Promoting Due Process in Global Antitrust Enforcement
Competition enforcement agencies around the world seek to promote due process in antitrust investigation and enforcement procedures. Policy recommendations from international organizations and legally binding commitments in free trade agreements reflect these concerns. During this event, Makan Delrahim discusses fresh thinking on ways to promote procedural convergence in global antitrust enforcement.
BELLINGER: So good morning, everybody. I am John Bellinger, the Council’s adjunct senior fellow in international and national security law. Great to see a full room, particularly at breakfast, so I think that tells us something about our speaker this morning.
Makan Delrahim has been the assistant attorney general for the Antitrust Division since last fall. You have his bio, so I am not going to go into a lot of the details other than to say two things. One, in this day where people question a lot the qualifications of government officials, I think Makan is probably one of the most-qualified people to hold the position of assistant attorney general for antitrust. He was deputy assistant attorney general in the Antitrust Division in the end of the first term of the Bush administration, beginning of the second term, 2003 to 2005, and he’s going to actually be building today on some of the issues that he worked on then. As you saw, previously he had been staff director and chief counsel and antitrust counsel for the Senate Judiciary Committee.
What’s not on his bio, which I found sort of interesting, were two things. One, that when he was going to GW Law School at night—and as you know, for Washingtonians, this is a really hard thing to do, to have a day job and go to law school at night—is he was working doing technology licensing at NIH, but that was not enough. NIH then detailed him over to the U.S. Trade Representative’s Office, where he really got his start on some of these trade issues.
And then, really, he is international himself. I can’t resist mentioning this, but he was born in Tehran and moved to L.A. in 1979 after the fall of the shah. So if we run out of talking about antitrust issues, we can talk about Iran.
Makan is going to talk this morning about international cooperation on antitrust issues and some new initiatives in the Antitrust Division. As I mentioned, these are issues of really longstanding interest to Makan when he was the deputy assistant attorney general overseeing the Antitrust Division’s international programs. He worked on these issues 15 years ago.
And I just want to mention that he is joined this morning by an old friend of mine, Roger Alford, professor of international law at—first at Pepperdine, more recently at Notre Dame, who has come in to be the deputy assistant attorney general overseeing the international programs at the Antitrust Division and taking Makan’s old job. When I was legal advisor at the State Department, Roger convinced me back in I think 2005—he was running an international law blog on the side of being a professor called Opinio Juris. And after chewing on my ankle for about three months, he convinced me to be the first U.S. government official ever to blog. (Laughter.) And I blogged for an entire week on Opinio Juris.
So, Makan, I don’t know who put you up to this speech, but watch—keep a close eye on Roger. So, anyway, the floor is yours. Makan’s going to come talk for a few minutes, we’ll talk up here, and then we’re going to open the questions to the rest of you all.
DELRAHIM: Thank you again, John, for that—for that introduction and your pioneering work in blogging. (Laughter.) People have overtaken you with microblogging nowadays. But thanks again for the opportunity to be here at the Council on Foreign Relations. I personally find invaluable the work that you guys do and the debate that is promoted here at CFR. You contribute immensely to the international dialogue and a—and a collegial understanding on international economic and diplomatic relations.
Today, as John mentioned, I’ll discuss an important topic related to international economic relations, which has been a focus of mine—as also he mentioned—since I was the international deputy over at the Antitrust Division. Specifically, I would like to offer some fresh thinking on how to promote greater procedural norms and due process in antitrust—or, as nowadays it’s referred to internationally, competition—enforcement.
Margaret Thatcher, at the height of the Cold War, said that, quote, “modern liberty rests upon three pillars: representative democracy, economic freedom, and the rule of law.” As competition enforcers, every day we have the privilege and honor to uphold all three pillars of modern liberty: We work within democratic institutions, in pursuit of economic freedom, subject to the rule of law. Given the natures of our duties, we tend to focus on economic freedom. Just as important, however, is how we uphold the rule of law in the pursuit of that freedom.
During my Senate confirmation hearings last year, I emphasized that the rule of law and its promotion internationally would be one of my top priorities as assistant attorney general. My first speech—my first public speech focused on international antitrust policy, including new approaches to international cooperation with close partners that would focus specifically on principles of nondiscrimination, procedural fairness, and transparency.
I appointed my good friend for over 25 years, a highly-respected professor of international law, Roger Alford from Notre Dame—took a lot of convincing; took me probably almost three months nipping at his ankles to convince him to come—to be the international deputy, and immediately challenged him and our very capable attorneys in our International Section at the Antitrust Division to think creatively in how we can promote fundamental due process in antitrust.
The proliferation of competition authorities around the world underscores the importance of agreeing on a core set of procedural norms. I sometimes joke that antitrust has been our greatest export outside the United States. We now have 140 competition agencies, approximately, and there’s greater international commerce, including because of the digital commerce that’s proliferating. So it’s more and more critical that we share a common set of principles that affords due process to individuals and businesses in investigations and enforcement.
Fortunately, the competition community has long embraced this issue as a—as a matter of common concern, and recognized that pursuing the common good of procedural fairness means acting according to a core set of common rules. There’s now a groundswell of support for fundamental due process in competition enforcement, and many believe that the time is right to propose some fresh thinking on how to accomplish this shared objective.
