Corporate Social Responsibility and the Possibility of Private Transnational Governance in Competition Law

Corporate Social Responsibility and the Possibility of Private Transnational Governance in Competition Law

Thanh C. Phan (University of Victoria, Canada)
DOI: 10.4018/978-1-5225-8266-3.ch012
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Abstract

Under economic globalization, anti-competitive acts transcend national borders and become a challenge for competition law as traditionally conceived. Most countries have been dealing with cross-border competition problems by using two basic methods: unilaterally extending national competition law's jurisdiction to acts conducted in foreign territory and cooperating in enforcing competition law. However, while the unilateral enforcement of competition law harms international comity, international cooperation in this area is constrained by conflicting national interests. Against the backdrop of such limits of statist mechanisms, this chapter examines the role of multi-national corporations in the enforcement of national competition law at a transnational level. It argues that when a multi-national corporation internalizes competition laws of countries as standards for its behaviors, the corporation can provide a mechanism to project those national laws at the transnational level by exercising its private power in a socially responsible way.
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Introduction

Under economic globalization, anti-competitive acts such as cartels, abuses of a dominant position, and illegal mergers transcend national borders and become a challenge for competition law as traditionally conceived. Most countries have been dealing with cross-border competition problems by using two basic methods: unilaterally extending national competition law’s jurisdiction to acts conducted in foreign territory and cooperating in enforcing competition law. However, while the unilateral enforcement of competition law harms international comity (Phan, 2016), international cooperation in this area is constrained by conflicting national interests (Phan, 2018). Therefore, many of the transnational challenges of competition law that emerge from the global economic order and, more specifically, the nature of global value chains and international commerce, cannot be addressed through state law.

In the context that state-based methods dealing with cross-border competition law problems are not effective or prohibitively costly, this chapter suggests a private transnational regime to deal with the problems by arguing that multi-national corporations (“MNCs”) can play a role in the enforcement of competition law in cross-border transactions through the application of contractor codes of conduct. This means when an MNC internalizes competition laws of countries, the corporation can provide a mechanism to project those laws at a transnational level using its private power. In doing so MNCs can help to enforce competition law in an international context that states are not likely to be able to provide in the foreseeable future.

This chapter contributes to the literature on transnational law from three perspectives. First, it examines a mechanism by which corporations can transform national law into transnational law. Second, while the literature on transnational law discusses private transnational rules such as best practices and good governance without explaining how these rules are made, this chapter analyzes a process that constructs some best practices and good governance. Third, this chapter shows that transnational law does not replace national and international law or diminish state regulatory authority or result in private hegemony. Transnational competition law discussed in this chapter helps to strengthen the regulatory power of states at the transnational level. It can enforce law of a less powerful country in the territory of a more powerful country and thus enhance justice and fairness in international society.

In addition, this chapter contributes to the literature on the roles of corporations in society by suggesting that some corporations may make business decisions that reflect what they think they should do in the public interest even if they are not obliged to do so. It does not claim that all MNCs will act in the public interest or embrace corporate social citizenship, but it examines factors explaining why some MNCs may do so. This chapter shows how corporations can, by internalizing widely shared social values, help to advance competition law at a transnational level. Although this chapter does not assume that MNCs will go beyond profit maximization, it suggests that corporations might be seen not only as problem generators but also as problem solvers. It also suggests a view about corporations that if there is no evidence showing that the global society is ready to get rid of corporations, we should make them more socially responsible and encourage them to engage in meaningful actions.

This chapter has four sections. The first section, which reviews different approaches to the objectives of corporations, suggests that some corporations are willing to make decisions that benefit society beyond the constraints of law. The second section discusses the role of MNCs in global governance. It shows that corporations have private authority but their role in global governance is not competitive or alternative to that of statist actors. The third section analyzes the internalization of law by MNCs through contractor codes of conduct and suggests that MNCs are capable of enforcing their norms. The internalization of law helps to explain the transformation of law into standards of behaviour and the extension of the normativity of law to geographic areas in which sanctions are not available. The fourth section, which discusses the transnational governance of competition law, shows that by requiring contractors in the global supply chain to comply with all applicable laws “lead firms”––corporations issuing contractor codes of conduct to govern their supply chain––can help to extend the jurisdiction of national law to the territory of other countries. It also examines a mechanism controlling the power of lead firms.

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