comp law in asia lecture slides week 1

National University of SingaporeLL4136/LL5136/LL6136Competition Law in Asia – 2011Week 1 - Introduction

Dr R. Ian McEwin

Visiting Professor, Law Faculty, National University of Singapore

Copyright R. I. McEwin

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Course InformationCourse Convenor: Dr Ian McEwin ETS Room 02-38

Tel: 6516 7613 HP 9118 1094 Contact Hours: Two hours lecture, one hour seminar/tutorial Tuesday 12-3 LAW SR 4-3

Assessment:

Final Exam 60%; Research Assignment 40%


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Competition laws - Introduction

• No established world framework of rules exists with respect to competition law

• Countries have considerable discretion in setting their own competition laws

• National competition law regimes and policies differ considerably – but mature competition regimes are converging based on the underlying economics – recognising that competition law can improve a country’s economic efficiency, innovation and productivity

• In many Asian countries competition law co-exists with fair trade provisions which are more concerned with consumer protection than competition – this course is primarily concerned with competition laws in Asia


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Introduction•Competition laws around the world share some

common features: For example, they prohibit: Horizontal agreements (between competitors) dealing

with setting price, sharing markets, limiting production etc

Vertical agreements (between buyer and seller) dealing with resale price maintenance, market division etc

Dominant firms stopping new entrants, driving efficient competitors out of business etc

Control of mergers in the expectation that more firms in a market means less collusion and less market power


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Introduction• Some competition laws also apply to public undertakings e.g.▫EU

Article 86 deals with the application of competition rules to public undertakings (Art 86(2)provides for a limited exemption)

Arts 87 to 89 of the EC Treaty deal with government actions e.g. competition can be restricted not only by businesses but also by governments, if they grant public subsidies to businesses. The Treaty of Rome prohibits any form of State aid that is likely to distort intra-Community competition, on the grounds that it is incompatible with the common market – with some exceptions

▫China Chapter V of the Anti-Monopoly Law prohibits government bodies from

engaging in administrative monopoly – where Govt. bodies give a competitive advantage to certain companies


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Introduction• Competition laws differ around the world by:▫Goals– some are more concerned with improving economic outcomes

while others try to ensure firms behave ‘fairly’ (whatever that means)▫What is meant by ‘anti-competitive’ conduct e.g. Singapore does not

prohibit restrictions between buyer and seller unless one party is dominant and uses those restrictions to stop a new entrant, drive an efficient competitor out of business etc

▫ The intensity with which competition laws are enforced – or sometimes not enforced due to a belief that competition laws are irrelevant (or upsetting of political or social structures)

▫ Enforcement methods (e.g. judicial or administrative)▫Whether there is only a national competition regulator or a supra-

national regulator (as in Europe)


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“Law and Legal Institutions in Asia” Asian Development Bank (Executive Summary in Workbin)

• Legal systems in Asia borrow heavily from the West• India & Malaysia – English law from colonisation• Japan – independently adopted law from France and Germany –

influenced by US law (e.g. forced to introduce competition law in 1947 by MacArthur)

• Taiwan – followed Japan after Japanese occupation from 1895• South Korea – followed Japan when Japan established protectorate in

1905 and colonial rule in 1910 – also influenced by US after WWII• China, like Japan, independently adopted European (mainly German)

law in early 20th century • However, argued that because Western law superimposed on Asian

concepts of Authority (allocates significant power to the ruler) Western laws “sometimes ignored or slow to gain acceptance” (p3)


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•Report used a topology of 4 legal systems based on 2 dimensions i.e.▫Resource allocative dimension (allocated by market i.e. Western

laws or State)▫Procedural dimension (rules-based – i.e. due process and

effective limitations on State power or discretionary i.e. considerable powers given to executive)

•This gives1. Market/rule-based legal system2. Market/discretionary legal system3. State/rule-based system4. State/discretionary legal system


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•Report concluded1. Market/rule-based legal system (Western countries)2. Market/discretionary legal system3. State/rule-based system4. State/discretionary legal system (Asian countries studied

in this category for some time between 1960-1995 but all have moved towards 1 mainly in move towards markets, less so towards rule-based legal systems – with possible exception of Malaysia)


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Administrative Law and Governance in Asia (Ginsberg and Chen, Routledge 2009)

•Moves towards rule-based procedures have continued since 1995

•Chen “Law, Development and the Typology of Legal Systems” (1999-2000) 4 Journal of Chinese and Comparative Law 30 said

“A hypothesis … is that it may well be the case that the evolution of the ‘procedural dimension’ of law is more concerned by the dynamics of the political system of the country concerned than by economic factors” (p 46) – he goes on to say that “there may not be a necessary connection between the allocative and procedural dimensions of law” – But is this true for competition law?

Asian legal systems and Administrative Law

• Administrative law concerned with regulating government conduct

•Distinguish▫ Judicialization – the range of activities over which judges

exercise authority. As dyadic relations based on reciprocity breaks down, business is forced to rely on a third-party to resolve disputes - leading to rules etc to guide future conduct In Asia, relations between individuals and individual/Govt.. tend to be dyadic. However, judicialization is tending to replace relational governance and so business will rely more on regulatory/judicial processes for adjudication

▫ Juridification – the extension of legal reasoning and procedures into social and political activities

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Asian legal systems and Administrative Law

• Tom Ginsberg (2009) identifies three explanations for increased role of courts:

▫ Economic – increasing globalization allows new entrant into domestic markets who are less trusting of local bureaucrats and whose entry upsets existing relationships

▫ Political – Japan financial problems in early 1990s led to less trust in Govt., loss of

power of LDP led to more transparency 1997 Asian Financial Crisis which started in Thailand and had big

impact in Korea and Indonesia – meant many existing promises were broken leading to pressures for political reform – reduction in political power led to increased judicial power (“As it becomes more difficult to produce legislation, courts have more policy space in which to insert themselves into policymaking without fear of legislative correction or discipline by other political actors” (p 7)

▫ International – mainly supranational regulatory bodies that constrain domestic policymaking

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Chen (2009)•Ginsberg, Tom and Albert H.Y. Chen Administrative

