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Assume further that they bribed the president of the foreign government to issue a Presidential proclamation ratifying all past private activities of the Sisal Cartel and announcing that future cartel activities were explicitly sanctioned and directed by the government. We assume that this proclamation was valid under local law and rendered the Sisal Cartel liable to expropriation of assets if they failed to continue their price-fixing control of exports to the United States. With these changed facts, could the defendants be successfully prosecuted under the Sherman Act?
This example brings into play the remaining two jurisdictional considerations I mentioned at the beginning of the discussion; namely, the doctrine of foreign governmental compulsion and considerations of comity. It would appear the cartel could not satisfy both local and U.S. law. The respective laws are in direct conflict. At the risk of disappointing you, I prefer to leave my question unanswered at least today.
There are arguments to be made on both sides. Present case law is relatively uncertain. I am sure we would look very carefully at such a fact situation and not reject lightly the option of bringing suitespecially where the vital interests of U.S. consumers were at stake.
The recent success of OPEC and attempts to form OPEC-like foreign governmental producer cartels may possibly be one of the most significant challenges to open international markets in which resources are efficiently allocated by competition. But I think the greater problem here is the cartel behavior rather than payments to foreign governments. In this regard, we intend to do all that realistically can be done to promote free and competitive international markets for the benefit of American consumers and exporters.
You have asked me to suggest what legislation Congress might enact to deal with problems raised by payments to foreign governmental officials. Confirming myself to the Sherman antitrust legislation, I think no new substantive legislation is necessary or appropriate with respect to antitrust enforcement. The Sherman Act is a masterwork which is hard to improve upon. Its breadth and flexibility enable the Antitrust Division and private plaintiffs to challenge illegal anticompetitive conduct of which bribery may be a part. Where considerations such as the four I have indicated weigh against the maintenance of an antitrust action, they do so for reasons deeply grounded in international law and longstanding traditions of respect for the processes of diplomacy and the sovereign integrity of duly constituted states. I do not believe that all courts which have evaluated these considerations in antitrust litigation have always acknowledged that some cases are contradictory and some standards are unclear. Nonetheless, the resolution of these contradictions and the clarification of these uncertainties is probably best left to the evolving process of common law adjudication. Factual settings are too varied and the range and relative weights of relevant principles and policies are too broad and too. delicate for simple, declarative legislation-at least at the present time.. We strongly believe that American firms can already operate abroad, prudently and successfully, within the antitrust rules set down over the years.1 American public policy-as most visibly reflected in
1 See statement of Deputy Assistant Attorney General Walker B. Comegys before Senate Subcommittee on Foreign Commerce and Tourism on S. 2754, Jan. 25, 1972.
the Internal Revenue Code is clearly set against the types of bribery we have seen in these hearings. Antitrust law and enforcement support that policy; accordingly, we see no need for any change in the antitrust rules in this area.
Now, just finally on the subject of legislation, I did want to come back to the issue that I was discussing with the CAB at the outset; namely, their second recommendation on what to do about foreign bribery which was essentially to give the CAB much more broader litigating authority on the grounds of manpower and expertise and so
I think, first of all, this recommendation is irrelevant to the foreign bribery thing. Second, I think it is wrong as a matter of policy and that the Congress has currently carried it forward in the Department of Justice Act. Third, this particular proposal was not, as far as I know, cleared by OMB and does not represent the administration's position.
Thank you very much, Mr. Chairman.
Mr. Nix. Thank you very much, Mr. Baker, for a most revealing and excellent presentation.
I would like to turn now to page 7 in which you say, two-thirds down on the page,
Let me turn then to five different hypothetical situations involving payments to foreign officials which might raise problems.
Now, as to your first, are there pending cases that are in progress as a result of disclosures under this particular section now under No. 1?
Mr. BAKER. Let me just repeat the question to make sure that I understand.
Mr. Nix. Absolutely.
Mr. BAKER. What you are asking, as I understand it, is do we have particular antitrust cases directed at bribery situations?
Mr. Nix. Exactly.
Mr. BAKER. We have none filed and so far as I know we do not have investigations that are particularly directed to bribery. In other words, our normal approach, because the antitrust laws are concerned with competition, is primarily to look at restraints on competition and then to go back behind it to the means by which they are achieved. Mr. Nix. Let us then go to No. 2, Payment for Specific Preferences in Foreign Government Procurement. Are there cases pending?