Today, I would like to share with you our recent efforts towards a new approach for an improved system of competition enforcement. The goal of this approach is to garner increased confidence and respect for antitrust enforcement globally. Specifically, we intend to achieve agreement among competition agencies around the world on fundamental procedural norms.
Towards that end, I’m pleased to announce that next week the United States, in partnership with leading antitrust agencies around the world, will introduce and invite the global antitrust enforcement community to help finalize and join the Multilateral Framework on Procedures in Competition Law Investigation and Enforcement. It’s a longer title. As we do very well in the federal government, we assign new acronyms. So MFP, for the Multilateral Framework on Procedures, for short.
For the past several months, we at the Justice Department have been drafting proposals and meeting with our counterparts from around the world to develop a draft text to serve as the basis for the MFP. We have worked closely with our colleagues at the Federal Trade Commission and, of course, the Department of State, and appreciate the cooperation and the wisdom they have provided.
On a personal note, I want to thank the most immediate former chair of the Federal Trade Commission, Maureen Ohlhausen, as well as her staff, as well as the new commission that just got confirmed recently, for their continued support and partnership with us on these.
We’re committed to including in the agreement those procedural commitments that reflect fundamental due process. We are also committed to bridging the differences between civil and common law countries, between administrative and prosecutorial approaches, and between young and old agencies in small and large markets. The goal is to identify procedural norms that are truly universal. What we have proposed are norms that are accepted across the globe and, indeed, that almost every agency already has recognized in some form or another.
To derive these principles, we compared the texts of competition chapters in major trade agreements, and every OECD and ICN—that’s the International Competition Network—guideline and recommendation touching on procedural issues. We also examined the practices of competition authorities around the world. As a result of this effort, we identified approximately a dozen core values. The MFP includes important due process commitments regarding nondiscrimination, transparency, timely resolution, confidentiality, conflicts of interest, proper notice, opportunity to defend, access to counsel, and independent judicial review.
We also have given extensive and considered thought to the appropriate compliance mechanisms. The MFP strives to ensure meaningful compliance among competition agencies toward advancing the culture of free-market competition that we share. Suggestions, guidelines, and recommendations were critical first steps in this process, but now is the time for us to go further. Rather than simply encouraging good behavior, the time is now for us to embrace meaningful mechanisms that encourage compliance. We have now canvassed every type of treaty one can imagine, and we have presented to our competition enforcement partners proposals that we think are meaningful and achievable.
The compliance mechanisms built into the current draft of the MFP, we are convinced, will be key to its success. We have proposed a variety of ways to ensure the greatest compliance by competition authorities. We expect nothing less from subjects of our enforcement, and we should expect nothing less from ourselves.
The compliance mechanisms do not envision establishing a formal and binding dispute settlement mechanism, but do help to ensure that we all have sufficient incentives to comply with the common commitments. Generally speaking, governments comply with international commitments because of threats of retaliation, promises of reciprocity, or potential harm to reputation. Given the context and the nature of our competition enforcement functions and the proposed commitments in the—in the MFP, our focus is on the last of these mechanisms: enhancing reputation, a value to which all of our competition agency partners already are committed.
In my 15 years’ experience with the increasing network of international competition authorities, I have found a common and positive characteristic. We all share a commitment to shared objectives, and each invest heavily in building relationships through frequent interactions towards advancing our shared values for free markets through competition law enforcement. Thanks to a vibrant press and active bar, we are subject to careful and constant scrutiny, increasing the transparency and information that is available on agency behavior. The rich network of relationships ensures that reputation matters, and that promise to abide by an obligation becomes a potent means of enhancing compliance.
Guidelines, as we all know, are valuable. Promises are different, however, because they create the opportunity for reflecting on decisions that may help enhance reputational standing among peers. This is true for both hard-law commitments such as treaties and soft-law commitments such as MOUs. Even the choice of whether to join a multilateral arrangement that is open to all and reflects fundamental norms is an important statement in international economic relations.
Accordingly, our goal has been to design a respectful agency-to-agency arrangement that is not a treaty in the formal sense, but nonetheless uniquely suited for the specific functions of market competition enforcement that we engage in. Given the broad consensus on fundamental due process, the main purpose of the upcoming discussions towards building a consensus next week will be—will not be to compromise on the norms, but to contextualize the language to reflect the different legal systems and agency approaches. Many agencies have likely already internalized these norms as part of their own legal systems.
We have been pleased, but not surprised, by the incredibly warm reception the MFP proposal has received around the world already. The vast majority of agencies with whom we have had the opportunity to discuss have welcomed the initiative and have agreed to help negotiate toward its conclusion. And, of course, it is our legal—it is our goal and design to ensure that every antitrust enforcement agency around the world joins it and finds its norms consistent with their approaches on process.
To date, we have asked our partner agencies to consider the need for a multilateral framework on procedures with core procedural norms and a meaningful compliance mechanism, and that they agreed to negotiate in good faith towards its conclusion. We have used opportunities at various international meetings to discuss informally the concepts of the MFP, including recently in New Delhi, where the ICN was held; in Brussels; in Mexico City; Washington, D.C.; and elsewhere. And we will continue further discussions in Paris next week during our meetings of the—at the OECD.
