Thank you, Mr. Chairman, for the opportunity to testify today on behalf of The SABRE Group, Inc. regarding the issue of international antitrust enforcement, a topic my company -- one of the world's leading providers of electronic travel distribution services -- considers to be of the utmost importance. My testimony today is divided into three areas.

First, I would like to acquaint the Committee with some of the facts underlying the Justice Department's investigation, which was subsequently referred to the European Commission (the "Commission"), regarding exclusionary tactics that have impeded the ability of SABRE (and other U.S. systems) to compete in key national markets in the European Union against an E.U.-based company known as Amadeus. That company, like SABRE, markets computerized reservation system (CRS) services to travel agencies and airlines and has long maintained monopoly shares in France, Germany, Spain and other national markets or "home" markets. We believe that the conduct described to the antitrust enforcement agencies is a clear violation of both the Sherman Act and Articles 85 and 86 of the Treaty of Rome.

Second, I would like to describe to the Committee our role in providing information to and otherwise assisting the Commission - Directorate General (DG) IV in its longstanding investigation. As the Committee may be aware, the SABRE case was the first matter officially referred by the United States Department of Justice (AJustice Department) to the Commission under the Apositive comity provisions of the 1991 antitrust cooperation agreement between the United States and the European Union. Without compromising matters that must for obvious reasons remain confidential I will tell you what we know of the status of that inquiry.

Third, based on my company's experience with the referral by the Justice Department and the now longstanding investigation by the Commission, I would like to make some suggestions -- which I hope the Committee will find constructive -- for potential changes in the referral process. Although we do support the principle of Apositive comity, and in particular commend the Justice Department and the Assistant Attorney General for their persistent and diligent efforts to make the referral process work effectively, nevertheless we believe there are ways that the process could be improved so that parties in the United States receive the same timely and thorough response to their complaints that we have come to expect from our own antitrust enforcement agencies.

1. Anticompetitive Conduct in National CRS Markets within the European Union To explain the nature of SABRE's complaint concerning exclusionary conduct by Amadeus in European national markets (and elsewhere), a brief description of the CRS industry and the technologies we use is necessary. At the most basic level, a CRS brings together buyers and sellers of travel in an electronic market place. Given its longevity, the purchase and sale of travel through a CRS is the most developed model of electronic commerce and is a large export for the United States. On a more technical level, a CRS consists of a central computer database and processor containing information on a variety of travel products. The travel agents and others who pay for access to the CRS database are known as Asubscribers. The travel providers who pay for distribution of their products and services through the CRS are known as Aassociates. Associates include, among other entities, air carriers, railroads, ferries, and tour operators. Computer reservation systems provide subscribers with schedules, fare information and available seat inventory, and permit payment, seat assignment, ticket issuance, and many other travel related tasks which, prior to the advent of such systems in the mid-1970s, were performed manually. Consequently, among its most important attributes, a CRS enhances subscriber productivity and, therefore, profitability. As a result, subscribers will naturally gravitate toward the CRS that provides the most complete functionality and contains the most accurate information about local travel providers.

Although the industry has changed considerably since it first began in the mid-1970's, the world=s major CRSs are still owned (or affiliated with) major airline holding companies : Amadeus (Air France, Iberia, Lufthansa) ; Galileo (Air Canada, Air Lingus, Alitalia, Austrian Airlines, British Airways, KLM, Olympic Airways, SwissAir, TAP Air Portugal, United, U.S. Airways,); SABRE (American Airlines) ; and Worldspan (Delta, Northwest, TWA). Airlines participate in the various CRSs at different levels of Aconnectivity. Higher levels of connectivity provide faster data transfer and more accurate information about the airline or travel provider, e.g. interactive A real-time exchange as opposed to the slower "store and forward" messaging (commonly known as "teletype" messaging). Similarly, airlines and travel providers may select different Afunctionality, allowing travel agency subscribers access to time-saving products on a particular carrier, such as electronic ticketing, pre-reserved seating or the ability to enter frequent flyer account information. A CRS with the highest connectivity and greatest functionality for significant air carriers, tour operators, railroads and other content providers in a market is the most desirable in that market.