Law and Governance in Asia Routledge 2009

Country Juridification Judicialization

Hong Kong Increasing Increasing

Indonesia Small increase Even smaller increase

Japan Significant increase Limited

Malaysia No increase No increase

Philippines Increasing Increasing

Singapore Low degree Lower degree

South Korea Increasing Increasing

Taiwan Increasing Increasing

Thailand Increasing Increasing

Vietnam Increasing (from low base)

Increasing (from low base)

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Competition Laws in South East Asia

• Jurisdictions that have introduced competition law who also have industry or sectoral regulation – e.g. ▫ Indonesia▫Singapore▫Thailand

•Others do not have a general competition law but have sectoral regulators that handle competition issues e.g.▫Brunei (telecommunications)▫Cambodia – looking at regulating telecoms▫Malaysia – telecoms, media and energy▫Philippines – at least eight different Acts that deal with

competition

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“Fairness” and Competition Law

•Liu (2004, p 1, fn1) notes that:

“Interestingly, the Asian jurisdictions that have an elaborate set of competition laws are all Civil Law countries like Japan, Korea, Taiwan, Thailand, Indonesia and China.

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“Fairness” and Competition Law• Liu (2004) “ Fairness is not just the name of the competition law in

Asia. The enforcement agencies want a fairness label, too. Therefore, for example, the Thai competition authorities are called the Thai “Fair Trade” Commission, even though nowhere in the legislative title of the Thai TCA contains any reference to fair trade.. This, again, follows the practice long established by older Asian competition authorities: the Japanese Fair Trade Commission, Korean Fair Trade Commission, and Taiwanese Fair Trade Commission. While the acronym “FTC” came from the Untied States and originated from the Federal Trade Commission, in Asia none of these jurisdictions are federal states. They never had the traditional or practice of installing independent commissioners charged solely with the task of enforcing well-defined laws. In fact, one cannot be convinced easily that these Asian FTCs are a truly independent commission as the American Federal Trade Commission is understood to be. Therefore, they can claim instead one and only one important feature: regulating “fair” trade.

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Kyu-Uck Lee, A “Fairness” Interpretation of Competition Policy with Special Reference to Korea’s Laws,”, KFTC 1997

“Competition is the basic rule of the game in the economy. Nevertheless, if the outcome of competition is to be accepted by the society at large, the process of competition itself must not only be free but also conform to a social norm, explicit or implicit. In other words, it must also be fair. Otherwise, the freedom to compete loses its intrinsic value. Fair competition must go in tandem with free competition. These two concepts embody one and the same value. This may be the reason that competition laws of several countries such as Korea and Japan clearly specify ‘fair and free competition’ as their crown objective.”

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Kyu-Uck Lee, A “Fairness” Interpretation of Competition Policy with Special Reference Korea’s Laws,”, KFTC 1997

In a developing economy where, incipiently, economic power is not fairly distributed, competition policy must play the dual role of raising the power, within reasonable bounds, of underprivileged economic agents to become viable participants in the process of competition on the one hand, and of establishing the rules of fair and free competition on the other. If these two objectives are not met, unfettered competition will simply help a handful of privileged big firms to monopolize domestic markets that are usually protected through import restrictions. This will then give rise to public dissatisfaction since the game itself has not been played in a socially acceptable, fair manner.”

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Competition Institutions in Asia

• Some competition regulators are independent statutory authorities while others exist within government departments

• Independent regulators:▫ INDIA – Competition Commission with appeal to the

Competition Appellate Tribunal▫ INDONESIA – Commission on Business Competition

Supervision (KPPU) – appeals to the District Court with a final appeal to the Supreme Court

▫SINGAPORE – Competition Commission of Singapore with appeal to a Competition Appeal Board (full merit review). Further appeal to High Court and Court of Appeal on points of law or size of financial penalty

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Competition institutions in Asia

•Within Executive Government:▫Japan – Fair Trade Commission – attached to Prime

Minister’s Office. Appeals to courts on basis of whether the Commission’s decision was based on ‘substantial evidence’

▫South Korea – Fair Trade Commission – part of the Ministry of Commerce – no right of appeal

▫Thailand – Trade Competition Commission is part of the Ministry of Commerce (Chairman: Minister of Commerce, Vice –Chairman: Permanent Secretary of MOC

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Abuse of DominanceTwo Main Approaches Worldwide

1. Regulatory Abuse of Dominance: Clear threshold set for dominance and then certain kinds of conduct prohibited ex ante

1. Indonesia

2. Thailand

3. Vietnam

2. Ex-post Regulation: Criteria for dominance established, but no ‘bright-line rules on conduct - ex ante. Instead evaluated ex post (usually with guidelines) to determine anti-competitive effect (effects examined to varying degrees in different jurisdictions)

1. China

2. India

3. Japan

4. Korea

5. Singapore

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Mergers•As with abuse of dominance there are two major

approaches to mergers A regulatory approach that prohibits mergers that lead to

market shares greater than a prescribed amount China (?) Vietnam – prohibits mergers if the combined market share is

greater than 50% - but exemption if one of the parties is at risk of becoming bankrupt or if the merger promotes exports or contributes to socio-economic development and/or technological progress (Art 19)

A case-by-case assessment of the anti-competitive impact All other jurisdictions

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China• In 1978 China introduced long-run economic reforms

based on market principles, including private ownership•China’s State Council called for anti-monopoly laws in

the late 1980s – the Ministry of Commerce became the main drafting agency – and consulted widely with overseas officials, academics, lawyers and businessmen

• In 1993 China introduced an Anti-Unfair Competition Law to stop deceptive advertising, coercive sales, appropriation of business secrets and bribery

•China enacted an Anti-Monopoly Law in August 2007 which became effective on 1 August 2008


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China – AML Goals第一条为了预防和制止垄断行为，保护市场公平竞争，提高经济运行效率，维护

消费者利益和社会公共利益，促进社会主义市场经济健康发展，制定本法。 Article 1 This Law is enacted for the purpose of guarding against or ceasing monopolistic conduct, safeguarding and promoting the order of market competition, improving economic efficiency, protecting the consumer's interest, protecting the public interest, and promoting the healthy development of the socialist market economy

• Earlier versions included “protecting the legitimate rights and interests of undertakings” i.e. competitors. Generally accepted in US, Europe etc that competition law should protect competitive processes and not protect competitors

