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DE RUEHBS #1662/01 3021556
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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 
 
¶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 
 
.