The gravamen of SABRE's complaint concerning Amadeus is that European airlines, railroads, tour companies and others who own or market the Amadeus system (or are affiliated with those that do) have unlawfully restricted CRS competition in their national markets by withholding (or delaying transmission of) critical fare information to SABRE and other U.S. sponsored systems, by requiring travel agents through the tying of airline commissions to subscribe to Amadeus or not to choose SABRE, and by refusing to provide U.S. systems with competitively necessary levels of connectivity and functionality (in some cases refusing to allow SABRE and other systems to distribute their products at all). As CRSs charge competitive rates with one another, ordinarily, airline participants are indifferent about CRS participation and want the widest possible distribution. For example, under normal market pressures, the overriding concern for air carriers should be selling seats, regardless of which CRS agents use to do so. This has not been the case in some markets. Exclusionary conduct by Amadeus and its affiliates has gone on for many years, virtually since the introduction of competition by U.S. companies in Europe over a decade ago, and has been extraordinarily effective in helping Amadeus to maintain monopoly market shares in the home countries of its owners and marketers. Indeed, the Amadeus CRS not only benefits from having more functionality and better information as to local travel providers in its home markets, Amadeus touts this advantage in its marketing to travel agencies, fueling a widespread perception in those countries that Amadeus is the only effective choice for travel agencies automating their businesses.

A few examples of the kind of unlawful and exclusionary conduct SABRE (and other U.S. systems) have encountered over the last decade as they attempt to compete in key European markets will illustrate the point. In 1990, after SABRE entered the Spanish market, Iberia Airlines announced it would no longer participate in the system; this had the immediate and obviously intended effect of crippling SABRE's marketing efforts in Spain. The carrier's withdrawal was averted only after the intervention of the Department of Transportation ("DOT") under the International Air Transportation Fair Competitive Practices Act ("IATCA") (49 U.S.C. 1159). In 1993, however, Amadeus owners Iberia and Air France announced that their domestic affiliates (i.e., carriers responsible for intra-country transportation) would not participate in SABRE at all (Iberia) or would participate at a very low level of connectivity (Air France) -- hurting SABRE's ability to compete in the local CRS markets. Although these efforts were also eventually thwarted with the assistance of the DOT under IATCA, and SABRE maintained the participation of these key carriers in their national markets, much damage was already done, in that subscribers could not rely on SABRE to offer the ability to sell tickets (or provide adequate functionality) on the most important carriers in those local markets.

In Germany, the national rail company Deutsche Bahn (until recently a co-owner of the Amadeus national marketing company in Germany) refused for more than ten years to sign a participation agreement allowing SABRE to sell rail tickets in Germany (where rail travel is essential to both the business and leisure traveler and, thus, a necessary component of any travel agency's offerings). Only after an order by the German competition authority did German Rail agree to commence the technical work necessary to sell tickets through SABRE. After two years of protracted negotiation, German Rail finally signed an agreement this past summer.

More recently, we provided the Justice Department and DG IV a letter from Air France to a French travel agency (using SABRE as its CRS) explicitly tying the payment of an "override" commission - an extra percentage on top of the carrier's usual commissions -- to the installation of the Amadeus CRS by a certain date. In other words, if this travel agency wanted favored treatment from the dominant carrier in France, it would have to use Amadeus as its CRS.

As a result of this pattern of anticompetitive behavior Amadeus dominates the CRS markets in each of the home countries in Europe of its owner or affiliated air carriers and related entities: Germany (78%); France (85%); Spain (93%); and Scandinavia (75-80%). These market shares mirror to great extent those of its owner air carriers and their affiliates in their respective home air transportation (and related travel) markets : Lufthansa/Germany; Air France Group/France; Iberia/Spain; and SAS/Scandinavia.

Because the national airline markets in Europe continue, for the most part, to be dominated by the flag carriers and their domestic affiliates, as one industry observer noted, such carriers have had Alittle incentive to Amanage their relationships with external distributors more efficiently and can Acharge customers high tariffs and undertake minimal marketing. Thus, for example, because Air France chooses to favor Amadeus, a potential subscriber in France seeking complete information about the carrier and its affiliates (which dominate the French air transportation market) would feel compelled to use Amadeus as opposed to another CRS for the most complete fare information, the most reliable level of connectivity and the highest degree of functionality on Air France. And Air France, due to its dominance in the French market, has little reason (or need) to cooperate with U.S.-based CRSs to provide complete fares, connectivity, and functionality in that market. Conduct of this very sort is, we believe, responsible for artificially inflated CRS market shares for Amadeus in Spain, Germany, France and Scandinavia at the expense of U.S.-based CRSs.