• Although domestic and foreign undertakings are treated the same in the legislation, in the debates prior to the AML, it was often stated that the AML should be used against foreign undertakings trying to dominate markets in China

Note: the source of the translation is: www.ANTITRUSTCHINA.COM


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China – AML Goals

•第四条国家制定和实施与社会主义市场经济相适应的竞争规则，完善宏观调控，健全统一、开放、竞争、有序的市场体系。 Article 4 The State shall make and implement competition rules appropriate for the socialist market economy and improve macroeconomic measures for a united, open, competitive, and well-ordered market system

•This Article is consistent with using competition laws to promote industrial policies – not all that different from other competition law regimes


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China – AML Goals

•Article 1 was the product of considerable disagreement in China between those:▫Who believe competition law should promote

consumer welfare and efficiency via competition▫Who believe it should protect small and medium

businesses from larger companies▫Who believe it should be used to protect local

companies from foreign competitors or to promote industrial goals such as local innovation etc


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China – AML Enforcement• Article 9 establishes an Anti-Monopoly Committee (AMC) (some

translate it as ‘Commission’) under the State Council which formulates and publishes competition policies, guidelines and co-ordinate overall competition law enforcement

• Article 10 allows the State Council to designate an Anti-Monopoly Enforcement Authority” which is responsible for enforcement work

• The State Council gave enforcement power – not to a single regulator – but instead to three agencies (which reflects historical responsibilities for these areas)1. State Administration of Industry and Commerce (SAIC) – conducts

investigations into monopoly agreements, abuse of dominant position, abuse of administrative powers to eliminate and restrict competition

2. National Development and Reform Commission (NDRC) examines pricing monopolies

3. Ministry of Commerce (MOFCOM) – supervises mergers


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China Anti-Monopoly Committee第九条国务院设立反垄断委员会，负责组织、协调、指导反垄断工作，履行下列职责：

Article 9 The Anti-monopoly Committee under the State Council performs the following functions:

（一）研究拟订有关竞争政策； (i) Making competition policies; （二）组织调查、评估市场总体竞争状况，发布评估报告； (ii) Organizing the investigation and

assessment of the market competition status as a whole and publicizing an assessment report;

（三）制定、发布反垄断指南； (iii) Making and publishing the anti-monopoly guidelines;

（四）协调反垄断行政执法工作； (iv) Coordinating the anti-monopoly administrative enforcement work; and

（五）国务院规定的其他职责。 (v) Other functions assigned by the State Council. 国务院反垄断委员会的组成和工作规则由国务院规定。 The structure and protocol of the Anti-monopoly Committee is developed by the State Council.


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China - Enforcement

•There is likely to be jurisdictional overlap between MOFCOM, the SAIC and NRDC

•For example, abuse of dominant position could involve pricing issues that could be dealt with by both the SAIC and NRDC

•Overseas companies may have to deal with more than one agency until the possible regulatory overlap is settled


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China – Extra-Territorial Application

第二条中华人民共和国境内经济活动中的垄断行为，适用本法；中华人民共和国境外的垄断行为，对境内市场竞争产生排除、限制影响的，适用本法。 Article 2 This Law is applicable to monopolistic conduct in economic activities within the territory of the People’s Republic of China. This Law is applicable to monopolistic conduct outside the territory of the People’s Republic of China that eliminates or has restrictive effects on competition in the domestic market of the People’s Republic of China.


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AML Applies to “Undertakings”

第十二条本法所称经营者，是指从事商品生产、经营或者提供服务的自然人、法人和其他组织。 Article 12 An “undertaking” in this Law refers to a natural person, legal person, or other organization that engages in the production or business of commodities or provides services.

本法所称相关市场，是指经营者在一定时期内就特定商品或者服务（以下统称商品）进行竞争的商品范围和地域范围。 A “relevant market” in this Law refers to the commodity scope or regional area within which the undertakings compete against each other during a certain period of time for specific commodities or services (hereinafter “commodities”).


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China – Overview of Prohibitions• China’s AML prohibits:▫ Three kinds of private conduct:

Anti-competitive ‘monopoly agreements’ Abuses of a dominant market position (abuse is eliminating or

restricting competition) Anti-competitive mergers i.e. concentrations that are likely to

‘eliminate or restrict competition’▫Abuse of administrative power

Aimed mainly at local government authorities who promote local enterprises (often state owned) at the expense of companies in other parts of China

▫ The private prohibitions are consistent with established competition law regimes – but mainly follow the German and EC approach


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China – Private Actions• Recent reports indicate that a Supreme Court notice, sent out before the AML

took effect, instructed lower courts to hear private actions under the AML regardless of whether there had been an official finding of wrongdoing.

• Private lawsuits have begun in regional courts –one is an abuse of dominance dispute between two web-based book publishers which is apparently the first private action under the law to reach the courts. Beijing Sursen Electronics, which sells novels online, has sued its rival Qidian for allegedly using its market power to stop a high-profile Chinese author from publishing a book on its site. The case is being heard before a Shanghai court. On December 22, 2008, the Shanghai No. 2 Intermediate Court announced the establishment of a new specialized combined panel of judges (called the " 反垄断案件专项合议庭 " in Chinese, and referred to below as the "Specialized AML Panel") dedicated to hearing AML lawsuits and related actions

• Microsoft??????


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India - History

▫1969 Monopolies and Restrictive Trade Practices Act▫Dec 2002 Competition Act passed by both houses of

Parliament▫Oct 2003 Competition Commission of India (CCI) established

with 1 Member and several staff – expansion halted by Writ Petition to Indian Supreme Court arguing that the CCI would exercise judicial powers and so should be headed by a Judge

▫Sept 2007 Parliament amended Act to meet Supreme Court’s objections but which also altered substantive sections of the original Act dealing with mergers and anti-competitive practices

▫May 2008 – positions in the CCI advertised


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India - CCI▫ February 2009

Mr. Dhanendra Kumar (former Indian Administrative Services Officer and executive director of the World Bank with experience in telecoms, energy and infrastructure) was sworn in as Chairman and Mr. H.C. Gupta (former Coal Secretary) was sworn in as a Member

▫March 2009 Mr. R Prasad (former Chairman, Central Board of Indirect Taxes), Prem

Prahsant Narain , Geeta Gauri an economist and Prahsant Narain , a lawyer, sworn in as Members

▫On 25 March 2008 The Indian government advertised the remaining two vacancies on the Competition Commission of India (CCI) and three vacancies on the country's new Competition Appellate Tribunal.

