In the global economy there has to be cooperation between countries, but the competition world is finding that there are fundamental differences in US and EU positions.

At the end of last year, competition lawyers in New York were assembled for the annual Fordham Antitrust Conference. On the podium was Konrad von Finkenstein, the head of the Canadian Competition Bureau reporting back on the activities of the International Competition Network (ICN), which brings together competition regulators from all over the world.

Von Finkenstein started to report on the ICN's recent conference in Naples. He explained that he and his colleagues had had a wonderful time in Naples, where the conference was held in an old fortress. He personally thanked the Italian Competition Authority for organising the conference and emphasised how good the food was. The conference consisted of two days of fruitful discussions – the first day between competition authorities and selected private practice lawyers with an audio-link to the press in another room, and the second day was only open to competition authorities themselves to discuss confidential issues. “Unfortunately, we accidentally left on the audio link to the press-room” Konrad explained somewhat apologetically. There was nervous laughter from the audience and the full horror of international cooperation had just manifested itself.

At a time when most companies were shedding staff and cutting all non-discretionary expenditure, the competition regulators were flying long-distance to attend a conference in Italy with no apparent purpose or result. What is worse is that they had just demonstrated a staggeringly cavalier attitude to their own confidential information. You certainly would not trust them with your most sensitive commercial information.

It is ironic that the electronic exchange of information between competition authorities has been made so much easier by the ubiquitous Microsoft Windows – Microsoft being one of the 'baddies' in the European Commission's global war on anti-competitive behaviour. Even a few years ago, documents had to be faxed, but communications can now go from one case officer to another via email without ever being subject to internal or external scrutiny.

The 1991 and 1998 EU/US cooperation agreements allow the exchange of agency confidential information, but limit the exchange of company confidential information where such an exchange would not be permitted by the legislation in force in the EU or US. For example, the European Commission would be entitled to send the US Federal Trade Commission an internal economic research report into a market, even if that report is not publicly available. Such a report would be considered agency confidential. However, a spreadsheet provided to the European Commission by a company in a merger case showing its sales of a product in a global market could not be exchanged without the consent of the company concerned. The company may, of course, be asked to sign away its confidentiality and allow the exchange of information between the authorities. In merger cases, the parties are typically dependent on a tight timetable and refusing a waiver might jeopardise the merger timetable. The European Commission has often stressed the benefit of waivers being granted in multinational mergers to allow the maximum degree of cooperation. Such statements, however, hide the fact that no degree of cooperation could have overcome the fundamental differences in GE/Honeywell, which was blocked by the commission after being cleared in the US. Where cooperation fails, it is not because the exchange of information is inadequate, but because of fundamental differences in ideology between Europe and the US.

The reform of the EU Merger Control system announced by Competition Commissioner Mario Monti at the end of last year will not make this any easier. Instead of opting for the US test of a 'substantial lessening of competition' (SLC), the Europeans have decided to retain the traditional dominance test and in order to capture a greater variety of sins, the meaning of dominance will be redefined to also include the unilateral effects of a merger. The result of this move is not just continued divergence between the EU and the US, but also a lack of clarity on the EU side. Officials on both sides of the Atlantic, with some notable exceptions, have sought to downplay the differences, but with the UK adopting an SLC test in its own merger reform, the situation is strangely reminiscent of the recent political differences in the UN Security Council.

One area that is less controversial than mergers is cartel enforcement. Cooperation in this area has often been cited as a success. On the surface everyone agrees: cartels are a bad thing, and shifting the focus away from mergers towards cartels is unlikely to cause the transatlantic tensions seen in GE/Honeywell. But below the surface, there are those countries that believe cartels should give rise to criminal sanctions, as they do in the US. The UK and Ireland have been promulgating legislation that will allow them to put company directors into prison and which allows the handing over of documents and information for the purpose of a criminal investigation without the consent of the individuals or companies concerned. These laws also allow them to extradite their own nationals to face trial in the US for equivalent offences. Although the commission has had to tolerate such developments, it is clear from private statements by commission officials that such a move is seen as fundamentally incompatible with the EU's legal order.

The commission's own reform of the EU competition system is based on the free exchange of information between the commission and the national competition authorities within the European Competition Network (ECN), with the national authorities taking on a greater share of the regulatory burden. Criminalisation will force this system to operate according to two different standards depending on whether the investigation is criminal or civil in character. Where a criminal investigation is underway in a member state, the ECN system is severely constrained. These constraints will limit the effectiveness of the ECN and reduce the effectiveness of EU reform.

Civil cooperation in the area of cartels is dependent on relevant waivers being given by the companies under investigation. Unlike in mergers, the parties have no incentive to grant any waivers so the temptation on the part of the competition authorities will be to treat a failure to grant a waiver as a lack of cooperation. This could have a detrimental impact on the immunity or leniency a company will receive in exchange for cooperating. This is not only dangerous, it is simply incompatible with the rights that parties have under their national law. A refusal to grant a waiver should never be seen as a failure to cooperate.

Finally, companies that make leniency applications to competition authorities should have the right to make all submissions orally to protect the information from disclosure in the US courts. The Plaintiff Bar in the US now seeks full disclosure of documents submitted to the European Commission and other competition authorities as a matter of course in order to use them in treble-damages class actions in the US. Compared with the potential costs of US litigation, the commission's fines are clearly the lesser of the two evils.

Oliver Bretz is a corporate and antitrust partner at Clifford Chance