines
are a serious problem that needs to be addressed.7 The competition authorities are
typically engaged in some type of ongoing study/investigation or enforcement
process in the pharmaceutical sector.8
4 The basic idea that LMICs are better served by avoiding negotiation of international competition norms
is not new. See, e.g., Abbott 2004.
5 UNDP, Using Competition Law to Promote Access to Health Technologies: A Guidebook for Low- and
Middle-Income Countries, United Nations Development Program (ed. F. M. Abbott) (2014), available at
6 See, e.g., PowerPoints by Frederick. M. Abbott at Access to Health Technologies, Patents and Prices:
Capacity-building Consultation on the Use of Competition Law to Promote Affordable Access, ISAGS
UNISUR-FioCruz-UNDP, Rio de Janeiro, Brazil, 5–7 Dec. 2017, http://frederickabbott.com/content/
recent_presentations [hereinafter ‘‘ISAGS UNISUR-FioCruz-UNDP 2017’’].
7 As a general matter, LMIC governments face substantially greater challenges in assuring affordable
access to healthcare than HIC governments. This should not come as a surprise. Healthcare is a line item
in the national budget, and resources available in LMICs are more constrained than in HICs. In
consequence, whatever may be the access problems in the Netherlands or USA, they are almost certainly
greater in a low or middle-income country. Certainly, some countries do more than others. The Chinese
government, for example, is strongly committed to achieving universal access to health care and devotes
substantial budgetary and personnel resources to achieving this goal. WHO, China Policies to Promote
Local Production of Pharmaceutical Products and Protect Public Health, World Health Organization 2017
(prepared by F.M. Abbott), available at: http://www.who.int/phi/publications/china_policies_promote_
local_production_pharm/en/. The Indian government provides a minimum of resources to its healthcare
system. WHO, Indian Policies to Promote Local Production of Pharmaceutical Products and Protect
Public Health, World Health Organization 2017 (prepared by F.M. Abbott), available at: http://www.who.
int/phi/publications/indian_policies_promote_local_production_pharm/en/. But, regardless of the general
government attitude toward the health of the local population, high-prices for pharmaceutical products
hinder access to medicines and harm patient populations.
8 See, e.g., Frederick M. Abbott, PowerPoint: Competition litigation/prosecutions and sector-wide
inquiries in healthcare and health technologies: Country experiences, at ISAGS UNISUR-FioCruz-UNDP
There are fairly common problems that LMIC competition authorities face that
make enforcement more difficult. Without question, a substantial impediment to
enforcement is a comparative lack of resources available or allocated to fund the
activities of the competition authority. This lack of resources sometimes reflects a
general budgetary situation within the relevant country. Sometimes the resource
constraint reflects a decision about government priorities which do not necessarily
entail strong competition law enforcement. In any case, we see situations where
company-specific or sector inquiries are not undertaken because funding, including
for staffing, is not available. This is an area where solutions may be ‘‘less
controllable’’ as a matter of legal or policy choice than other areas. But, it is by no
means the only obstacle.
1 Access to Evidence
In the competition law context, access to information is important across all aspects.
The traditional means for securing prosecutable information is voluntary and
compulsory production of evidence by the target or targets of investigation.9
Without adequate evidence, there is a limited range of potential action by
competition authorities. This is an area where the relatively ‘‘young’’ competition
authorities in LMICs suffer in comparison to their HIC counterparts.10 Many
competition authorities lack the power to compel the production of evidence, even
when an enterprise is identified as the target of an investigation. For competition
authorities in a substantial number of LMICs the answer to the question ‘‘what
powers do you have to gather evidence’’ is answered by ‘‘we can only ask for it’’.
Sometimes if the initiation of a formal inquiry is approved by the head(s) of the
competition authority, compulsory process can be initiated. But there may be
substantial political constraints affecting a decision to open a formal investigation.
In effect, only by bringing a case before a judicial authority can compulsory
production of evidence be secured. This is putting the cart before the horse.
Bringing the case before assembling and analyzing the evidence presents obvious
Recommendation 1: Support should be given to competition authorities in LMICs
for the purpose of supporting legislative and/or regulatory reforms that will enhance
investigative authority, in particular the authority to compel the production of
evidence based on the competition authority’s mandate to enforce competition law.
Safeguards may and should be employed as appropriate to protect confidential
commercial information against disclosure.