▫Monopolies and Restrictive Practices Commission to be wound up and the CCI to become operational in May

▫Mr. Kumar announces in March that the CCI’s first priority would be to investigate takeovers and mergers and acquisitions that lead to the creation of monopolies and cartelisation.


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India - Monopolies and Restrictive Trade Practices Act 1969

•Majority of cases dealt with under the Act involved consumer protection rather than competition

•Many cases involved contract disputes that had little to do with competition

•So bureaucracy now faces lack of experience in dealing with competition law issues despite the long life of the competition statute

•Very few cases on hard-core cartels – seen as the most important anti-competitive practice by most economists


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India - Competition Act 2002

•Covers three main areas i.e.:▫Anti-competitive agreements▫Abuse of a dominant position▫Combinations (i.e. mergers)

•Firms can be fined (10% of turnover or 1/3 of cartel profits) - includes criminal penalties for non-compliance with Orders etc (like in Singapore)

•Leniency program available


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Indonesia

• Law Number 5 of 1999 Concerning the Prohibition of Monopolistic Practices and Unfair Business Competition

• Law Number 5 was passed by the Indonesian House of Representatives, and signed into the law in March 5, 1999. Businesses were given an additional six-months , i.e. until September 5, 2000 , to comply.

• Purpose of Law Number 5 (Article 3)1. To safeguard the interests of the public and to improve national

economic efficiency as one of the efforts to improve the people’s welfare.

2. To ensure the certainty of equal business opportunities for large, medium, and small-scale business enactors.

3. To prevent monopolistic practices and unfair business competition.4. To create effectiveness and efficiency in business activities.


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Indonesia a. Prohibited Agreements1. Oligopoly (Article 4)2. Price fixing, except when part of a joint venture (Article 5)3. Price discrimination (Article 6)4. Predatory pricing by agreement with competitors (Article 7)5. Resale price maintenance (Article 8)6. Market division (Article 9)7. Group boycotts (Article 10)8. Cartels (Article 11)9. Trusts (Article 12)10. Oligopsony (Article 13)11. Vertical integration (Article 14)12. Exclusive dealing concerning re-supply (Article 15 (1))13. Tying (Article 15 (2))14. Reciprocal dealing (Article 15 (3) a)15. Exclusive dealing (Article 15 (3) b)16. Agreements with foreign parties that may result in monopolistic practices or unfair

business competition (Article 16)


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Indonesiab. Prohibited Activities1. Monopoly (Article 17)2. Monopsony (Article 18)3. Market control (Article 19)4. Predatory pricing (unilaterally) (Article 20)5. Fraudulently determining production costs and other costs (Article 21)6. Conspiracies to rig bids (Article 22)7. Obtaining competitors business secrets (Article 23)8. Impeding the production and marketing of competitors products (Article 24)c. Dominant Position9. Abuse of dominant position (Article 25)10. Interlocking directorates (Article 26)11. Cross-share ownership (Article 27)12. Mergers and acquisitions that may result in monopolistic practices or unfair

business competition (Article 28)


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Indonesiad. Exemptions (Article 50)1. Agreements intended to implement applicable laws and regulations

(Article 50 a)2. Agreement related to intellectual property (Article 50 b)3. Agreements related to standard setting (Article 50 c)4. Agency agreements that do not include resale price maintenance

(Article 50 d)5. Agreements for the purpose of research and development (Article 50

e)6. International agreements ratified by the government (Article 50 f)7. Export agreements (Article 50 g)8. Activities of small-scale enterprises (Article 50 h)9. Activities of cooperatives aimed at serving their members (Article 50

i)

Japan• 1947 “The Law Concerning Prohibition of Private

Monopolization and Maintenance of Fair Trade Law” (Law No 54 of 1947) – based on US antitrust law

• 1953 – significantly amended due to economic difficulties e.g. several exceptions to prohibition on cartels and to allow collaboration on R&D agreements

• The Act prohibits a business from▫Preventing ‘free and fair competition’ via cartels▫Unjustly maintaining monopolistic position or unjustly excluding

others▫Distorting competition by using any of 16 practices▫Merging where there it is likely to substantially restrain

competition in any field of trade


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Japan

•Three years ago the Japan Fair Trade Commission (JFTC) introduced a leniency program (following that of the US) – considerable skepticism that it would work as it was felt that whistle-blowing was contrary to Japanese corporate culture (also argued in Singapore). However more than 150 leniency applications have been received

•On 18 February 2009 the JFTC imposed its largest cartel fine of Yen 11.7 billion) against two companies in the domestic PVC industry


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Japan

• In February 2009 a Bill to amend Japan’s Anti-Monopoly Act (AMA) was submitted to the Diet – now approved

• The amendments included:▫Allowing the JFTC to impost significant administrative fines

for some kinds of vertical practices▫ Impose considerably greater penalties for cartels, including

increased fines and longer jail (gaol) sentences▫Changes to the pre-merger notification process▫Change rules with respect to the JTFC’s handling of

sensitive commercial information including the exchange of information with foreign competition authorities


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Japan – New Administrative Fines for Unilateral Conduct

• The AML prohibits two kinds of unilateral conduct:▫ Private monopolisation (i.e. exclusionary conduct that forecloses

competition from other firms or controls the operations of a competitor)▫Unfair trade practices (conduct that impedes fair competition such as

refusals to deal, abuse of a superior bargaining position, resale price maintenance)

• Under current AML unilateral conduct not subject to administrative fines (control of a competitor has been potentially but never used)

• Under the Bill this conduct would be subject to administrative fines as follows:▫ Private monopolisation – 3% of sales for retailers, 1% for wholesalers

and 6% for the rest – an active enforcement area▫Unfair Trade Practices – e.g. abuse of superior bargaining position – 1%

of affected sales


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Japan – Increased Penalties

•Firms that play a leading role in a cartel would be subject to a further 50% penalty (on top of the current 10% maximum, or 3% for retailers and 2% for wholesalers). So a leading firm could be fined 15% of sales or 4.5% for retailers etc.