We intend for the MFP to be an open rather than a closed instrument. That means that it will be open to every competition authority around the world. That’s a model of negotiation that is common in other contexts, and one that we are confident will be successful here. This approach allows for the negotiations to proceed toward a strong document at a brisk pace, but also allows for inclusive input from others. I expect this approach will generate momentum towards core commitments with widespread adherence in the coming months.
In proposing the MFP, we have borrowed liberally from other sources. The draft is an amalgamation of other competition initiatives already in place, combined with ideas derived from other contexts. This new model of cooperation builds upon and is fully consistent with previous efforts to promote procedural fairness. It’s a logical, incremental, and yet significant step towards promoting procedural norms. I truly believe that explains why it has been warmly received by so many other competition agencies so far.
Let me speak briefly about the building blocks that have informed the current initiative. First, the cornerstone of the MFP is the network of competition agreements between competition agencies already. For decades competition authorities have entered into cooperation agreements to reflect a commitment to close collaboration. The United States has over a dozen of such—such cooperation agreements, and there are almost 150 such agreements around the world. These agreements are the principal expression for coordinating competition enforcement, and the MFP reflects and builds on that.
The second building block for the MFP are the procedural principles promulgated by international organizations, the OECD and the ICN. They have been invaluable platforms for the promotion of sound competition enforcement. The work the competition community has done and continues to do through these organizations helps make an agreement such as the MFP possible. These organizations have routinely promulgated best practices, guidelines, and recommendations, and they’ll continue to do so. We welcome those efforts that have played a major role in promoting—in promoting them—promoting the norms in the MFP, and we will continue to play a major role in that. It’s important to note that both the OECD and the ICN encourage competition agencies to implement the suggested guidelines and recommendations in a variety of ways, including through international agreements.
In 2014, the OECD recognized that, quote, “transparent and fair process(es) are essential to achieving effective and efficient cooperation,” and that competition agencies are “committed to working together to adopt…international cooperation instruments,” including “new forms of cooperation.” There have been similar language in the ICN’s Operational Framework. Cooperation agreements, including the MFP we’re discussing today, complement and enhance the work of these organizations.
Finally, the third building block of our proposal are commitments in competition chapters in certain free trade agreements. The provisions in modern competition chapters vary in their scope and detail, but they all include core commitments such as transparency, nondiscrimination, and procedural fairness. Notable examples include the Korea-U.S. Free Trade Agreement, as well as agreements that are under consideration currently such as NAFTA 2.0. I should note that the MFP is fully consistent with these FTA chapters, and seeks to build upon and extend the due process commitments beyond just our closest trading partners.
We welcome and support competition chapters in FTAs, and have spent many hours negotiating them. They’re useful as examples of instruments that reflect binding commitments on procedural norms, but we also recognize their limits. Competition chapters are a small part of free trade agreements, and the agenda of every trade negotiation encompasses issues that extend far beyond the core concerns of antitrust laws. A multilateral arrangement between competition authorities on fairness is far more likely to generate both broad and deep commitments.
These three building blocks, taken together, form the basis of the MFP in competition law. Our shared vision is a multilateral framework that is open to all competition authorities, as I mentioned before; reflects fundamental due process values recognized by almost every competition authority; enhances and extends the work of international organizations; and incorporates meaningful mechanisms to secure compliance. With those goals in mind, we’ll proceed with the discussions next week in Paris and thereafter, and invite all antitrust enforcement agencies to join us in the pursuit of providing due process as we achieve our goal of liberty through the proper enforcement of competition laws.
Thank you so much. (Applause.)
BELLINGER: So, Makan, thank you for that announcement. That’s a—seems like a—I’m not an antitrust expert, but it seems like that’s a significant announcement that—the Multilateral Framework for Procedures being launched.
So let me—I want to tease out some of the details of things that you mentioned, and then we’ll open it up for questions in about 10 minutes. So it sounds like you’re not springing this on the rest of the world, that you’ve got—that you’re pretty far along. It sounds like you’ve actually got a text that has been circulating and that you’re headed to Paris next week to try to—I don’t know whether finalize or get as far along as you can. So tell us about the process from here. Everybody wants to know, are we there yet? How long is this going to take to, is your sense, to negotiate this multilateral framework? And when do you think it might end up being open? As you said, you want to have it be an open agreement, open for others.
DELRAHIM: Thanks for that. And, again, thanks for indulging me today on this.
As far as the process, so next week we have, you know, a number—I think almost a dozen agencies with whom we have shared the agreement and have discussed this over the last three, four months. And we’ll be sharing the text more broadly. I did not intend this, nor is it really a U.S. proposal, but really one where a number of important partners on international enforcement agree with. And there are reserve clauses, clauses that you’re familiar with in the international law arena, that allows for different agencies, you know, with their different capacity levels to be able to commit to these procedural norms and values. Frankly, it’s designed in a way where it would be tough to not join, I think, for competition agencies. I think within the next, I’d say—my hope is that by the end of this year we will have a strong representation of both young and new agencies, as well as civil and common law countries, to—that have—that will have signed on to this, to the commitments, and the dialogue will continue.
BELLINGER: So you’ve got, you think, pretty good buy-in, at least from this initial group of a dozen countries, as to what you’re trying to do and these dozen or so procedural goals.
