January 1, 2015
On 20 November 2007, at the 13th Association of Southeast Asian Nations (ASEAN) Summit held in Singapore, ASEAN Leaders adopted the ASEAN Economic Community (AEC) Blueprint which is a master plan guiding the establishment of the ASEAN Economic Community. This master plan includes the setting up of competition policies by each ASEAN member country on a nationwide basis by the end of 2015.
As the deadline draws closer, and given that the implementation of competition policies are set out specifically in the AEC Blueprint, compliance with the respective competition laws in each of the jurisdictions will be something which business entities in the region are likely to implement going forward. It may be a challenge for entities as they would be required, at one time, to understand the nuances and distinctive features of the competition rules of the ten ASEAN member countries.
This article aims to provide a snapshot of the current situation and set out what to expect in 2015 by exploring the developments of competition policy and law implementation by each ASEAN member and the progress of ASEAN as a whole.
Singapore is one of the first few ASEAN members to implement a generic competition law regime. While there have not been huge fines or headline news, the enforcement of competition law in Singapore has nonetheless been active, detailed and based on sound economic and legal principles.
2014 saw the Competition Commission of Singapore (CCS) flexing its muscles against international cartels (i.e. the ball bearings cartel and the freight forwarders cartel), thus sending a signal to the business community that conduct occurring overseas that has an effect on the Singapore market will render local businesses liable under Singapore competition law.
The infringement decisions against the ball bearing manufacturers and the freight forwarders attracted substantial penalties amounting to more than S$9 million and S$7 million respectively. Coupled with its track record of investigating local entities, these decisions quash any speculation that the CCS would not pursue activities involving local entities beyond Singapore’s shores or against multi-national corporations with high turnover.
In relation to merger control, the decision in the acquisition of JobStreet Corporation Berhad by Seek Ltd/Seek Asia Investments Pte Ltd marks the first merger in which the CCS has accepted both behavioural (i.e. undertaking to not enter into exclusivity contractual obligations with recruiters) and structural commitments (i.e. divestments of assets of its domain name jobs.com.sg). Rather than deciding that the merger substantially lessened competition and therefore blocking it, the CCS meticulously considered the commitments offered which led to their conclusion that both behavioural and structural commitments were sufficient to ensure the maintenance of competitive market structures within the Singapore market.
In light of the mounting level of competition enforcement in recent years, Singapore business entities should ensure that they are compliant since competition law principles are established and enforcement appears to be steadily increasing.
Since the commencement of Malaysia’s Competition Act in 2012, the Malaysian Competition Commission (MyCC) has steadily ramped up its enforcement activity. It has investigated anti-competitive agreements imposed at trade association meetings as well as bilateral anti-competitive agreements between competitors. In a notable decision relating to Malaysian Airline and AirAsia, the MyCC imposed a hefty financial penalty of RM10 million on each party for their participation in a collaboration agreement to share certain routes.
Similarly, in its first abuse of dominance case against Megasteel, the MyCC took an aggressive stance and issued financial penalties amounting to RM4.5 million for Megasteel’s margin squeeze (by charging unfairly high rates in the downstream market) abuse in the hot roll coil industry. The financial penalty imposed amounted to 10% of Megasteel’s worldwide turnover.
It is likely that the MyCC will face an increment of investigations and will continue to increase its enforcement efforts; it introduced leniency guidelines recently in anticipation of such increase in efforts.
Indonesia was also one of the first ASEAN member states to implement a generic competition law regime in 1999. However, it has only been in recent years that the law became more widely and effectively implemented.
With over 500 local and provincial governments, the Competition for the Supervision of Business Competition (KPPU) faces several challenges in its oversight of competition regulation, especially within public procurement. Fighting corruption and cartel behaviour (through bid-rigging) remains the single top priority of the KPPU and it has entered into Memorandums of Understandings with various government agencies (such as the Corruption Eradication Commission, the Attorney General of the Republic of Indonesia and the National Police Criminal Detective Agency) to strengthen the enforcement of competition law and ultimately promote a healthier business environment in Indonesia.
In recent years, the KPPU has also taken steps to sanction cartel conduct. For example, it has recently investigated six tyre companies (Gajah Tunggal, Bridgestone, Goodyear, Sumi Rubber, Elang Perdana Tyre Industry and Industri Karet Deli) for their alleged price fixing and exchange of information at industry association meetings. It has also investigated cartel activity in the food supplies industry thus uncovering ongoing cartels in the supply of beef, garlic and soybean. Additionally, it is considering implementing a leniency programme (as recommended by the Organisation for Economic Co-Operation and Development) which will most certainly see an increase in cartel investigations.