•Maximum jail (gaol) sentences have been increased from 3 to 5 years – up to date all convictions have resulted in a suspended sentence (only permitted for sentences greater than 3 years)

•Leniency program expanded to allow an increase from 3 to 5 firms that qualify for some leniency


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Malaysia–Ministry of Domestic Trade & Consumer Affairs

FAIR TRADE PRACTICES POLICY OBJECTIVES The Fair Trade Practices Policy (FTPP) was approved on 26 October 2005 to seek the

following policy objectives :- Promote and protect competition in the market; Create dynamic and competitive entrepreneurs; Provide fair and competitive market opportunities for businesses; Prohibit anti-competitive practices including those originating from outside the Malaysian

territory and affecting the domestic territory; Prohibit unfair trade practices in the economy; Promote rights of SMEs to participate in the market place; Promote consumer welfare; and Encourage socio-economic growth, generate efficiency and equity.

SCOPE OF FTPP The FTPP will not address:- Sovereign functions of the Government; and All actions and

measures attributable to the state that seeks to encourage socio-economic growth to generate efficiency and equity.


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Malaysia–Ministry of Domestic Trade & Consumer Affairs

TRADE PRACTICES PROHIBITED UNDER THE FAIR TRADE PRACTICES BILL (FTPB) The proposed FTPB will prohibit the following conduct :- Abuse of Dominant Position Conduct which abuse one’s position as a monopoly or monopolization, such as predatory

pricing, exclusive dealings, excessive pricing and tied selling. These can lead to inefficiencies and raise costs to the economy and society.

Hard Core Cartels In a market dominated by few producers (oligopolistic), firms might find it profitable to collude to fix prices, allocate markets, limit production, and engage in bid rigging in order to maximize their profits. These firms also aim to restrict entry of new firms in the market or cause existing firms to exit the market due to their inability to compete.

Anti-Competitive Practices Anti-competitive agreements which seek to restrain and eliminate competition such as retail price maintenance, collusive tendering and restraints on production or sale.

Unfair Trade Practices FTPB will prohibit unfair trade practices, which substantially lessen competition, or create unfair competition conditions between competitors or harm consumer interests. It will therefore address unfair practices including misleading advertisements, unfair dealing between small and large economic operators, false promotions, claims, statements, promotions and sales tactics.

Organization Structure for the Enforcement Authority To implement the FTPB, a framework for an enforcement system will be set up as follows :- Fair Trade Practices Commission (FTPC) comprising of Commissioners who are government officials and other members who

have experience in and knowledge of matters relating to business, industry, commerce, law, economics, public administration, fair trade, competition, consumer protection or any other suitable qualification. The Commission will be serviced by an administrative body;

Fair Trade Practices Appeal Tribunal to review decisions taken by the Commission if referred to it by parties; and Judicial review to the High Court. Fair Trade Practices Commission Fair Trade Practices Appeal Tribunal Judicial Review to the High Court (From the Official Website of the Malaysian Ministry of Domestic Trade and Consumer Affairs)


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Philippines• Last year there were several anti-trust bills pending before the Philippine Congress. The current 14 th Congress has

several bills on anti-trust and competition law pending before both chambers, among them are the following:

▫ House Bill No. 01678 – An Act prescribing a fair competition law, and the creation of a Fair Trade Commission and for other purposes;

▫ House Bill No. 03856 – An Act creating the Philippine Fair Trade Commission, regulating and penalizing unfair trade practices and other anti-competitive practices and conduct, unlawful mergers, acquisitions and combinations in restraint of trade, unfair competition, abuse of dominant power, and appropriating funds therefore, and for other purposes;

▫ Senate Bill No. 123 – An Act prohibiting monopolies, attempt to monopolize an industry or line of commerce, manipulation of prices of commodities, asset acquisition and interlocking memberships in the Board of Directors of competing corporate bodies and price discrimination among customers, providing penalties therefore, and for other purposes;

▫ Senate Bill No. 1122 – An Act amending Republic Act No. 3815, also known as the Revised Penal Code, as amended, Article 186 on monopolies and combinations in restraint of trade;

▫ Senate Bill No. 2544 – An Act to strengthen the prohibition against monopolies and cartels of basic necessities or prime commodities, amending for the purpose Republic Act Number Seventy-Five Hundred and Eighty-One, otherwise known as the Price Act; and

▫ Senate Bill No. 3099 – An Act prohibiting anti-competitive practices and creating the Competition Regulatory Commission.

• Senate Bill No. 3099 (“SB 3099”), or “The Anti-Trust Act of the Philippines,” appears to be the most comprehensive competition bill for consideration. It consolidates the anti-trust laws and establishes the Competition Regulatory Commission (the “Commission”)

(See online, www.congress.gov.ph and www.senate.gov.ph)

http://www.congress.gov.ph/

http://www.senate.gov.ph/


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Malaysia - Public Consultation Document issued 17 January 2008

“Fair Trade Practices Bill to be tabled next year – 20 August 2008Reports by LEE YUK PENG, ZULKIFLI ABD RAHMAN, SIM LEOI LEOI and ELIZABETH LOOI

MALAYSIA will be introducing a Fair Trade Practices Bill so that consumers will be assured of quality goods and services at reasonable prices. The Fair Trade Practices Bill is expected to be tabled in Parliament by early next year.

It seeks to promote fair and competitive market environment in the country. Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said feedback was being sought from industry members, non-governmental organisations and government agencies.

“So far, there are no laws to counter monopolistic trade activities,” he said in response to a question by Zuraida Kamaruddin (PKR – Ampang). “As of now, we can only take action if the monopolistic practices among businesses contravene the Trade Descriptions Act 1972 and Consumer Protection Act 1999,” he said.

Zuraida had asked whether the Government was delaying the tabling of the Bill to protect government-linked companies (GLCs).Shahrir also said that the ministry carried out enforcement activities as provided under the Supply Control Act in which officials

ensured the supply of consumer goods from manufacturers to the market was adequate.He said it was not true that the Government was delaying forwarding the Bill to Parliament to protect GLCs. “More groups have

expressed interest to join in the consultation talks on the Bill.

“We also want the Act to be consistent with the aspirations outlined in the Asean Community blueprint, in which member countries will have its own Anti-Competitive Act by 2015,” Shahrir said.”