9 See, e.g. Frederick M. Abbott, PowerPoint: Evidence and Remedies in Competition Law Investigations,
ISAGS UNISUR-FioCruz-UNDP 2017.
10 See US Department of Justice Antitrust Division Manual, Fifth Edition, Last Updated August 2017,
available at: https://www.justice.gov/atr/file/761166/download; ECN Working Group Cooperation, Issues
and Due Process, Investigative Powers Report, 31 Oct. 2012. European Commission Report on powers of
competition authorities, and DOJ enforcement manual, available at: http://ec.europa.eu/competition/ecn/
2 Transparency of Prices and Other Information
There is today a lot of talk about ‘‘transparency’’ in relation to the pharmaceutical
sector, such as in the context of evaluating R&D costs in relation to prices.11 Such
information may be important to enforcement actions involving excessive pricing if
patented single-source pharmaceuticals are brought within the scope of excessive
More generally, in relation to the general theme of transparency, a major issue
across competition authorities is lack of data regarding pricing. Here, widely
adopted corporate strategies enter into play. Pharmaceutical companies routinely
require that pharmaceutical procurers enter into agreements that obligate secrecy of
pricing information, which are treated as a ‘‘trade secret’’. Procurement authorities
and other purchasers are potentially subject to legal action for breach of trade
secrecy obligations if they disclose prices. The common seller’s ‘‘pitch’’ for this
obligation is that ‘‘we are giving you a special deal, but we cannot do that if others
will learn of it, because they will demand the same thing’’.
At the outset of a pharmaceutical sector inquiry, the competition authority will
want to assess the prices being charged in the local market in comparison with
prices charged in other markets.13 As a consequence of pharmaceutical industry
practice, comparison across markets becomes quite difficult. Because the price of a
pharmaceutical ultimately charged to a patient or insurance provider is typically
subject to markup through the distribution process, access to the end-user price of
that product may be of limited use. It is not clear how often pharmaceutical
companies attempt to enforce trade secrecy regarding price in terms of initiating
actions before courts or administrative authorities. It could be that ‘‘civil
disobedience’’ by those procuring medicines would be sufficient to address this
problem. But, to be clear, it is a common theme of competition authorities in LMICs
that they are unable to get pricing information because of contractual confidentiality
Recommendation 2: LMICs should be encouraged to adopt legislation making it
unlawful to establish an obligation precluding the disclosure of the prices paid for
pharmaceutical products, whether through trade secret or other forms of protection.
Broader efforts to require transparency of information relating to costs, margins
and prices in the pharmaceutical sector should be pursued.
11 See, e.g., Catherine Saez, WHO Members Set to Debate Transparency of R&D Costs, Intellectual
Property Watch, Jan. 24 2018; Council of Europe Parliamentary Resolution regarding public health and
the pharmaceutical sector, Eur. Parl. Doc., Resolution 2071, 30th Sitting (2015) } 1.
12 Frederick M. Abbott, Excessive Pharmaceutical Prices and Competition Law: Doctrinal Development
to Protect Public Health, UC Irvine Law Review, Volume 6, Issue 3, pp. 281–320, Dec. 2016, available at
13 Anticompetitive abuses are prevalent with respect both to the originator and generic pharmaceutical
sectors as evidenced, for example, in the ongoing antitrust action by the US States Attorney Generals
against a substantial number of generic producers, In re: Generic Pharmaceuticals Pricing Antitrust
Litigation, United States District Court, Eastern District of Pennsylvania, Lead Case: 16-AG-27240.
3 Imbalance in Lawyering Resources
Competition authorities in LMICs face the same imbalance in legal resources that
affect LMIC officials in other areas of law enforcement. The idea of taking on a
Novartis, Pfizer or GSK in a protracted legal battle is intimidating in the sense that
‘‘winning’’ will likely mean defending appeals to the highest court of the land, and
the attendant expense associated with protracted litigation. Novartis, for example, is
famous in the patent arena for pursuing cases without hope of victory ‘‘because it
can’’.14 Pfizer and GSK may be willing to settle with the US government because
they know that they cannot wear down government litigators until they surrender.15
That may not be true in the typical LMIC.