Mr. BAKER. I am sorry. That was the point I didn't understand and didn't probably clarify it. My answer, I think, applied to all five categories of cases. Let's take them one at a time.
What I said on the first case in the testimony was that I didn't think it was an antitrust violation in any event. On the second one, as I say, I don't know of any particular case that we have raised as I indicated. We raised the possibility that this could be, and there have been some revelations in some of your hearings and some of the other public disclosures.
Mr. Nix. Suppose I take the five together. Under the five categories, how many cases approximately are presently being investigated? Mr. BAKER. We have current investigations of several alleged commodity kinds of cartels and there has been in addition the Arab boy
cott issues. It is possible that in any of these there may be bribery involved but primarily we are looking at what is going on. We are not starting with the bribery and then following it back.
Mr. Nix. I see. Can you indicate the approximate number of these cases that we are speaking of?
Mr. BAKER. Just so you and I don't misunderstand ourselves, we tend to use cases to mean file cases that are in court; and I am talking about investigations not cases in court.
Mr. Nix. Yes.
Mr. BAKER. I don't know. Let's say something like a half dozen. Mr. Nix. Now, of course, we both know it is absolutely necessary to initiate these investigations if the American public as well as stockholders are to be protected. That, of course is true.
Mr. BAKER. Yes.
Mr. Nix. I have the understanding that we are talking about cases that arose not longer than 3 years ago. Is that your understanding? Mr. BAKER. I, in all candor, have to again say that because our primary focus has not been on bribery but on restraints of international trade that I don't have a factual basis other than what I have read in public for making that judgment.
Mr. Nix. How do you describe international trade?
Mr. BAKER. Well, the way I describe it, of course, it is more accurately described as foreign commerce of the United States in terms of two things as I said in my statement. The first one is import competition into the United States and the second one is what I would call bully-boy tactics with respect to our export trade, and that is our focus.
Now, I think you are pressing me and I get the sense that there are some interesting questions as to whether we should indeed have different and stronger laws directed directly at bribery of foreign officials as for instance that provision in section 162 of the Tax Act.
The antitrust laws are clearly not directed particularly at that kind of conduct. In certain circumstances they may be usable and the conduct may be within the statute of limitations and they may indeed. be the best law we have, but I think they are not so directly applicable as to domestic bribery law or whatever because essentially what we have to prove, and as you so eloquently said how difficult it is to get the facts-first of all, that there was a bribe and, second, that it is somehow fitted into the competitive picture in a way that fell within our antitrust laws.
Now, as you well know, indeed far better than I, it is damn hard to prove the first one, the bribe, and then when you have to go the second step and really fit it into a much broader pattern very often of international monopolizing conduct and so on it makes the antitrust laws not the most cost effective enforcement tool to deal directly with bribery if that is your overriding concern. Maybe I don't make myself clear.
Mr. Nix. I am deeply concerned, I think many people are concerned, to know whether or not it is desirable to improve the laws, or change them rather-whether it be an improvement or not-impinging upon this particular type of conduct. Now, I don't call it illegal because it is not violative in some instances of any law that we have on the books but certainly it is not in the best interests in many instances of the people of this country.
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Mr. BAKER, I mirin mention one other thing n. remis of this and that is, as you recognize far more than most peopic, Lk mves CALE toos that one has are very important to the whore proces and we do have pending proposals to substantial expand our Crd Process AS and get better discovery in a variety of different ways 1 car tend. and would not. that this is primarily an miernational projem but if we had better investigative tools there would be. I am some, at least some more cases in whier we were able to use antitrust laws to deal with the kinds of problems that you are specifically consomed with. I am just giving you & perspective and knowledge, and schien your support for that type of legislation.
Mr. Nix. I want to express my personal thanks and the thanks of the subcommittee. Mr. Baker, for your appearance and contribution. I didn't know the bells would ring now.
Mr. BAKER. Perlaps you eat come down and tell us how to enga Lize the executive branch so the bells ring.
Mr. Nax. Our the angels est. dr that.
However, I deeply appreciate your presence here today and hope to Bee vor ageir sometime sooT..
Mr. BAKER. I am honored to be here.
M. Nix. The subcommitee will stand adorned.
[Whereupon. at 4:16 p.m... the subcommittee adjourned.),