Source: The Star Online http://thestar.com.my/news/story.asp?file=/2008/8/20/parliament/22124136&sec=parliament


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Malaysia• Malaysia’s generic competition legislation, the Competition Act 2010

(‘Competition Act’), was passed on 22 April 2010 by Malaysia’s House of Representatives, the ‘Dewan Rakyat’,

‘to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers’.

• The Competition Act, is anticipated to come into force early 2012, prohibits anti-competitive activities, such as:▫ horizontal and vertical anti-competitive agreements and ▫ abuses of dominance.

• The Competition Act, however, does not expressly regulate mergers and acquisitions.

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Philippines – Senate Bill 3099• Section 2, Article 1 of SB 3099 declares the State policy to “maintain and enhance free and full competition in trade, industry

and all commercial economic activity and to penalize all forms of unfair trade, anti-competitive conducts and combinations in restraint of trade in order to improve consumer welfare.” Consequently, this proposed law of general application would embrace all areas of trade, industry and commercial economic activity.

• Unfair Competition. The bill establishes an outright ban on unfair competition and including therewith the following acts:▫ the distribution of false or misleading information which is capable of harming the business interests of another firm;

▫ the distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis, related to the price, character, method or place of production, properties, suitability for use or quality of goods;

▫ false or misleading comparison of goods in the process of advertising;

▫ fraudulent use of another’s trademark, trade name, or product labeling or packaging;

▫ unauthorized receipt, use, or dissemination of confidential scientific, technical, production, business or trade information; or

▫ collusion in business practices that are clearly against economic efficiency and consumer welfare, such as price fixing, bid rigging, restriction of output and market shares and allocation of geographic markets and customers.

• Abuse of Dominant Position. The bill treats this issue first with the definition of “dominant position” as a situation where a firm, if, acting on its own, can profitably and materially restrain or reduce competition in a market for a significant period of time. It then branches out to provide for situations when the rules are inapplicable. As a safe harbor, the proposed law excuses firms from being considered as dominant when their market shares do not exceed the percentage set by the Commission guidelines. Curiously, even if a firm exceeds such percentage set, it may or may not be found dominant, depending on the economic situation in that market.

• Mergers and Acquisitions. Covered by Article 3 of the proposed law, Section 8 thereof expressly prohibits concentrations that will significantly limit competition as may be determined by the Commission. The Commission, in turn, is mandated to adopt and publish regulations from time to time that stipulate – ▫ the minimum size or size of concentrations subject to the notification requirement prescribed;

▫ the information that must be supplied for notified concentrations;

▫ exceptions or exemptions from the notification requirement prescribed for specified types of concentrations; and

▫ other rules relating to the notification procedures laid down by the Article.



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PhilippinesGlobal Competition Review Tuesday, 06 January 2009

“The Philippines' National Economic Development Agency has asked the country's congress to draft legislation to prevent companies from distorting the market by forming cartels.

The agency focused its comments on oil companies and public utilities. While oil companies have recently reduced prices, NEDA, quoted in the Philippines Inquirer, says that there should be further reductions, based on oil price trends in the world markets as delays in fuel price drops are affecting the prices of other goods as well as the rate of inflation. NEDA contends that although there has been some reduction in interest rates, an antitrust law would stimulate the economy and bring prices more into line with countries such as the US, where oil prices are lower.

Hilary Jennings, head of outreach of the OECD's competition division welcomes the discussion, but says that the country must ensure that any new law must deal with the whole market, not just one sector, to be effective.

"Tackling cartels in any sector is always, in the OECD's view, important, says Jennings. "[However], introducing a general competition law to make markets work well would be more likely to deliver broader benefits for Philippine consumers in the wider economy as well as in the specific oil market."

Others point to a need for resources to back up competition enforcement. Erik Söderlind, head of Asia competition at Linklaters LLP in Hong Kong says: "It is no use calling for new competition regimes unless sufficient resources are allocated to the authorities that are put in place to enforce them. Having 'effective' legislation on the books serves no practical purpose."

At present, the country has no specific legislation to deal with competition issues, although there are a number of pending bills before congress. Dennis Quintero, a senior associate at Quisumbing Torres in Manila says: "There is a strong likelihood that these bills will be passed into a law that will strengthen Philippine antitrust legislation and enable the country to catch up with the more sophisticated competition laws of other jurisdictions.“

Source: http://www.globalcompetitionreview.com/news/article/12533/philippines-agency-demands-antitrust-law-fight-inflation/


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South Korea

•Constitution says in Art 119(2) that the State can regulate economic affairs within the framework of a free and fair market

•Monopoly Regulation and Fair Trade Act 1980 – amended more than 10 times

•Korea Fair Trade Commission set up by Art 35 – Chairman and Vice Chairman are Presidential appointees – says in Art 37(3) that they are ‘political appointees’


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South KoreaKOREA FAIR TRADE COMMISSION’S 2009 BUSINESS PLAN - Yong-Ho Baek, Chairman of Korea Fair

Trade Commission (the “KFTC”), reported the KFTC’s key business plan for the year 2009 to President Myung-Bak Lee on December 18, 2008. The key points of the KFTC’s 2009 business plan are:

1. Stronger Enforcement of Antitrust Law against International Cartels and Abuse of Intellectual Property Rights

The KFTC expects that the global economic crisis will lead to an increase in international cartels . In preparation for such possibility, the KFTC plans to increase the number of examiners and develop their expertise and skill. The KFTC will also focus its efforts on trying to prevent international cartels by engaging in a closer investigation collaboration with the competition authorities in the U.S., the EU, China and Japan. The KFTC also plans to enforce the antitrust law more strictly against the abuse of intellectual property rights by global companies in the IT and pharmaceutical sectors (e.g., interference with new entry through the abuse of patent rights), which abuses are also drawing an interest from the competition authorities in the EU and elsewhere.

2. Prevention of the Unfair Trade Practices to Protect Small and Medium-sized Enterprises and to Protect Consumers’ Rights and Interests

The KFTC plans to closely monitor unfair subcontracting practices, such as unfair reduction in the supply price, theft or unlawful acquisition of technology and payment in kind, and impose stricter sanctions on repeat violators, such as imposition of administrative fines and filing of a criminal complaint. In addition, the KFTC will focus its efforts in investigating and remedying unfair trade practices by monopolistic or oligopolistic public enterprises. The KFTC will continue to analyze the causes which are creating a significant difference between the domestic and overseas prices of several major products. If necessary, the KFTC plans to amend the relevant regulations to improve the situation.