Attached as Exhibit A and Exhibit B are CRS market share graphs for certain European countries showing market shares in the Amadeus dominated countries and in "open" countries.

2. The APositive Comity Referral of the Amadeus Inquiry to the European Commission

In 1991, the United States and the European Union signed an agreement to enhance cooperation between them in enforcing competition laws (the AAgreement). Under the pact, each party agrees to (i) notify the other whenever it appears that its enforcement activities would affect the other's Aimportant interests ; (ii) provide the other with significant information it receives about anticompetitive activities in the other's territories ; (iii) assist in and coordinate enforcement activities ; (iv) accept the application of Atraditional comity principles ; (v) promote the use of Apositive comity ; and (vi) participate in regular meetings and information exchanges on antitrust matters.

By far the most important of these features is the use of Apositive comity. Under this doctrine, the parties stipulate that if one of them believes its Aimportant interests are being adversely affected by anticompetitive activities in the territory of the other party that violate that other party's competition laws, the affected party may request that the other party initiate enforcement activities under its laws. The party receiving such a request, however, is under no obligation to initiate enforcement proceedings. It is required to notify the referring party of its decision regarding whether to initiate enforcement activities. Should the notified party decide to initiate enforcement activities, it must inform the referring party of the outcome of those proceedings. The referring party at all time remains free to undertake its own enforcement efforts. The Agreement does not provide for the sharing of confidential information otherwise protected by statutes or regulations by either party, e.g. grand jury proceedings. In June 1998, the E.U. and U.S. signed a supplemental agreement to the 1991 cooperation pact dealing with positive comity. The main changes are designed to clarify when an agency will defer or suspend its own enforcement activities (the "Affected Party") in favor of those of the party to whom the referral is made (the "Territorial Party"). Deferral or suspension is now premised on agreement by the Territorial Party to take definitive action concerning the challenged conduct within six months of deferral or suspension by the Affected Party. Further, deferral or suspension is contingent on the Territorial Party facilitating the continued involvement of the Affected Party in the enforcement process. The Territorial Party, therefore, must use its best efforts to pursue sources of information suggested by the Affected Party and must take into account the views of the Affected Party at important stages of the enforcement process (including settlement and remedies). Under the new agreement, the Territorial Party must update the Affected Party regularly on the status of the investigation and notify the Affected party of the results of the enforcement activities. Nothing in the new agreement, however, requires the Territorial Party to act on a request from the Affected Party, nor is the Affected Party required to suspend its own activities. Finally, the Affected Party is free to initiate or reinstitute enforcement activities that were suspended in favor of enforcement activities of the Territorial Party. In order to evaluate the effectiveness of Apositive comity as a mechanism for international antitrust enforcement, it is important to understand the concepts underlying the doctrine, which have their roots in a 1967 Council Recommendation of the Organization for Economic Cooperation and Development (AOECD) on Co-operation between Member Countries on Restrictive Business Practices Affecting International Trade. The term Apositive comity was coined and given emphasis in the Agreement. Positive comity is also an important part of the 1995 agreement between the U.S. and Canada.

According to the Justice Department, Apositive comity arrangements are among the best ways to redress private restraints barring access to foreign markets, as the process helps Aempower competition authorities and to insulate them as much as possible from short-term protectionistic influences. Additionally, Apositive comity makes it more likely that Athe kind of evidence necessary to properly decide these kinds of cases can be obtained as the referring party's ability to gather evidence in another's territory is Aextremely limited. Finally, Apositive comity increases pressure throughout the world to Aallow competition authorities to conduct their work fairly since it provides a Asensible, systematic approach to fact-gathering, reporting, and bilateral consultation among competition authorities. The E.U. has expressed similar sentiments about the Agreement.

