Competition Law In South East Asia Riding The Wave Of Development.
Legal News & Analysis - Asia Pacific - Regulatory & Compliance - Competition & Antitrust
17 July, 2018
There has been a flurry of activity in several South East Asian (SEA) competition law regimes recently, which signals that the competition law landscape in the region is evolving and becoming increasingly sophisticated.
In this article, we look at some of the recent key developments in SEA as well as some of the broader changes in Asia and the implications of the latter for the former.
The ASEAN Experts Group on Competition (AEGC) have been committed to fostering a competition culture since 2007. Improved cooperation and coordination between competition authorities in SEA is a priority and it has been reported that a number of initiatives have been put in motion to further that goal (for instance, a regional cooperation framework being drafted).
It remains to be seen whether a fully- edged ASEAN network, which will conduct joint investigations, will be put in place in the near future as a result of the AEGC. A step in that direction may be taken later this year when the ASEAN competition law enforcers network will reportedly be established.
There have been several notable developments in Singapore since the start of 2018. On 1 April 2018, the Competition Commission of Singapore was renamed the Competition and Consumer Commission of Singapore (CCCS). It will now be both the competition enforcer and the consumer protection watchdog for Singapore. It is expected that the CCCS’ two functions will not overlap in individual cases, but could overlap where the CCCS is conducting a market study where it may look at both competition law issues and consumer protection issues. In addition, since January 2018 the CCCS has taken on the Chairmanship of the afore mentioned AEGC. In terms of recent enforcement, the CCCS imposed a record-breaking ne of S$19.5 million (€12.2 million) on ve companies for the sharing of pricing information to x the prices of aluminium electrolytic capacitors, which are used in domestic appliances, in January 2018. The ning decision in Singapore came ahead of nes being imposed in relation to the same cartel conduct in the EU where the nes imposed totalled over €250m. The CCCS has also recently investigated an alleged refusal to supply lift spare parts for the maintenance of lifts in Singapore public estates, which resulted in voluntary commitments from the two companies involved in the infringement.
Aside from these cases, the digital sector has been a key focus for the regulator. For example, according to public sources, the CCCS is expected to investigate the commercial arrangements between third-party online travel- booking platforms and the providers of ights and hotels later this year. The regulator will look at how they are negotiated and applied, and how online travel-booking platforms and service providers compete. The CCCS and the Personal Data Protection Commission are also launching a joint study of the competition, personal data protection and consumer protection issues that might arise if a data portability requirement is introduced in Singapore.
Long awaited changes to the competition law of Indonesia are at its most advanced stage in the legislative process since the competition law regulator of the country, the Commission for the Supervision of Business Competition (KPPU), began lobbying for amendments to the regime over a decade ago. These changes include increasing available penalties for anti-competitive behaviour and broadening the investigation powers of the KPPU. According to recent reports, however, the latest drafts of the law require that some of these investigation powers be exercised by the police and not the KPPU itself.
Meanwhile, the KPPU appointed a roster of new commissioners in April 2018 following the expiration of the terms of the previous commissioners. The new commissioners have hit the ground running. They announced a budget proposal featuring a 27% budget increase for 2019 and publicly stated that they are considering procedural changes of the KPPU’s operations, aimed to address criticisms over the KPPU’s procedural propriety. The latter comes after the Supreme Court of Indonesia’s recent decision to uphold a lower court decision to set aside the KPPU’s penalty on local food and beverage producer Forisa, on the grounds of procedural impropriety during the course of witness examination by the KPPU. These changes could include fundamental reforms to the present hearing system, in which commissioners involved in the investigation of a case also act in a judicial capacity during the case hearing.
The KPPU continues to pursue a number of ongoing enforcement cases relating to tender and bid rigging issues, which has historically represented the majority of the KPPU’s cases, as well as a number of merger control related breaches. In addition, the KPPU has made public statements that its key enforcement focuses include the staple foods, agriculture and banking sectors.
The Philippines Competition Act is one of the newer competition law regimes within the region, having been passed into law only in 2015. However, since its establishment, the Philippines Competition Commission (PCC) has quickly made headlines for its e orts in grappling with the nation’s telecoms sector after the two largest telecoms service suppliers acquired the assets of the third largest provider and left the country with a duopoly. The PCC has been an active merger control authority in the region – it has received over 150 noti cations relating to over 130 transactions since it was set up in February 2016. In addition to its active enforcement of the merger control regime, the PCC has also been investigating a number of antitrust cases, including ongoing investigations into suspected cartels in the cement, garlic, power and healthcare industries.