DELRAHIM: I do, I do. And, you know, initially, with the general concept, many enforcement agencies said that makes sense; I can’t imagine not agreeing to these principles. And so we went towards drafting, and a lot of language was shared back and forth to get to a place with a diverse group of enforcement agencies, in agencies in new jurisdictions. So, for example, one of our I think important trading partners in China, their antitrust law is not even 10 years old, this August will celebrate its 10-year anniversary. But they should be commended for how far they’ve come along, and they continue to reform. They’re about to implement new reforms in this coming month—they just announced it recently—where they take three different agencies around their government and consolidate them into one in a new ministry dealing with antitrust enforcement, which I think is a positive step.
BELLINGER: So let’s talk a little bit about who’s in and who’s out. We were talking beforehand. Obviously, I’ve been at the State Department, where we worked on lots of treaties and agreements and less-binding things. And sometimes you’ve got a big multilateral agreement where it’s open to all countries; sometimes you start with a smaller group. It often makes sense to start with a smaller group because then you can get buy-in from the likeminded and lock that down rather than trying to start with 190 countries and then you get the lowest common denominator. The problem, of course, with starting a small group is the people who are not part of the small group are unhappy that they’re not part of the small group, and then they complain bitterly from the outside and lob things in at you, and then may ultimately try to change the agreement. So talk to us about that. I mean, are—who’s in and who’s out? And who’s going to be unhappy that they were not included? For example, China, Korea, some of the countries that we’ve had some concerns about on trade, are they going to be part of this initial small group? If not, how do we encourage them to join later?
DELRAHIM: Sure, it’s a good question. The goal has been to not—to make sure that there’s not two different classes where there’s, you know, the in-crowd and the out-crowd. Our initial approach was to work with partners who have had experience like the United States has had, and Canada and others, but also a diverse group of—in different regions, and to be able to work with them. I don’t want to get into specific countries we have discussed this with, but the idea was to come up with the common understandings of those shared values, not so much to have an inclusive and, you know, two different classes of agencies, but really to make sure that we have the common understandings, and it’s not a—you know, a U.S.-handed-down set of proposals but one where it has broad buy-in, which will make it easier.
And our goal is to then release the text soon to all agencies—including China, Korea, the Japan Fair Trade Commission. Those are important allies and partners in this paradigm. And so I don’t think there should be any agency that will—that should feel that they’re—they’ve been left out or are not part of that initial group because I think the initial negotiations will really occur once it’s broadly disseminated. This first group is not really a, you know, negotiation. It’s more a common collaboration on the final text.
As I mentioned, it’s really not intended to compromise on the values because these values are those that have been shared through not only the international organization principles, but many agencies around the world already are committed to these internally, or at least they say so.
BELLINGER: So let’s talk a little bit about the substance. You said that it’s—and this makes a lot of sense—sort of an amalgamation of principles that are already out there in competition chapters of FTAs, in some of these soft-law guidelines. You sort of pulled them together and added some others. Does it go beyond just being an amalgamation? Are you trying to raise the bar? Because particularly if you’re starting with 12 countries, this is a chance not just to patch things together but to say we think the bar ought to be up here.
DELRAHIM: The goal is to have that common bar. And really, ultimately, it’s to the benefit of the enforcement agencies. We want to enhance the trust and the respect with our procedures.
And, you know, and that is to take into account the different legal and political systems we might have in different regions. But ultimately, you want to be sure that the subjects of the law enforcement in antitrust law all appreciate—whether we may end up with a different outcome in the U.S., in Europe, in China or whatever, you want to be able to have confidence in that process. So these commitments to the procedural norms are really to the benefit of the whole international community on this because we’ve had greater and greater international commerce that are affected by antitrust laws, and we don’t have a multilateral agreement of disciplines. And I don’t really know if it makes sense in that type of an environment of a—you know, of a multilateral trade agreement like the WTO. However, at a minimum on these procedural norms like nondiscrimination, like transparency, like the ability to have independent judicial review.
And many people would probably agree that antitrust law in the United States was saved by the court system. And the flexibility of our law enforcement model has allowed for new thinking and new understanding of economic models that has changed our approach to antitrust law to make sure we’re not preventing business practices that actually could be consumer-enhancing. And we have gone through those changes, and I am already seeing that in—you know, that’s happening in China, where the judiciary has taken a very active role in helping understand how they’re executing their antitrust laws. And we want to be sure that, you know, to the extent those countries allow for that, that they commit to it.
BELLINGER: So let me bore into that. How is this, then, an improvement? We have these FTA competition chapters. We have soft-law guidelines. You have interagency agreements with—either bilateral or with groups. You know, why is this framework going to be an improvement on that?
DELRAHIM: So two reasons. One, you will have—you know, similar to how some of these international organizations and soft law give guidelines, once we all promise to each other as enforcement agencies that we will live up to a certain level of commitment, it’s going to be a lot more meaningful to make sure we raise the bar on procedural norms and the due process we afford individuals and businesses.
And, two, because of the—I think the reputational concerns that agencies would have, it is going to be much more likely that there will be compliance with these norms. So we have a handful of, as I mentioned, about a dozen or so of these international cooperation agreements. This will allow us to have a better dialogue and cooperation on enforcement, cross-border. But also, when a company comes and complains to an enforcement agency that, hey, this foreign agency is discriminating against me, we will now have a mechanism by which to say, well, let’s take a look; are you really just complaining because your practices abroad is now subject to some law enforcement, or is there really something inherently problematic with the process—the way they’ve done a raid, the way they may not allow for attorney-client privilege? That the—it might be arbitrary of how they enforce the law rather than a transparent system, which I think is really important.