Imbalance in legal resources is a persistent problem in the international legal
system and its ultimate implementation and enforcement of rules in domestic law. It
is a problem that affects implementation and enforcement of patent rules generally,
and it has become a growing problem regarding investor to state dispute settlement
(ISDS) mechanisms, causing a number of governments to step back from ISDS
commitments. The wide-spread nature of the problem does not mean that it should
not be addressed in respect to implementation and enforcement of competition law
to the extent feasible. Since government budgets in LMICs are generally
constrained, one route to approach the problem is by pooling resources. This is
not so easy since domestic procedures differ, as do substantive law and language.
Nevertheless, a good deal of competition law involves securing basic evidence and
economic analysis, and aspects such as these may be less subject to material
variation. For example, a regional investigation of pharmaceutical prices, patent
and/or exclusivity abuses, and related matters are probably good subject matter for
cooperative evidence-gathering and analysis.
Recommendation 3: LMICs should be encouraged to invest in establishment of
pooled legal resource centers or other cooperative arrangements for investigating,
analyzing and prosecuting competition law actions. Such centers or other
arrangements may be most practical at the regional level.
4 New International Rules are Likely Pursued for the Wrong Reasons
In the competition arena, for the 60 ? years from failure of the Havana Charter
until quite recently, multinational business interests (i.e. the rent seekers) strongly
resisted negotiation of multilateral competition rules. Yet, during the past several
14 See, e.g., Novartis v. Union of India, In the High Court of Judicature at Madras Dated: 06.08.2007 The
Hon’ble Mr. Justice R. Balasubramanian and The Hon’ble Mrs. Justice Prabha Sridevan W.P. Nos. 24759
and 24760 of 2006, in which Novartis argued for direct application of the TRIPS Agreement despite
obvious constitutional impediment of India’s ‘‘transformation’’ system of treaty implementation.
15 See, e.g., US Department of Justice, Office of Public Affairs, GlaxoSmithKline to Plead Guilty and
Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data, July 2, 2012, to ‘‘resolve
its criminal and civil liability arising from the company’s unlawful promotion of certain prescription
drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting
practices …’’; Gardiner Harris, Pfizer Pays $2.3 Billion to Settle Marketing Case, NY Times, Sept. 2,
years, chapters on competition have emerged in bilateral, regional and plurilateral
trade and investment agreements (TIAs), with active support from groups like the
US Chamber of Commerce. It should be evident that US-based multinational
corporations have not suddenly developed a passion for having themselves more
closely regulated. They are, instead, worried about the activities of competition
authorities in emerging market countries like China and India that suddenly threaten
their freedom to operate.16
When two HIC governments negotiate a TIA and address competition policy and
law, it is likely that the national competition authorities of the respective
governments will have a significant voice at the negotiating table, and will
appreciate the issues at stake in terms of potential restrictions on authority. The EU
Competition Directorate and the US Department of Justice/Federal Trade
Commission are unlikely to allow themselves to be frozen out of important
potential changes to their authority. In the Australia-United States FTA, by way of
illustration, a substantial portion deals with matters of cooperation in investigations
based on previous specific agreements on competition law enforcement.17 Though
such TIA competition chapters have the capacity to restrict freedom of action, texts
designed to facilitate cross-border prosecution of competition actions, including
enforcement of judgments, may be useful. Moreover, negotiators were careful to
avoid subjecting significant competition provisions to dispute settlement under the
When the context is broadened to TIAs between LMICs and HICs, because of the
relatively nascent character of many LMIC competition authorities and their lack of
relative power within the national government structure, risks are substantially
heightened that rules restricting the freedom of action of national authorities will be
unduly constraining. This is, of course, the history of TRIPS-plus rules constraining
intellectual property-related flexibilities in FTAs. This is not an argument based on
the premise that competition authorities in LMICs lack the sophistication to
understand the risks of terms that constrain competition rules. Individual
competition personnel in LMICs may have equal sophistication with their HIC
counterparts. The problem is rather that they confront the same power imbalance
that public health-sensitive IP LMIC negotiators have faced in FTA negotiations.
They lack the power status of finance ministry within the national government and
their interests are more likely to be conceded as part of a trade package, just as the
interests of the health authorities have been conceded. Moreover, even seemingly
benign constraints imposed in the early days of competition law implementation
may have deleterious consequences.