The origins of the SABRE/Amadeus referral can be traced back to 1995, when Amadeus sought permission from the Justice Department to proceed with an acquisition of one of its U.S. competitors, SystemOne, Inc. At that time the Justice Department received complaints from the other U.S.-based CRSs that the owner carriers of Amadeus were not providing the U.S. systems with complete and timely fare information, equal connectivity and complete functionality as compared with what was being provided to Amadeus. After conducting its own investigation into the conduct, the Antitrust Division publicly disclosed on April 28, 1997, that -- on January 20, 1998 -- it had made the first request under this Apositive comity regime to the European Union's competition authority C Directorate General IV (DG-IV) C asking DG IV to investigate anticompetitive conduct by European airlines and their affiliates that was preventing U.S.-based airline computer reservation systems (ACRS) from competing effectively in certain European markets. The Justice Department further stated that, while it had referred to DG-IV its investigation of anticompetitive conduct in Europe, it would continue to investigate the possibility that similar conduct by the same or related parties were preventing U.S.-based CRSs from competing effectively in a number of countries in South America.

In its referral the Justice Department cited evidence that Aexclusionary conduct may be preventing U.S. companies from vigorously competing in the computer reservations systems market in Europe. In accord with the principles of Apositive comity, the matter was referred to the European Commission given that it would be Ain the best position to investigate this conduct because it occurred in its home territory and consumers there are the ones who are principally harmed if competition has been diminished. Equally true, the Justice Department said it Aretains a strong interest in this matter because U.S. companies may have been blocked from becoming effective competitors and the exclusionary conduct might have adverse effects on U.S. markets as well.

The Amadeus referral has now been pending formally since January 1997, almost twenty-two months (and informally much longer). No decision on the investigation has been made by DG-IV to our knowledge. Because The SABRE Group's experience may be instructive to the Committee and the Antitrust Division, as our government seeks to refine and improve the mechanisms for international antitrust enforcement, and to other private parties injured by anticompetitive conduct occurring within the European Union, we attempt below to summarize some of the obstacles we have encountered in obtaining a final resolution of SABRE's market access complaint. In so doing, we are not challenging the good faith or conscientious commitment on the part of DG-IV, and certainly not of the Justice Department. By identifying some of the structural impediments to prompt resolution, however, we are endeavoring to make constructive suggestions for enhancing the efficacy of positive comity and thereby increasing confidence in its application.
Inherent Delay

First, it appears that the referral process inevitably means delay in obtaining a resolution on the merits. Our internal legal staff and external counsel first met with a case investigator from DG-IV in early February 1997, immediately after the matter was referred from the United States. The purpose of this initial meeting and additional meetings that followed in the spring, summer, and fall of that year was to review the evidence that had already been provided to the Justice Department, to learn of any questions or concerns of the new investigatory agency and to offer assistance in providing further information and in obtaining discovery from European-based travel agents and others who would support the allegations. While it was clear to our counsel that the Commission was committed to fulfilling its obligations under the Agreement with the United States -- and that commitment still seems obvious today -- it was equally apparent from the initial meetings with the Commission that the Amadeus matter would be, for all intents and purposes, a new case from the point of view of DG-IV. In effect, much of the benefit of the near two-year investigation by the Justice Department into Amadeus was lost because of the apparent requirement that DG-IV staff commence its own investigation rather than continue an inquiry begun on the other side of the Atlantic.

The delay engendered by DG-IV having to start afresh is compounded by the lengthy processes in place within the Commission for making decisions with respect to civil non-merger investigations. The Commission may decide to investigate competition problems based on information from many sources. Once it decides to investigate, it may seek information under the so-called Article 11 process (basically written interrogatories). If it chooses to issue such letters, it must prepare them in the native language of the target party. If the conduct involves many companies across national boundaries, the translation burden is large (and time consuming). Once the Article 11 letters go out, our experience is that a party will generally have 30-60 days to respond. Usually, the Commission will send out "simple" Article 11 letters to which the response is voluntary. The Commission finds that most companies will respond to the "simple" letters. If they do not, or if the responses are not satisfactory, the letters may be recast as a statement or decision, formally adopted by the Commission, with financial penalties for failure to comply. Responses at this stage will generally take an additional 30 - 60 days. The Commission may also gather information (particularly, documents) through an Article 14 inspection ("dawn raid"). A "dawn raid" requires elaborate coordination with the local competition authorities and entails going to the offices of the targeted party and seizing documents.