BELLINGER: So the ideal is, as I understand it, this sort of would become the gold standard, and agencies conducting antitrust reviews or investigations should be complying with these procedural standards? Before, they could easily duck different things because it was—they were either not party to an FTA, or they were not party to certain guidelines, or they are not part of the antitrust network. But this will ideally become the gold standard for procedures. Of course, some countries may just not join. And then you can’t really accuse them of not complying if they’re not—if they’re not part of it. But you hope—that’s where the reputational damage comes in.
DELRAHIM: I think so. I think—I think it behooves every agency to commit to these types of norms. And if they don’t, it also sends a signal. What does it mean, if you’re not agreeing to the principles of non-discrimination and transparency? So I think it’s really important. Now, we want to be respectful. There’s reserve clauses in the agreement that allows for different agencies to have certain respect. So some legal systems, for example in Mexico, they do not recognize attorney-client privilege. But perhaps the antitrust agency over there recognizes how important it is for cartel enforcement to have that, because you’ll be able to, you know, get access and cooperation in an amnesty program from international council. And they may want to recognize some level of it, but we fully appreciate that it might be, you know, their broader legal system that doesn’t recognize the concept of attorney-client privilege. Roger just earlier this week was in Mexico and gave a 45-minute speech on attorney-client privilege. So it’s a great—
BELLINGER: That must have been fascinating, Roger. (Laughter.)
DELRAHIM: We were invited and asked to do that. And the president of the antitrust authority there is an incredible forward-thinking lady who has been great for enforcement over there and implementing great reforms. And they invited us, because they want to learn about our process. And I think that’s a positive norm. I think that’s something that’s developing because I think the inherent goal is to have these shared set of values. So that’s why I’m hopeful that there’ll be broad acceptance of this.
BELLINGER: So a couple more questions, one, obviously, on any treaty—this is not a treat; in fact, it’s not binding, it’s essentially an MOU—but—
DELRAHIM: Multilateral, MOU, I guess it’s probably in that space.
BELLINGER: —is compliance. Now, when it comes to something that’s not binding, then compliance is really the wrong word because nobody is required to comply. But we want people to observe these procedures because you’re going to be laying these out as the procedures that we think that antitrust agencies out to follow. So how do we, particularly since this is not binding and there ae not tribunals, how do we get them to observe? You mentioned essentially reputational harm, naming and shaming, you haven’t joined, you haven’t complied with these—with these standards. So how do we—how do we do that?
DELRAHIM: Yeah, and I would probably characterize it less as, you know, shaming, but rather, you know, a mutual interest in enhancing trust in the—in the functions of that enforcement agency, which would be the motivating factor. So there’ll be a reporting on the developments and compliance with those commitments. It would be a trigger for agency-to-agency consultation, when a subject of that country has been subject to those enforcement actions. And say, hey, you know, can we talk about this?
This happens right now already because of the relationships we have. But we’ll say, look, you know, did you really provide transparency here? Did you provide the opportunity for counsel? Did you—so with each of these commitments, it will allow for that. And I think it will allow for greater confidence around the world within the business community to want to be subject to competition enforcement. Ultimately, that’s probably the best way for us to enforce antitrust laws and make sure that corporate citizens don’t take actions that harm consumers is a lot of, you know, self-reliance and being willing to be subject to the antitrust authorities, and investigations, and enforcement.
BELLINGER: So last two questions. One, you mentioned the business community. Presumably the Justice Department is not just doing this for the sake of good government, you feel like doing this. You’re doing this largely, or at least in part, because U.S. companies, you feel, are not subject to due process around the world. What is the business community—who presumably has not seen this text yet, or maybe they have—going to think of the—of this framework?
DELRAHIM: Yeah, and so the goal of it is actually for our own efforts as competition law enforcers, and also the broader international—the respect and I think the trust in the broader system of competition. And so that was really the motivating factor, not so much a protectionist measure for the business community. I would anticipate that the business community would welcome this, once the text is public. And again, none of these concepts are necessarily brand new. Each of the concepts have been identified, whether it’s the ICN, OECD, or other FTA agreements. So a lot of these concepts will be there and should have the support. Again, if you want to violate the antitrust laws and engage into price-fixing cartels, you won’t like this either. So the goal is to make sure that when the laws are enforced that we have the transparency, we have the sunlight shining on us and all of our partner agencies to mutually raise the system of competition enforcement.
BELLINGER: So last question, and not on the focus of your speech but since we captured you here today, obviously this administration is—particularly right now, but since the beginning—doing a lot on tariffs and trade, renegotiating agreements, you know, threats to impose tariffs, imposing tariffs. Other agencies have the lead on those—USTR, Commerce, Treasury, the White House—but that can have a real impact on your efforts. So how does the antitrust division participate in those—presumably if they’re negotiating a competition chapter in NAFTA you’re right there—but more generally if it’s tariffs or other things that could have an impact on your policies, are you—do you have a seat at the table in these—in these discussions.
