Effective antitrust enforcement in an increasingly global economy depends on close governmental cooperation and coordination as well as respect of the decisions other nations. But how should United States antitrust enforcement agencies react when increased dialogue and communication with foreign antitrust agencies which is meant to reduce misunderstanding, and over time, reveal areas of agreement, actually leads to a divergence in the application of antitrust policies?

On December 7, J. Bruce McDonald, Deputy Assistant Attorney General for the Antitrust Division of the Department of Justice (“DOJ”), released a statement which criticized the decision of the Korean Federal Trade Commission (“KFTC”) to fine Microsoft Won 33bn (approx. $31m) for allegedly abusing its dominant position in the South Korean market. Of particular concern to the DOJ was KFTC’s requirement that Microsoft separate its Media Player and instant messaging software from the Windows operating system within six months. Microsoft will be required to offer two new versions of Windows in South Korea, one of which must be stripped of Windows Media Player and instant messenger software. The other must contain links to internet pages that allow users to download competing software products.

The KFTC decision is a setback to relations with the DOJ and the US Federal Trade Commission which date back to 1996, and the on-going negotiations for a bilateral cooperation agreement. The KFTC decision mirrors the European Commission decision in March 2004 which required Microsoft to also offer an unbundled version of its Windows software. In light of the EU’s experience, the DOJ believes that the KFTC’s proposed remedy will be ineffective: “[D]emand in Europe for the version of the operating system with the media player code removed has been lackluster, suggesting limited effect on competition from the type of unbundling remedy the Korean Fair Trade Commission is pursuing”.

Moreover, there are concerns that the proposed remedy will stifle technological innovation in Korea. In response to the KTFC decision, Microsoft stated that “competition in these technologies has been, and remains, vibrant” and, that the “decision could have the effect of chilling innovation in Korea”. The DOJ agrees. “The Division continues to believe that imposing ‘code removal’ remedies that strip out functionality can ultimately harm innovation and the consumers that benefit from it”.

There is a general consensus that the United States antitrust agencies have benefited enormously from their ability to learn from mistakes in antitrust goals and antitrust analysis over the past 100 years. This experience arguably allows the DOJ to share its experiences, and challenge the application of antitrust policies and the enforcement practices of foreign agencies in individual cases. In this case, the DOJ believes that “Sound antitrust policy should protect competition, not competitors, and must avoid chilling competition even by ‘dominant’ companies” and, that “regulators should avoid substituting their judgment for the market’s by determining what products are made available to consumers”. Accordingly, “Korea’s remedy goes beyond what is necessary or appropriate to protect consumers”.

Certainly, foreign antitrust agencies have their differences stemming from, for example, different legal systems that take the form of set legal or procedural frameworks, or, in terms of analytical approaches, remedies, and internal procedures. But an immeasurably valuable means of avoiding divergent and conflicting remedies is increased bilateral cooperation and coordination. Sometimes, this will mean deference to the decision of foreign enforcement agencies. But there must have been an opportunity for the other country to express its concerns, and the enforcing country should not needlessly disregard the concerns of the other country. This may have been the concern at the DOJ following the KFTC’s decision in the Microsoft case. “We had previously consulted with the Commission on its Microsoft case and encouraged the Commission to develop a balanced resolution that addressed its concerns without imposing unnecessary restrictions”.

Despite the above criticism, the DOJ nevertheless recognizes that increased international cooperation and coordination is the primary means to improve antitrust enforcement across the globe, and, in particular, between the US and Korea. “Notwithstanding today’s divergence, it is important to emphasize the overall strong and positive relationship between the US and Korea on matters of competition policy. The continued success of this working relationship is particularly important in the context of global markets”. This cooperation and enforcement should benefit both consumers and business in Korea and the US, and generally lead to closer relations between the two governments.

Authored by:
Neil Ray