Indonesia has developed a credible competition regime. While there are some very substantial challenges to effectively permeate the business community’s awareness of and compliance with competition law throughout the economy, the KPPU appears committed to the task.
Thailand’s generic Competition Act has also been in force since 1999 and it seeks to regulate most trade practices of business operators over a broad spectrum of commercial activity. Certain industries, however, are excluded from the purview of the Competition Act, these include the energy industry and the telecommunications industry and they are governed by industry-specific regimes which have the same effect as the national Competition Act. Notwithstanding the existence of written competition legislation, only 93 complaints have been made to the Trade Competition Commission, however, no cases have so far reached trial.
However, Thailand remains keen on developing its enforcement efforts. Recently, from 8 September to 17 September 2014, the Competition Commission of Singapore spoke at a programme for senior judges and court administrators from Thailand’s Office of Judiciary. The Thai officials were given a detailed insight into Singapore’s competition law regime, as well as CCS’s engagements at ASEAN in the area of competition policy and law.
Vietnam’s competition law has been in force since 2004 with the Vietnam Competition Council (the Council) actively sanctioning anti-competition conduct.
The Council has aggressively pursued cartel agreements that affect the market in Vietnam. In July 2010, the Council imposed financial penalties amounting to VND 1.9 billion on 19 automobile insurers for their participation in price-fixing agreements. In August 2013, the Council issued an infringement decision against 12 companies (which provided insurance for pupils in the Khanh Hoa Province) for anti-competitive agreements among themselves and this resulted in the companies terminating such agreements. Currently, there are two ongoing investigations against price-fixing cartels – in the roofing panel market in North and Central Vietnam, and the passenger hydrofoil market on the Ho Chi Minh –Vung Tau route.
In the area of abuse of dominance, the first case handled by the Council was against the Vietnam Air Petrol Company for its abuse of its monopolistic position in supplying aircraft fuel in Vietnam for which the Council imposed a fine of VND 3.7 billion. The Council is currently investigating a major foreign direct investment enterprise specialising in film importation and distribution for alleged abuse of its dominant position in the distribution of imported motion pictures in Vietnam. This marks the first investigation into foreign direct investment enterprises. However, it is unlikely to be the last as Vietnam appears committed to securing a business-friendly competitive environment.
Brunei formally commenced the process of drafting its national competition law in 2012.
In February 2014, the final draft of Brunei’s Competition Order was at its final stages of review as the Brunei’s policymakers carried out preparatory work for the implementation of the Competition Order. Preparatory work for the introduction of a generic competition law included an exchange programme with the CCS to obtain detailed insight into Singapore’s competition regime.
Cambodia/Myanmar/Laos Peoples Democratic Republic
The 2015 mandate may be an uphill challenge for developing nations such as Cambodia, Myanmar and Laos People’s Democratic Republic as their national competition law either remains in draft form or is unimplemented.
In an interview in October 2014, Penn Sovicheat, director general at Cambodia’s Ministry of Commerce, cited the complexities of the competition laws and Cambodia’s political economy as one of the reasons for the delays; he noted that Cambodia is “still not half way” in establishing a competition regime.
This view was also shared by Myanmar’s director of the Competition Policy Division at the country’s Ministry of Commerce who also shared Myanmar’s difficulty in meeting the deadline and attributed the lack of competition law experience in both the government and the private sector as key challenges in enacting its competition law.
While, the Laos People Democratic Republic has basic competition legislation since 2004 when the Decree 15/PMO (4/2/2004) on Trade Competition was issued, its plans of implementation are still underway.
To-date, the Philippines has implemented a competition regime which consists of a number of sectoral laws that address anti-competitive conduct and unfair competition.
As part of its progression towards the 2015 deadline, the Philippines implemented Executive Order No. 45, series of 2011, designating the United States’ Department of Justice as the Competition Authority in Philippines.
With the establishment of a national competition law in October 2014, after the government’s house appropriations committee approved the National Competition Policy Bill, Philippines has showed signs of progress towards the 2015 goal.
2015 will see the establishment and formative years of many new competition regulators within ASEAN. Financial penalties and anti-competitive enforcement are likely to increase and regulators within ASEAN would most likely cooperate on investigations and merger control. Businesses would need to embrace competition law compliance as part of an overall risk management strategy. Compliance programs that have specific competition law modules and training programs that are found in most multinational corporations will soon be found in local or regional entities. Business entities would need to work towards getting their employees updated with competition law principles which would thereby reduce the risks of inadvertent infringements of competition law.