DELRAHIM: We do. And we have been very, you know, active in the trade policy committees, the staff and the principles, you know, the attorney general has been part of those discussions where there have been multiple reviews. And I think those are good reviews. It’s always good to go back and take a look at agreements, multilateral agreements, bilateral, trilateral, and evaluate whether, you know, folks are living up to their bargain, and whether or not the negotiations that—you know, the items we bargained for years ago still make sense and reevaluate those.
So we support. We have—you know, we have about 55 or so Ph.D. economists at the antitrust division, in multiple sectors—in almost all sectors, because depending on the merger they come in. Earlier this week we discussed the Bayer-Monsanto merger and we had to learn about, you know, glufosinate and nematodes and all sorts of stuff that our guys had to become real experts real quick. And so we lend that expertise to the various, you know, international trade or economic interagency groups. And we’ll continue to do that.
BELLINGER: Great. Well, Makan, that’s great.
Let me open it up now to the floor. Just raise your hand and I will call on you. This is, as you know, on the record. I do want people to identify themselves and their affiliation, which means that also will be on the record, just so you know. But the floor is now open. So, let’s see, here in the middle. And probably go ahead and stand up. The microphone will come to you.
Q: I’m Diane Bartz with Reuters.
So you work for an administration that’s famous for policy U-turns. How has this affected this effort?
DELRAHIM: Well, I don’t know if I agree with your characterization of policy U-turns. I think we continue to improve upon policies. And this is a further improvement upon where we have been. About 15 years ago, the international agencies in the antitrust arena created the International Competition Network, which had continued to have huge benefits for antitrust enforcement. This is, I think, a natural next step to do so, and continue to improve the process and enhance the trust in the decision-making of enforcement agencies around the world, which ultimately helps consumers.
BELLINGER: I saw one there.
Q: Good morning. Patricia Wu, C&M International. Thank you so much for your leadership on these critical issues.
I’m curious, your comment on compliance or observing the provisions, could you comment a little bit further about what role, if any, you see civil society or private sector playing as part of this compliance observership piece? Is there a role for those entities? And if so, have you thought about what that might look like, beyond obviously the folks coming into your office and advising where they’re experiencing difficulties?
DELRAHIM: Thank you for that. I think it’s a great question. And absolutely. So it’s the very last part of your question that kind of changed how I would approach the answer to this, because that’s a really important part. It’s an important part of what we do at the antitrust agencies. We have an open system. Sometimes it becomes cumbersome because the subjects of our investigations. We have—you know, we explain our theories. They can kind of come and debate, argue against it. We have multiple levels of review internally. So there’s the career staff that will investigate, then they’ll go up, and through the political leadership to make judgement calls and evaluate whether an enforcement action makes sense or it requires any changes. I anticipate, you know, the international agencies will go through the same process.
And the best way to do that, just as we’ve seen in the United States in the last 120 years in antitrust enforcement, is agencies continue to get challenged because, you know, we don’t have the monopoly on knowledge about business interactions and ultimately the effects of those on consumers. Sometimes we learn through that give and take. And I would anticipate and would welcome that, if there are subjects of antitrust enforcement agencies around the world that believe that there’s an enforcement action that is just wrong. And it might be completely well-intentioned, it’s just that it’s wrong. Just like we had, you know, in this country many enforcement policies that didn’t make sense and had to be changed.
They would bring it to us, or to those agencies, and allow for that agency-to-agency consultation and dialogue to help educate them. We do a lot more public outreach in the antitrust division than any other divisions of the Justice Department. Largely the reason for that is the most transparency and disclosure you have on the enforcement policies and principles, the better compliance you get from companies and individuals, the more they know what is illegal that, you know, you and I cannot split up the country to sell our widgets, you know, west and east of the Mississippi River, and we would earn some pinstripes from the Federal Government if we did so, the more likely it is they will actually comply with the law.
And that’s part of the reason we do that. We, frankly, don’t have the types of budget to try to police every anti-competitive conduct that might occur. So we set certain examples by the enforcement that we take. And there’s great antitrust counsel in the—out in the bar that advise their clients to do it properly. And that’s probably the best way to enhance the consumer welfare through compliance with the antitrust laws.
Q: Thank you. Steve Myrow with Beacon Policy Advisors.
Given the high priority that this administration is putting on reducing prescription drug prices and promoting competition in that space, and also that the government is the biggest payer for prescription drugs, how do you—what type of framework do you use for antitrust enforcement with the ongoing consolidation in this sector? And is it different from the framework that you use for other sectors?
DELRAHIM: Good question. We do not, you know, change our antitrust framework depending on the sector. We have—you know, it’s now, I think, public—I’m pretty sure it’s public. I don’t want to make it public if it’s not. But we have a major criminal investigation into price fixing in the generic pharmaceutical industry. Activities are going on in the district court in Pennsylvania, and the investigations continue. We’ve had multiple CEOs who’ve already pled guilty to that—there’s multiple, multiple drugs that many of us in this room or our parents are taking every day that have been subject to that. The Federal Trade Commission has, you know, the expertise. And they enforce activity broadly in the pharmaceutical industry, and the types of practices and mergers that occur in that.
And so that will continue and continues. They have been quite aggressive in that. But also on the competition advocacy, and advising the Food and Drug Administration and others on certain rules that might have anti-competitive effects. Even a little bit, I think, more broadly on that, it might touch on areas of intellectual property law that we’ve been quite active in advancing, you know, the right policies, to make sure that the incentives are there for research and investment into lifesaving drugs, but also make sure that the incentives are not there to violate the antitrust laws to raise prices to consumers. So hopefully that answers your question. But, you know, our framework for competition does not change based on the industry we operate in.