Once the information process is complete, the Commission must decide whether to proceed with the investigation. It can reject the complaint, settle the case informally, adopt a favorable decision and impose penalties immediately, or, more commonly, issue a statement of objections setting out the offending conduct, the reasons for the Commission's conclusion, and a proposed penalty. While not a written requirement, statements of objection -- especially regarding "high profile" cases -- must generally go through a debate and approval process within the Commission. Initially, the cabinet "subject matter" experts of each of the twenty Commissioners will meet and reach consensus on what the statement of objections will say and the appropriate penalty. The same debate then moves onto the "Chef de Cabinet" level where the process is repeated. Finally, all twenty Commissioners must vote on the proposed statement of objections and penalties where approval of the measure will require 11 of 20 votes. (We note, however, that this process is not followed in all cases and a delegation of authority may shorten this procedure).

Once a statement of objections is prepared, it is sent to the target party for response, who is then given access to the files and the opportunity to make a written reply, generally within 30-60 days. The targeted party may also request an oral hearing before an independent Hearing Officer. Only after this process is complete will the statement of objection (if still warranted) be finalized including, any penalty.

Before the statement of objections is finalized, however, DG IV must consult with the Advisory Committee on Restrictive Practices and Monopolies, which is comprised of representatives of the Member States competition bodies. While not a formal requirement, our understanding is that this body must approve of the measures taken before the statement of objections becomes final.

These elaborate processes (which most U.S. companies are not familiar with) can easily lead to Amixed signals as to when a final decision on issuance of statements of objections will be made and in our case have certainly contributed to our perception of a very lengthy, drawn out procedure.
Differences in Investigatory Techniques

Second, the events of the last twenty-two months reveal differences in investigatory techniques used in the two jurisdictions that are startling to private American companies accustomed to the practices and procedures of our Antitrust Division or Federal Trade Commission (or of the antitrust enforcement agencies of the various State attorneys general). For example, the Commission has no ability to gather documents, other than through a "dawn raid." As "dawn raids" appear to be rare, elaborate exercises, one must question whether the Commission effectively has the ability to gather documentary evidence other than that in the possession of the complaining party. If the complaining party is the Justice Department, one then must ask whether the United States can -- on balance -- really obtain more evidence through the referral process than it could using its own compulsory process over companies that do business in the United States and that engage in conduct which is reached by U.S. antitrust law under the Foreign Trade Antitrust Improvements Act of 1982 (15 U.S.C. 6a).

Article 11 letters, like interrogatories, have limited efficacy. These are written questions to which a clever draftsman may avoid responding with substance except when they ask for objective facts, e.g., sales numbers, and the like. Unlike the civil investigatory process in this country, there are no depositions under oath and, apparently, no criminal penalties for filing incomplete or false responses. Moreover, it does not appear that DG IV, routinely (if ever) interviews third party witnesses as part of its investigation.

Another difference is the translation burden. As noted earlier, all communications between the Commission and the targeted parties must be translated into their native languages. If multiple parties are involved, the time to simply translate documents can be a serious impediment to speedy relief. U.S. companies are also accustomed to the Justice Department and FTC "team" approach in which a senior investigator and staff (including an economist and paralegals) will review the evidence, seek additional evidence from the complaining party, third parties, and the target(s), and prepare a case (if warranted) from that evidence. The Commission, unfortunately, suffers from resource problems. In our experience, a single case worker was assigned to review (and gather) evidence involving highly technical issues and (at least) eight targeted parties. In all fairness, given this burden on one person, it is hardly surprising that the investigation is still ongoing.

A lack of resources and unfamiliarity with U.S. procedures probably explains (in part) why The SABRE Group was requested to reformat all of the evidence turned over by the Justice Department into a form more useful to the case officer. We also undertook to cooperate with DG IV by providing additional materials and resources to help educate DG IV staff on the industry's history. The Company provided, among other things, (1) legal research memoranda regarding application of EU law to the facts and on potential remedies; (2) a detailed index of all of the supporting documents provided by the DOJ and resubmitted the box of supporting documents organized by topic; (3) a list of third parties who could provide additional evidence to DG IV supporting our allegations; (4) draft Article 11 letters to the targets and to third parties; (5) a draft consent order setting out the types of injunctive relief that would be necessary to stop the pattern of discriminatory practices against U.S.-based CRS companies; and (6) new evidence regarding the practices at issue in the referral. Company officials traveled to Brussels on numerous occasions to meet with DG IV officials, answer questions, and provide additional background training on the industry and the problems enumerated in the DOJ's complaint. While we were, of course, more than willing to provide such support, it must be recognized by U.S. companies whose matters are referred under "positive comity" that the burden on the complaining company is somewhat greater than in the United States.
Different Evidentiary Standards