Under the Philippines Competition Act, the PCC has jurisdiction over administrative proceedings and penalties, whereas the country’s Department of Justice has jurisdiction over criminal proceedings and penalties. However, the two bodies entered into a memorandum of agreement in June 2018, under which the parties agreed that the PCC would be the lead agency on investigations and prosecutions related to anti- competitive practices. The PCC has also stated that it is close to nalising its leniency program, which will be harmonised with the relevant rules enforced by the Department of Justice.
Despite having been established since 2011, the Malaysian Competition Commission (“MyCC”) has reportedly been hindered by lack of resources and has to date only issued a relatively small number of infringement decisions. However, according to recent reports, the regulator is hopeful that greater support will come from the recently elected government, which is expected to appoint a new Minister of Domestic Trade, Cooperatives and Consumerism (head of the government department to which MyCC reports), a position that is currently unoccupied.
Nevertheless, the MyCC stated in April 2018 that it has in fact probed over 80 cartel cases since its establishment.
The MyCC has also recently conducted market reviews of the building materials and pharmaceutical sectors in Malaysia.
From a policy perspective, the MyCC has recently commenced a consultation on its draft guidelines on intellectual property rights and competition law. The MyCC is also reportedly interested in introducing a new merger control regime. In contrast to many other Asian jurisdictions, Malaysia currently has no merger control system.
Vietnam approved a new law on competition on 12 June 2018, which is expected to come into force in June 2019.
The new law is expected to:
(a) enable the regulator to pursue all acts which affect competition in Vietnam (i.e. the regime will have extraterritorial application for the rst time);
(b) introduce a leniency programme for the first time (which will apply to all anticompetitive conduct, not only cartel conduct as is the case in most other systems); and
(c) introduce a new National Competition Agency.
The new law is also expected to introduce new merger control thresholds. The current thresholds are based on market shares.
The new thresholds are expected to be more exible and could be triggered on the basis of revenue or assets in the jurisdiction as well as the value of the transaction.
Other relevant developments in SEA and Asia
Both Thailand and Myanmar have newly introduced competition laws that came into force during the course of 2017. In both cases, the new legislation seeks to introduce a regime that is largely aligned with other international models. The practical impact of the new laws remains to be seen, as both regimes remain in the early stages of implementation.
A number of regulators throughout Asia (including in China, Japan and South Korea) have suggested that the digital sector will be a key focus in the coming years. This is echoed by many of the regulators in SEA and we expect this trend to take shape in SEA in the near future. Indonesia’s KPPU will continue to focus on the digital economy as a key priority in 2018, according to a speech made in December 2017 by the KPPU’s then Chairman Syarkawi Rauf. In February 2018, the Head of the CCCS, Toh Han Li stated that the CCCS is looking at the use of big data as its next project and also commented that the CCCS already has the necessary tools to deal with competition cases involving digital disruptor rms (there is an ongoing debate in Asia and beyond as to whether new antitrust tools are needed).
While it remains to be seen whether Asian competition authorities will amend their existing laws, guidelines and tool box for dealing with antitrust issues relating to the digital sector (for example, in the context of the amendments of Indonesia’s antitrust laws), it is possible that Asian authorities may in due course adopt a di erent approach to the assessment of issues in the sector. This difference in approach could extend, for instance, to a greater analysis of alleged anticompetitive conduct in multi-sided markets and the greater use of market studies and monitoring mechanisms (as opposed to enforcement action) by authorities. This approach, and in particular the use of market studies, has already been adopted in other jurisdictions in Asia as well as in the EU.
The competition law regimes in SEA appear to be undergoing another wave of development, with established regulators continuing to grow and the newer regulators bedding down and/or consolidating their regimes. There is no reason to assume any let up in this growth and the coming years will no doubt continue to witness increased activity on part of the regulators in SEA, as they evolve to deal with the plethora of antitrust issues that arise across the region.
By Mark Jephcott, Partner and Head of Competition Asia, Herbert Smith Freehills LLP; Ajit Kainth, Registered Foreign Lawyer (England and Wales) and Howard Chan, Associate, Herbert Smith Freehills
For further information, please contact:
Ruth Stackpool-Moore, Director of Litigation Funding / Head of Harbour Hong Kong