U.S. Seeks to Restrict Participation in Cartels

Spurred by the involvement of United States multinationals in the international uranium cartel discovered in 1974, Rep. Albert Gore (D-TN) has introduced legislation in Congress to curtail the participation of American corporations in these pools.

The Cartel Restriction Act (HR 4661) requires United States firms to notify both the Federal Trade Commission (FTC) and the Attorney General if they are approached to become part of a cartel or to engage in anti-competitive practices. A second, highly controversial provision of the bill grants Unites States courts the right to review the laws of other nations which may serve to cloak the activities of illegal cartels.

Testifying this summer before the Subcommittee on Consumer Protection and Finance of the House Interstate and Foreign Commerce Committee, Gore called the tremendous OPEC price increases a "pure example" of the power of international cartels. He maintained that secretive cartels may now exist in the electrical equipment, bauxite, and coffee industries. "U.S. dependence on imports of critical minerals such as cobalt, manganese, chromium, and titanium," Gore observed, "make these prime targets for future cartel activity as well."

According to Peter Knight, Gore's legislative assistant, the subcommittee will try to schedule more hearings next session. "We view the opposition as strong," Knight said of the bill's prospects. "There are a lot of people who firmly believe that multinationals should be left alone, not encumbered by antitrust laws when they do international business." The bill's future will not be improved by the electoral results of November.

Both the FTC and the Justice Department testified in support of the bill's general concepts. Assistant Attorney General John Shenefield said the Justice Department desires "to pierce through whatever curtain or facade is put over international cartels to combat American participation in cartels overseas that are harmful to the American consumer." But Shenefield warned that the bill's notification requirement may be too broad and called for limiting the notifiable offenses to "those that are clearly antitrust violations in every case, what have come to be known as per se violations."

Robert Rowe, assistant director of the FTC's Bureau of Competition, also expressed concern over what he termed "the broad sweep of the bill's reporting obligations." Rowe claimed that HR 4661 could unnecessarily encompass business ventures that do not directly or substantially affect American consumers. But he asserted that the bill would serve a "useful purpose" and "facilitate government challenges to ... restraints of trades."

The State Department, however, steadfastly opposes HR 4661. William Lake, deputy advisor in the State Department, reported that the State Department is "troubled by the reporting provisions of the bill which would place burdensome and possibly harmful requirements on U.S. companies engaged in international trade." But Gore counters: "I would hope that [the bill] would lead American companies to steer clear of cartels. A legitimate joint venture would not be affected by this reporting requirement."

Lake also claimed the measure "would aggravate longstanding tensions about the extra-territorial applications of U.S. law."

The issue of foreign sovereignty is crucial to international antitrust actions. "The amenability of international cartels to prosecution under American antitrust laws," maintains Rowe, "has come to be one of the most important issues confronting the antitrust enforcement community."

In November 1977, the Tennessee Valley Authority (TVA) sued 13 foreign and domestic uranium producers for violating United States antitrust laws by allegedly participating in the uranium cartel. "Some of the defendants have defended themselves," S. David Freeman, chairperson of the TVA, said, "by raising the act of state and sovereign compulsion doctrines, and alleging that discovery of cartel documents located abroad would be illegal under secrecy laws enacted by Canada, Australia and South Africa." The TVA lawsuits are currently in the pretrial discovery stage, and trials are not expected to begin until September 1981, according to Freeman.

Gore's bill attempts to break through the barriers established by foreign laws allowing courts to weigh the United States' interest in antitrust enforcement. "The modern cartel," Gore explained, "involves close cooperation between corporations and host government, combining the awesome economic and political clout of the multinational with the antitrust immunity inherent in the sovereignty of foreign nations. Today's cartel is indeed a formidable foe for U.S. anti-trust laws."

- by David Corn