USMCA adds unprecedented due process protections in competition probes

17 October 2018 3:25pm

15 October 2018. By Maxwell Fillion.

The US-Mexico-Canada Agreement contains unprecedented due process rights for those being investigated by the countries’ competition authorities.

The deal calls for agencies to follow common legal practices, such as mandating attorney-client confidentiality, providing the right to present evidence to an independent ruling authority, and creating a right to call expert witnesses. These stipulations, and more, are included in a US free trade agreement for the first time.

Despite the agreement's new commitment to due process, the text won’t have much practical effect on the way competition law is enforced in the agreeing countries, Sean Heather, vice president of the US Chamber of Commerce’s Center for Global Regulatory Cooperation, told MLex. He doesn’t want it to, either.

“I hope that this agreement has no impact,” Heather said. “I say that because I don’t believe that the US business community has had an adverse or difficult relationship with either the Mexican or Canadian competition authorities.”

It’s likely, however, that the new rights will be included in future US free trade agreements, Heather said. The office of the US Trade Representative declined to comment on future agreements.

“It’s significant,” Heather said. “You go back and look at US FTAs, starting with [the North American Free Trade Agreement] but also with Chile, Peru … [They] kind of said three things at most. One, you should have a law. Two, you should have an agency. And three, you shouldn’t discriminate. It said very little beyond that.”

The deal contains an article specifically dedicated to procedural fairness in competition law enforcement. It stipulates timely investigations that give subjects access to the concerns the agency has with their behavior, including the alleged competition laws being violated.

The text calls on countries to ensure subjects can present evidence supporting their defense in front of an impartial judicial or administrative authority. If the contest is heard by an administrative authority, the body deciding on the case must be independent from the unit alleging the subjects violated competition laws.

It also attempts to address the oft-heard complaint that agencies take too long to review mergers, requiring investigations be conducted on a definitive deadline or “within a reasonable time frame.” Additionally, it requires that early consultations be permitted between competition authorities and merging companies, which allows agencies to air out merger concerns before handing out allegations of misconduct.

Melanie Aitken, a former Canadian competition commissioner who now practices in the US, said the agreement won’t change much about the way the countries' competition agencies interact with one another. Meaningful cooperation among the authorities instead derives in practice from day-to-day consultations regarding cross-jurisdictional competition proceedings.

“My bottom line is that the real way that you advance cooperation and communication between agencies is through the building of trust and the working together over time,” Aitken said.

— Step by step —

Considering there were no procedural fairness clauses in competition proceedings provided by USMCA's predecessor, the North American Free Trade Agreement, the text is a break with the past. However, its foundations can be seen in prior US free trade agreements.

Negotiations for the Trans-Pacific Partnership, which was killed by US President Donald Trump the week after he took office, contained a section dedicated to procedural fairness in competition law enforcement. However, it still fell short of the USMCA. The chapter allowed subjects to present evidence in their defense but did not require that evidence be presented to an independent administrative or judicial body.

Tad Lipsky, a law professor who was director of the Federal Trade Commission's Bureau of Competition at the start of the Trump administration, told MLex the new pact also builds on the language in the US-South Korea agreement, or Korus.

Korus, which was signed in 2007, called for subjects to be represented by counsel and present evidence in their defense, but did not mandate access to information necessary to present an adequate defense.

— 'Something to point to' —

The text loses its muscle, however, because it’s not subject to dispute resolution, Aitken told MLex.

“They’re really aspirational in my view,” Aitken said of the procedural rights.

The Mexican Competition Authority said the countries instead decided to include text that outlines proper consultations regarding issues that arise from the competition policy chapter. Per the agreement, countries must describe to one another how the issue affects their trade with relevant public information. In response, the country being taken issue with must provide “full and sympathetic consideration to the concerns” of the country.

Although there is no dispute resolution, Lipsky said, the document compels the authorities to follow due process laws, and “gives people something to point to” during proceedings if they feel they’re being treated unfairly. He added that he’d like to see procedural fairness policies be legally enforceable in future FTAs.

— Left to interpretation —

The USMCA text also lacks specificity in certain key areas, leaving it up to the countries' competition agencies to properly define terms in the agreement.

For example, the US, Canada and Mexico can apply national competition laws to business activities outside their jurisdiction, so long as the activities have “appropriate nexus” to the country’s jurisdiction.

It’s unclear what “appropriate nexus” means. When asked who would define this term, the Mexican Federal Competition Commission, or Cofece, told MLex it’s up to the respective competition agencies to determine what the term means, and to resolve to the proper consultations outlined in the agreement if a disagreement arises between the countries.

Canada’s Competition Bureau did not respond to requests for comment. The US Department of Justice declined to comment.

The agreement is now in the hands of the countries' legislative bodies, including the US Congress, where Trade Promotion Authority has fast-tracked the deal to allow members of Congress to vote yes or no without being able to filibuster or amend the deal. Votes have not been scheduled yet, but the US House of Representatives is out of session until Nov. 13, 2018, when it will reconvene after the midterm elections.