16 See, e.g., US Chamber of Commerce, Competing Interests in China’s Competition Law Enforcement:
China’s Anti-Monopoly Law Application and the Role of Industrial Policy (2014), available at: https://
17 See Australia-United States Free Trade Agreement, Chapter 14, Competition-Related Matters, e.g., at
Art. 14.2: Competition Law and Anticompetitive Business Conduct (done May 18, 2004), available at:
18 See Art. 14.11, Aus-US FTA.
In the TPP, where a number of LMIC governments were involved with HICs, the
competition rules on their face are benign procedural or due process obligations.19
No one can object in principle to ‘‘good governance’’. But, the stakeholders
supporting these rules have not set out to champion individual rights. Instead, their
objective is to create a legal environment where trade authorities can bring pressure
to bear with respect to the adequacy of processes, a way of throwing a wrench into
competition law enforcement actions.20 This goal may not be so difficult to achieve
in many LMICs because of the general constraints facing the competition authorities
in these countries, which make prosecuting enforcement actions somewhat difficult
without these additional complications.
Just as with the inter-competition authority agreements traditionally entered into
between HIC authorities, the nascent interests of LMIC authorities are perhaps best
served by intra-group rules facilitating cooperation on matters such as
evidencesharing, enforcement of judgments and other matters relating to making prosecution
more efficient. Care should be exercised even with respect to seemingly benign
rules regarding matters such as internal due process. Such rules can be taken
advantage of by powerful corporate actors to inhibit investigations and prosecutions.
Substantive rules are almost certainly better left for a later stage.
One final aspect should be mentioned. Based on a long history, competition
doctrine in HICs is to some extent ‘‘calcified’’. Basic doctrinal shifts are very slow
in coming. LMICs are positioned to serve as competition laboratories because
domestic doctrine is evolving today. My own hope is that LMIC competition
authorities will lead a push for enforcement against excessive pricing; recognizing
that the UK Competition and Markets Authority (CMA) has already moved in this
direction, and the EU Commission has taken some small steps. Efforts by USTR and
other HIC trade negotiating authorities to prescribe competition norms is almost
certain to be directed towards putting a break on the evolution of strengthened
Recommendation 4: LMICs (and HICs) should resist efforts to introduce
competition rules in international agreements that impose constraints on the
discretion embodied within national competition systems. ‘‘Due process’’ should be
left for national constitutional and judicial processes, within the general constraints
imposed by international law. As discussed in Recommendation 3, regional
negotiations aimed at improving the tools at the disposal of competition authorities,
such as establishment of pooled legal resource centers and evidence-sharing should
19 See, e.g., Chapter 16, Competition Policy, Art. 16.2: Procedural Fairness in Competition Law
Enforcement, Transpacific Partnership Agreement, Consolidated TPP Text, available at: http://www.
20 In the TPP, the competition rules are not subject to enforcement pursuant to the dispute settlement
chapter of the agreement. (see Art. 16.9: Non-Application of Dispute Settlement: ‘‘No Party shall have
recourse to dispute settlement under Chapter 28 (Dispute Settlement) for any matter arising under this
Chapter.’’ While this certainly reduces the immediate threat, this is a first ‘‘beachhead’’ into the area, and
should be anticipated to become stronger once the concept becomes embedded.
There is wide international consensus that competition rules play a valuable role in
balancing public and private interest. Significant progress has been made in the
development of competition law interests in LMICs. Nonetheless, competition
authorities face substantial obstacles in investigating and prosecuting
anticompetitive abuses. Improved investigatory tools are needed, as are budget resources.
Cooperative regional arrangements are one approach that has potential. National
reforms that give competition authorities stronger investigative powers, and to
promote transparency, are important. In the meantime, subjecting these nascent
authorities to additional constraints through rules in TIAs is unnecessary and likely
to be counterproductive.
The concept of an integrated international competition rule and enforcement
system has a natural appeal for those who believe that multilateral organizations can
serve a valuable role in promoting shared values and broadly advancing public
interests. History teaches caution. Governments negotiate and ultimately control
multilateral governance, and governments, and particularly trade negotiators, are
influenced by stakeholder interests. In the competition arena, until recently major
multinational corporations strongly resisted the negotiation of multilateral rules
because they enjoyed wide freedom to operate, particularly in LMICs. That has
changed as freedom to operate has been increasingly curtailed. The pushback is a
demand for rules to regulate competition authorities. This demand should be treated
with great caution.
There may come a ‘‘golden age’’ when there is a sufficient balance between
corporate and LMIC competition authority power that negotiation of substantive
competition rules can be undertaken to further the public interest. We are not in that