BELLINGER: Ted and then in the back.
Q: Ted Voorhees, Covington.
Makan, thanks very much for this very important initiative and for showing leadership—U.S. leadership in this area. You mentioned in compliance, sort of soft compliance by reputation, which is probably a really good idea. Let me see if you can go one step beyond that. Have you considered the possibility of scoring observants, and whether that might be a piece of measuring compliance over the—or, in the future? Softly at first, but some kind of scoring mechanism to see whether and how well people are doing what they say they think they’re doing?
DELRAHIM: So we have discussed it internally. That’s certainly an area that—you know, particularly in the intellectual property area, investment regimes. It was when I was at the trade rep’s office, you know, when it came to this special 301 process on intellectual property and then the GSB preferences, we—you would, you know, technically score and you had different grades of priority foreign countries, foreign watch countries, and all of this other stuff. That might work. And we provide input into the 301 process to the trade rep’s office, where there’s international regimes that might be discriminatory. And I think that’s a proper mechanism to do so.
At the moment, I don’t know if as peers with our international partners it makes sense to have a scoring system, but I think it’s probably much better diplomatically to share our views or concerns. Because, again, in my experience, with almost every agency—regardless of the regime or political system—they all want to do the right thing. This isn’t in the trade world where, you know, we’re trading 30 percent reduction on frozen chicken breasts in exchange for, you know, plastic footwear quotas, or peanuts versus, you know, car imports. Those are real trades that go on to liberalize markets. That’s an interesting regime.
Competition law doesn’t allow—you say, well, we really shouldn’t use the consumer welfare standard of market entry, in exchange we will, you know, do this and give you relief on cartel enforcement. It doesn’t work. And given the culture of competition that has been promoted more broadly, I think that a more collegial effort will continue. But we certainly will not be shy about sharing our views with the trade rep’s office and other agencies if we believe that there’s discriminatory behavior that’s exhibited by our foreign partners.
BELLINGER: Far back.
Q: Hi, Makan. Jeff Bliss with The Capitol Forum.
I just wanted to get a little broader answer from you on this. Obviously, the administration is involved in trade fights with Mexico—or, renegotiations with Mexico, Canada, China, Europe. These are all your major competition partners. And I’m wondering, are you concerned that any of those fights would interfere with what you’re trying to do on the competition front.
DELRAHIM: I think those are trade dialogues that are going—you know, that are important to continue to reevaluate, make sure the American worker and consumer is treated fairly in those discussions. I don’t believe it has. I mean, obviously where you—wherever you have, you know, different regimes cross border it affects competition analysis. But it is not one where it affects our relationship on the law enforcement functions that we continue to do.
Again, antitrust is not something—again, it’s law enforcement. It shouldn’t be regulation. It’s been—you know, one of the initiatives I’ve had at the antitrust division, particularly in merger enforcement, is to get us out of this business where we’re extracting commitments outside of the competition regime, that businesses are perfectly willing to give as a tax of consummating a merger, but really getting back to the core function of law enforcement. And when you’re in the law enforcement regime, you know, the core principles and values of law enforcement are not something that are subject to trade.
BELLINGER: You still have a question over here? Yeah.
Q: Jacob Harold with GuideStar.
So for many years antitrust law has been focused on consumer welfare price in particular. And with the rise of the platform economy, we’ve seen a—that be really complicated. And so I guess my question is, will this new procedural framework offer a way for us to have a collective conversation about how antitrust law in general needs to evolve in the platform economy?
DELRAHIM: Yeah, well, for many years it has focused on consumer welfare standard. And for many more years, it will continue to focus on the consumer welfare standard. I think that war has been somewhat fought and over. It was—kind of reared its ugly head last year a little bit within certain policymakers. But I think cooler heads across the political spectrum won on that issue, that it doesn’t really—antitrust should not—you know, we should ultimately look at the effect on competition and consumers. And price is not the only factor. I mean, it’s price, it’s output, it’s quality. And those are factor that go into our decisions every day. The antitrust standards were perfectly well-suited 20 years ago where technology challenged us with Microsoft’s practices and software.
And many people raised concerns whether or not the antitrust laws are well-suited for technology. It was. The D.C. Circuit, after the Justice Department brought the case, set certain standards and reinforced that. And I think it will continue to do that. So there’s a lot of discussion about platforms. And I had a chat last week at Marconi University in Milan that went into some of that. I think the standards are fine, as long as agencies ensure that they fairly apply an economics-based and evidence-based approach to antitrust law, not just because a company is big or based from a certain region.
Q: Irving Williamson, International Trade Commission.
You didn’t touch on—and it may be premature—but I was just wondering, what thoughts are you having about how you’re going to either administer this new agreement, is there going to be a secretariat to handle notifications and all those mechanical things that go along when you have a lot of countries that are sort of signing onto a common principle?