56

South KoreaKOREA FAIR TRADE COMMISSION’S 2009 BUSINESS PLAN - Yong-Ho Baek, Chairman of Korea

Fair Trade Commission (the “KFTC”), reported the KFTC’s key business plan for the year 2009 to President Myung-Bak Lee on December 18, 2008. The key points of the KFTC’s 2009 business plan are:

3. Closer Monitoring of and Improved Preventive Measures against Unfair Trade Practices targeting Ordinary Consumers

The KFTC plans to designate medical device, mobile communication, private education, petroleum product and other industries, which have very close relationship with the day-to-day lives of ordinary consumers, as “industries subject to closer monitoring,” and investigate price-fixing, tying, unfair labeling and advertisements and other unfair trade practices in these industries. The KFTC will also closely monitor the industries where harm to ordinary consumers are expected to increase, such as illegal multi-level marketing, e-commerce, funeral arrangement services and private loan business, and plans to improve regulations and provide awareness education.

4. Flexible Review of Business Combinations and Active Use of the Collaborative Act Permit System The KFTC will review the anti-competiveness of business combinations in light of the global competition and

dynamic market conditions. Also, in the event that the KFTC decides that it is unavoidable for the companies to jointly decrease production or jointly downsize the production facilities in order to cope with the economic crisis, the KFTC will try to reduce the enterprises’ burden through a reasonable enforcement of the competition law, such as temporarily permitting such collaborative act (but not on price fixing).


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South KoreaChina: Korea Considers Antitrust Exemptions For Certain Cartels To Assist Economic Recovery16 January 2009 Article by H. Stephen Harris, Jr. , Peter Wang and Shinya Watanabe In an effort to aid the country's recovery from economic crisis, the Chairman of the Korea Fair Trade Commission (KFTC) reportedly has announced that

the KFTC may invoke its power to exempt certain cartels from the Korea antitrust laws, so long as the cartels do not engage in "direct price fixing." The Korea Monopoly Regulation and Fair Trade Act (MRFTA) and a Presidential Decree have authorized such exemptions, but so far none ever has been granted. The authorization of cartels now would represent a shift from the KFTC's recent trend of punishing cartel behavior with increasing severity. Nevertheless, such exemptions would protect cartel members from liability only under Korean law. Therefore, the risk of antitrust liability elsewhere remains—including civil and criminal liability in the United States and some other jurisdictions—for both Korean cartel members and non-Korean companies collaborating with them, for sales of affected products outside Korea.

The cartel prohibition of the MRFTA already exempts "unfair collaborative acts" that are deemed by the KFTC to meet the requirements set out in the Presidential Decree on MRFTA enforcement and have as their purpose industry rationalization, research and technology development, overcoming economic depression, industrial restructuring, rationalization of trade terms and conditions, or enhancement of competitiveness of small and medium-sized enterprises.

For each of these purposes, the Presidential Decree provides separate, rather general, criteria for unfair collaborative conduct to qualify for exemption. For example, to justify an exemption for the "rationalization" of an industry, the KFTC must find that (1) effects from the cartel, such as technological enhancement, quality improvement, cost reduction, and efficiency increases are clearly manifested, (2) the rationalization of the industry using means other than a cartel is difficult, and (3) the beneficial effects of industrial rationalization outweigh the effects of prohibiting the restriction of competition.

An exemption for the purpose of overcoming economic depression would be available if the KFTC finds that (1) there has been a continuous decline in the demand for a particular product or service for a substantial period of time, due to a continued large oversupply, and the situation will most likely to persist in the future, (2) the transaction price of a particular product or service persistently has fallen short of the average production cost, (3) a considerable number of companies in a given area of trade will likely be unable to continue their businesses, and (4) the circumstances in criteria (1) through (3) cannot be overcome through the rationalization of enterprises.

These exemptions authorized under Korean law suggest the question of whether they would give rise to any of the special defenses that exist under U.S. law for conduct undertaken or compelled by foreign governments, including the act of state doctrine or the foreign sovereign compulsion defense. In addition, U.S. courts sometimes abstain from imposing U.S. law on foreign conduct in cases that would require an assessment of the validity of foreign government actions. It should be noted that such defenses generally do not apply where the conduct is undertaken by private companies and is authorized, but not compelled, by a foreign government entity.

Given the risk of antitrust liability outside Korea for members of an exempt Korea cartel and for companies collaborating with cartel members, any participant should monitor the conduct of an exempt cartel to carefully assess its risk of antitrust liability outside Korea for the cartel's activities. http://www.jonesday.com/pubs/pubs_detail.aspx?pubID=S5754

http://www.mondaq.com/redirection.asp?company_id=1588&article_id=72396&individual_id=546230&redirectaddress=http://www.jonesday.com/lawyers/bio.aspx?attorneyID=S3618

http://www.mondaq.com/redirection.asp?company_id=1588&article_id=72396&individual_id=372810&redirectaddress=http://www.jonesday.com/pjwang/


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South Korea• In January, 2009, the Korean FTC issued a 133-page public version of its findings against

Intel, which it announced last June• It is argued that Intel offered Samsung Electronics Co. a series of ‘carrots and sticks’ to

Sambo Computer–two big PC makers in Korea–to reduce chip purchases from rival Advanced Micro Devices Inc. and keep Intel as their main supplier. For example, Intel allegedly withheld rebates from Samsung in 2002 to punish it from starting to use AMD chips, later coming up with a more attractive collection of incentives that eventually led Samsung to curtail purchases from AMD.

• Intel argues actions such as conventional volume discounts, are designed to reward companies that buy more from Intel. But at least three Samsung executives, it is argued “consistently testified” that Intel “suggested rebates in exchange for abandoning” AMD chips.

• The KFTC translation also cites documents from Intel’s Korea subsidiary, which it says describe the “main achievements” of its actions involving Samsung: “excluded a competitor – AMD, hindered AMD’s expansions in the domestic market; AMD’s decreasing awareness or reputation in the market and within Samsung; Samsung’s abandonment of AMD CPUs,” using computer-industry parlance for microprocessor chips.