Third, evidentiary standards employed by the European Union may subject U.S. companies to a higher requirement of proof than would be customary in the United States before our antitrust enforcement agencies would proceed (or than would be imposed in a civil trial). For example, "internal" documentation (i.e., memoranda of the complaining party on the conduct in question) is generally not deemed sufficient evidence to progress an investigation; unless additional third party documentation is presented to support the allegations, the Commission is unlikely to proceed with an investigation. This presented quite a challenge in our case as many of the documents we provided the Justice Department (and which formed the basis of the referral) were, of course, internal summaries of conversations or problems we experienced in attempting to enter European national markets. Moreover, it is unlikely that a complaining company will have in its files "smoking guns" prepared by the other side.

However, as noted above, DG IV appears to be severely limited in its ability to gather documentary evidence on its own. Consequently, unless U.S. companies can unearth third party documentation backing up the allegations they will have a difficult time convincing the Commission to proceed with a referred investigation. Fortunately, we were able to direct DG IV to a number of third party documents already contained in the materials provided by DOJ and, as part of the reformatting process described above, gathered additional third party documentation (or objective) documentation supporting our allegations. The SABRE Group believes, however, that additional third party documentation could be obtained by DG IV by simply contacting the individuals and companies identified as having information relevant to the allegations.

Another issue is the use of "confidential" documents. The company was asked by Justice Department to identify which of the documents provided in January 1997 to DG IV should be considered "confidential" and thus not made available to the target companies. We identified a number of documents as confidential (such as business plans that may have included descriptions of the anticompettive conduct), while others were either redacted or deemed non-confidential. Under the Justice Department's Civil Investigative Demand ("CID") procedures, all documents and responses to questions provided to the United States are deemed confidential and they are not shared with any third party or the target. Under E.U. rules, however, if the targeted party cannot see a document, it cannot be used as the basis for the complaint. Long after completing this process, we learned that the Commission could not use, as the basis for a complaint, any documents (or parts of documents) that were marked as confidential as those documents could not be shared with the targeted parties.

Another striking difference in investigatory procedures and evidentiary standards is the evident inability of the Commission to rely on secondary materials in the public domain-- such as trade journal articles, newspaper articles, and so forth -- as the basis for pursuing discovery or admissions against a party under investigation. In contrast, in the United States, the Justice Department might appropriately pursue discovery against a target of an investigation based on the target's statements quoted in the press, which, upon confirmation, would be admissions. In our instance, we were required to withdraw a number of such articles (including some footnoted in this testimony) from the evidentiary record because DG IV could not use such materials in its investigation.

We do not suggest, by the lengthy discussion above, that the referral process can never work -- only that there are obstacles which both the United States and the European Union must work to eliminate if the process is to work effectively and provide U.S. companies with a fair and speedy resolution of their claims. (The final section of this testimony addresses our ideas for improvements in the process.) Indeed, Mr. Chairman. we are now hopeful that the longstanding investigation -- begun in the Antitrust Division and completed at DG-IV -- may be nearing a close. We believe that the merits of the case referred by the Justice Department are so compelling that appropriate action will be taken by the Commission in the near future.

3. Assessment of APositive Comity and Suggestions for Improvements in the Referral Process

The travel distribution industry has provided the first test of Apositive comity under the Agreement. As such, the stakes are very high -- not only for SABRE, but also for the referral process itself. As the first request under the Agreement, the referral demonstrates a strong commitment on the part of both parties to cooperate in antitrust enforcement. The request also indicates a belief by the Justice Department that the Commission has the will and power to overcome political pressures. In an address at Fordham Law School in 1995, then Principal Deputy Assistant Attorney General Klein stated:

In order for [positive comity] to be successful, however, the foreign country concerned must have in existence a strong antitrust law that prohibits a range of collusive or monopolistic practices similar to that prohibited by the Sherman Act and that provides sufficient authority to its enforcement authorities to eliminate the unlawful practices. To deter these activities, the foreign laws must also provide for penalties on violators that are sufficiently high to offset the potential profits that companies believe they can derive from the unlawful conduct.
Likewise, Mr. Klein cautioned:

[E]ven among countries with reasonably sound and longstanding antitrust laws, we too often see them, even today, failing to provide the resources or political support to its competition authorities to enable them to enforce their law in an effective manner. Thus, this referral can be seen as an acknowledgment by the United States variously of the power and independence of DG-IV, a belief that E.U. competition laws provide adequate discovery mechanisms, will be fairly applied, and contain sufficient penalties to deter anti-competitive conduct, and an acceptance that effective international competition enforcement will require this level of trust and cooperation. Such cooperation Ais critical in today's increasingly globalized economy. According to the Assistant Attorney General, advances in technology have meant Athat markets throughout the world are economically available even to previously domestic businesses. Such globalization can also bring problems; cases in which anti-competitive horizontal or vertical restraints prevent foreign competitors from being able to compete on a level playing field have become Amore prevalent. Because this was the first Apositive comity referral under the Agreement, there was little guidance beforehand as to the likely conduct of the investigation. The consultations called for under the Agreement do not deal specifically with referrals under Art. V. With the benefit of the experience of The SABRE Group over the last two years, we respectfully submit that the following improvements be made:

First, more intensive and more frequent communications between both governments would help make the referral process effective, given the significant differences in U.S. and E.U. procedures. The Antitrust Division should continue to take advantage of procedures available to it -- not the least of which is compulsory process over companies doing business in the United States -- and share the fruits of its procedures on a continuing basis with Commission investigators. At the outset of the process there should be an indepth meeting in which the agency referring the matter presents its views of the evidence, potential legal theories, and ideas as to remedies to its counterpart across the Atlantic. The referral should be less of a Ahand off of the investigation and more of a partnership forged in the spirit of the original Agreement.

Second, we believe that the U.S. government should take on formal responsibility for updating private parties whose complaints have been referred to the European Union on the status of their pending matters and in particular on a timeframe for resolution.

In this respect a private U.S. firm who has been referred by its government to the European Union is much like a U.S. citizen traveling abroad (who might look to the State Department for assistance in unraveling foreign customs and procedures). So long as information regarding the likely date for completing the investigation can be released without compromising the underlying matter (and subject to appropriate safeguards), this information should be made available on a periodic basis to the private parties involved.

Third, the Justice Department and the Commission should immediately undertake to review what steps could be taken to enhance convergence of investigative procedures and should exchange recommendations with one another as to how to improve the processing of non-merger cases. As already discussed, the Commission does not use depositions under oath to gather testimony and its power to collect documentation is limited. Given the number of parties involved in the Amadeus marketing network and the technical nature of the CRS industry, the Amadeus referral raises a serious question as to whether the Article 17 discovery procedures are adequate to justify one of the major tenets of positive comity -- that the E.U. is able to gather evidence that would otherwise be unavailable to the Justice Department.

Fourth, each referral should begin with a candid review by the two governments of the ability of the agency to whom the matter has been referred to marshal needed resources. As Mr. Klein stated, successful Apositive comity referrals will turn in large part on the willingness of the governmental bodies to provide resources and support to their competition authorities so as to permit a proper and complete investigation. In this regard each party should be encouraged to enlist and use the active assistance of attorneys, economists and paralegals supplied by the other, to overcome any resource limitations that arise.

Fifth, a strict timetable for action is warranted under the referral process. The Justice Department and DG-IV must establish and maintain deadlines as to when action can be expected and when milestones in the direction of the case will occur. Without such a timetable, the credibility of a referred investigation could be in jeopardy, especially if the investigation languished in bureaucracy. As already pointed out, the complaining parties in a referred case, too, have a keen interest in knowing what to expect and when to expect it. If private parties are satisfied with the treatment of their causes by foreign competition authorities, future referrals will be more likely and more frequent.

Finally, the Justice Department should be prepared to act when Apositive comity does not work as intended. The Agreement itself provides a mechanism for dissatisfaction. If the Justice Department is not satisfied with the results, it can bring its own action in the U.S., and vice versa. In announcing this referral, the Justice Department also mentioned its separate investigation into the same types of behavior by the Amadeus CRS in South America. The option of unilateral enforcement expressly reserved by the 1991 and 1998 agreements is important and should be retained both generally and in this case.