DELRAHIM: So, no, I don’t think—you know, the ICN 15 or so years ago was a great new example of an international organization. It didn’t have, you know, an office in Geneva and Brussels and secretariats and all sorts of bureaucracies that go along with some of those agencies. It’s actually turned out to be a very nimble confab of international enforcement agencies, as well as NGAs that participate. It’s got a virtual secretariat that rotates around. We—you know, it goes around different countries. Each year it has a forum, but then every—almost every week, it seems like, there’s conference calls of different committees and subcommittees that promote that. Randy Tritell and Liz from the Federal Trade Commission; Linda (sp), and Cathy (sp), and Brinkley (sp) from the international section—division are actively involved every—almost every single day in having some phone call at odd hours of the day to promote those discussions.
With this—I view this as an agreement of a set of commitments. And we will continue to have agency-to-agency discussions. But it doesn’t have a dispute mechanism system that requires, you know, an appeals process and all of that. And I think this framework works in competition. And it’ll be interesting to see over the next 10 years how it responds to some of the challenges we might have, and what the affect will be, and whether or not it requires such as that. I don’t envision it needing it, nor will it have one set up, up front.
BELLINGER: Chris Yoo.
Q: Christopher Yoo from the University of Pennsylvania.
First, I wanted to thank you, Makan, for adding this to the many initiatives you’ve launched and helping us really think intelligently in the way you’ve set up the division to really have a very ambitious agenda to take on a number of issues. I think this is very welcome. As you know, I’m doing work on comparative enforcement and due process and antitrust enforcement. So let me ask you a question that I get, and see if you can help me answer it and help us collectively answer it together. Due process is sometimes said to be a common law oriented, adversarial process-oriented idea. In civil law jurisdictions, I think—it has to include them. And the breadth is important. But civil law jurisdictions are based on inquisitorial models with judicially led inquires which don’t necessarily have the same conception that American law and British law do. Have you encountered any pushback or resistance or difficulty fitting the ideas that are sometimes more associated with adversarial systems with civil law jurisdictions with a different tradition?
DELRAHIM: Great question. And thank you for your academic and intellectual input into this area. We can use more and more research and the type of important contributions that you make into this area. It’s an important point. It’s one where as it’s designed, it is intended to address the concerns over the civil law countries. And it does. Many—I mean, for example, the European Commission. Former commissioner and later prime minister, Mario Monti, implemented significant changes during his tenure, around 2003-4. It happened right after the Honeywell-GE proposed and failed merger that—where the European Commission and the U.S. came to different conclusions. And it caused a big dialogue internationally, but it created very important changes that have been long lasted. And they should be committed.
But they incorporate many changes. And they continue to revise those. These commitments are designed to perfectly fit within that. And we have not gotten pushback from the civil law countries. And they’re an important part, given how many civil law regimes are out there, and the breadth we would want this to be adopted.
BELLINGER: I’ll do one more question. Sir.
Q: Thank you. Bill Courtney, RAND Corporation.
In a number of countries state enterprises are one of the biggest sources of inadequate competition and productivity. Does cooperation among competition agencies, does that play any role in putting more pressure on governments to rein in those restraints on competition?
DELRAHIM: A great question. And a really important part of the expansion of the culture of competition and antitrust laws internationally has been to liberalize those state-owned enterprises. You know, some people might point to, you know, the postal service as one, where in the United States we still continue to have some level of a state-owned enterprise, which might be well-suited for some liberalization. The—it is—whenever we have bilateral meetings with important jurisdictions, and we have them all the time, we have—I think my first one after I got confirmed was the trilateral with Canada and Mexico, where we have those every year. We had one with China just earlier this year, and we continue to have them with all of our important partners in Asia and Europe.
One of the—one of the top and important topics of discussion in almost one of those is how to do address state-owned enterprises, especially as the east European countries went to less of a, you know, command and control system. They began privatizing their different entities—whether it’s telecommunications, mining, energy. The concepts of competition have been really important. They’re always rough at first, because you’re changing a completely different mindset about how to think about free markets, but it’s an important one. And every agency—the antitrust agencies—are committed to it. And they believe in the principles of competition within their state-owned enterprises.
In China, that’s one that is happening at all levels of the government constantly. Of course, you have different politically forces internally. You know, Mexico for decades had to—you know, there was a debate between their telecommunications regulator, which as many of you know regulators are often captured by the subjects of their regulation, which is not always the best model. And also, their antitrust enforcement body that constantly had this give and take, which ultimately led to some recent changes and the creation of a new agency with new powers in some sectors, but then also exemptions from the telecom sector.
So that is continuing. A lot of the fresh new agencies, both in east Europe and in Asia and some in Latin America, are constantly affected by it. They ask for technical assistance from the FTC and the DOJ. And we provide them with the investigative tools on how to approach state-owned enterprises as they try to address that. But it’s an important part. Usually they cause more consumer harm than even private conduct does, where you have those types of government restrictions and government-owned enterprises that don’t really engage in free competition for the consumer. So it’s an important focus. And I think this framework will help with that, to advance that even further.
BELLINGER: So, Makan, let me end by saying, one, thanks for being with us to make this announcement. Good luck next week and in the negotiation. And then finally, just as someone who did this a lot, and I see David Gross, various others, Ken Weinstein who would be up making these sort of announcements, I think it’s so important actually to go out and give these talks and then to answer questions about what government is actually do. So thank you for doing that. And good luck with it. Thanks for being with us.
DELRAHIM: Thank you so much for having me. Thank you. (Applause.)