• The document cites similar Intel actions involving Sambo, adding that Intel also convinced Sambo not to participate in an AMD product launch event in September 2003.

• Intel has appealed to overturn the KFTC decision.

Taiwan

•1991 – Fair Trade Law enacted with effect from 1992•Covers ▫Anti-competitive business practices▫Unfair business practices▫Pyramid selling schemes

•Amended▫1999 – increased penalties▫2000 – adjusted administrative practices▫2002 – changed merger notification system – raising

thresholds and improved procedural transparency

Taiwan

•Objectives Art 1 (Fair Trade Law 2002)▫Maintain the trading order▫Protecting consumer’s interests▫Ensure fair competition▫Promote economic stability and prosperity

•Of course maintaining the trading order and promoting economic stability and prosperity may not be compatible with promoting competition

Thailand

•Thai Constitution (1999) Art 87 – Government must support free markets led to Trade Competition Act 1999

•Thai Constitution 2007 Art 43A person shall be free to engage in activities or occupations and to compete freely and fairly. Restriction of such right under paragraph one is prohibited except by virtue of law, with a specific purpose of maintaining economic and social liability, protecting public utilities … or preventing monopoly or removing unfair competition.”

Thailand

• Price Control and Monopoly Act 1979 had price control provisions and anti-monopoly provisions – now replaced by▫Prices of Goods and Services Act 1999 (e.g. soap, pigs) and▫Trade Competition Act 1999

Section 25 – market dominance Section 26 – mergers Section 27 – price and trade collusion Section 29 – unfair trade practices (e.g. which destroys,

impairs, obstructs, impedes or restricts other business operators


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Vietnam• 2004 National Assembly of Socialist Republic of Vietnam

enacted the Law on Competition – entered into force on 1 July 2005

•Art 4(1) “Enterprises enjoy freedom to competition within the legal framework. The State protects the lawful right to business competition”

•But Art 4(2) says “Competition must be implemented on the principles of honesty, non-infringement upon the interests of the State, public interests, legitimate rights and interests of enterprises, consumers and compliance with the provisions of this law.”

• Long Act – 123 Articles in 6 Chapters


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Competition Law for ASEAN?• The EC Treaty signed in Rome in 1957 said that ‘undistorted

competition’ was one of its fundamental objectives• Main competition provisions in Arts 81-88▫Arts 81 and 82 prohibit anti-competitive agreements and abuse of

dominance▫Art 86 stops Member States from adopting measures that would

violate competition rules (relative to state-owned firms and firms involved in services of general economic interest)

▫Art 87 prevents Member States from giving state aid that restrict competition and intra-Community trade

▫At the EC level the European Commission overseas those provisions (Director-General Competition or DG COMP). At the national level all Member States have there own competition authorities which apply EC and national competition laws


65

Competition Law for ASEAN?•For there to be an ASEAN Competition law there

would have to be:▫Agreement on the competition law rules (but several

countries do not have competition laws at all or at least do not effectively implement them)

▫Provisions dealing with attempts by ASEAN countries to advantage their own firms relative to other ASEAN members

▫A supra-national regulator to handle competition law issues that have an impact wider than a single ASEAN country

•The prospects?


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ASEAN ECONOMIC COMMUNITY BLUEPRINT

“B1. Competition Policy41. The main objective of the competition policy is to foster a culture of fair competition. Institutions and laws related to competition policy have recently been established in some (but not all) ASEAN Member Countries (AMCs). There is currently no official ASEAN body for cooperative work on CPL to serve as a network for competition agencies or relevant bodies to exchange policy experiences and institutional norms on CPL. Actions:i. Endeavour to introduce competition policy in all ASEAN Member Countries by 2015;ii. Establish a network of authorities or agencies responsible for competition policy to

serve as a forum for discussing and coordinating competition policies;iii. Encourage capacity building programmes/activities for ASEAN Member Countries in

developing national competition policy; andiv. Develop a regional guideline on competition policy by 2010, based on country

experiences and international best practices with the view to creating a fair competition environment. “

http://www.aseansec.org/21083.pdf


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3rd Meeting of the ASEAN Experts Group on Competition (AEGC)Kuala Lumpur, Malaysia 25 - 26 March 2009

From Speech by Mr. Teo Eng Cheong, Chief Executive of the Competition Commission of Singapore

“The AEGC has held two Meetings, two training work shops, and one policy dialogue session with the Chairman of the UK Office of Fair Trading, Mr.. Philip Collins. Three workgroups have also been set up to carry out the AEGC’s projects; a workgroup on capacity building planning for member economies, led by Malaysia; a workgroup for the publication of a handbook on ASEAN competition laws to provide clarity and facilitate businesses’ investment decisions in the region, led by Vietnam, and a workgroup for the drafting of a regional guideline on competition policy, led by Singapore. As the AEGC, we have also contributed to the competition chapter of the successfully concluded ASEAN Australia New Zealand Free Trade Agreement, or AANZFTA.

And more than just the tasks we have completed, the intangibles, like the friendships forged over meetings and trainings, and the many meals in between, cannot be measured in any scorecard. There is value in knowing that we are all working towards a collective purpose, to create a highly competitive economic region out of ASEAN. The setting up of the AEGC has definitely sent a strong signal to the global business community and investors that ASEAN is serious in ensuring a fair and competitive market conducive to businesses and benefiting consumers.

But more importantly, we have built the strong foundations on which the AEGC will continue to grow in the next few years.

The AEGC has much to do, and to look forward to in its second year. We have many programmes lined up for the next 2 years, as well as donor partners willing to support the AEGC with funding and technical assistance. We will have technical assistance and funding from the Federal Government of Germany through InWEnt, and through the German Technical Cooperation, or GTZ. We have also benefited greatly from the US Federal Trade Commission and Department of Justice, as well as the Asian Development Bank Institute and the Japan Fair Trade Commission, and we look forward to continued partnerships with these agencies.”

http://www.ccs.gov.sg/NewsEvents/Speeches/3rd+AEGC+Meeting+25+Mar+09.htm

comp law in asia lecture slides week 1

Documents

competition lawcountries

intracommunity competition

national competition

mature competition regimes

law faculty

law sr

antimonopoly law

common market