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The ASEAN Competition Law: Steps toward the Unified Competition Law

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Title: The ASEAN Competition Law: Steps toward the Unified Competition Law


1
The ASEAN Competition Law Steps toward the
Unified Competition Law
Asian Competition Forum, 21 May 2008, Singapore
  • Toshiaki Takigawa
  • Professor, Kansai University School of Law,
    Osaka, Japan
  • takigawa_at_ipcku.kansai-u.ac.jp

2
ASEAN from FTA plus to a Single market
  • ASEAN Free Trade Area (AFTA, 1994) adopted Common
    Effective Preferential Tariff (CEPT) aiming to
    reduce import tariff to 5 by early 2008.
  • ASEAN or AFTA is not a custom union, in which
    member countries adopt same tariffs.
  • ASEAN aims to eventually eliminate all barriers
    to regional economic integration
  • ASEAN Charter (2007) at Article 2, 2 (n) .

3
ASEAN Economic Community (AEC) as Single Market
  • The Bali declaration (2003) advocated the
    establishment of ASEAN economic community (AEC)
    to be realized in 2020.
  • AEC is to establish ASEAN as a single market.
  • ASEAN aims to go beyond ordinary FTAs, but aims
    to achieve the EU-like single market, which
    necessitates the unified ASEAN competition law.

4
Several models of competition law harmonization
at FTAs
  • There exists no single model of competition
    harmonization across FTAs.
  • As ASEAN aims to eventually achieve a single
    market, only those FTAS which achieved
    considerable degree of competition law
    harmonization may be taken as models.

5
Case to be avoided NAFTA competition charter
  • The Parties shall cooperate on issues of
    competition law enforcement policy (Article
    1501(2) of NAFTA )
  • NAFTA art. 1501 requires treaty members to
    proscribe anti-competitive business conduct and
    to take appropriate action.
  • Nevertheless, dispute resolution procedure is not
    applicable to art. 1501(2) .
  • Antidumping rule has been maintained.

6
Case to be taken as a useful model Australia-New
Zealand FTA
  • Harmonization of competition law has been
    exercised as part of coordination of business law
    including competition law, securities law and
    takeover law.
  • The Memorandum of Understanding on the
    Coordination of Business Law (2000)
  • ANZCER contains no anti-dumping provisions, and
    trade is now subject only to the disciplines
    imposed by domestic competition laws.
  • Nevertheless, ANZCER concerns only two countries.

7
Need to tackle private barrier to free trade
inside ASEAN
  • First basis for competition law integration in a
    single market is that private business conduct
    forms private barriers to trade and competition,
    and thus hampers economic integration of ASEAN.
  • As ASEAN will succeed in dismantling governmental
    trade barriers inside ASEAN trade and commerce,
    privately construed barriers remains as an
    important barrier, which ASEAN should tackle.
  • Movement of goods and services inside ASEAN,
    after the accomplishment of deep integration,
    need to be treated as commerce to which
    competition law is applied. Then, application of
    trade law should be denied to inside ASEAN
    commerce. Trade laws (antidumping law, in
    particular), even under the WTO treaty rule, may
    be applied in protectionist ways, and thus
    hampers economic integration of ASEAN.
  • As the second basis for competition law
    integration, in a deeply integrated economy,
    companies need to be engaging in business under
    the same (or deeply harmonized) competition law,
    so that companies are not hampered by different
    competition rules.

8
Practical Need for the ASEAN Competition Law
  • At present there are too many jurisdictional
    barriers which hamper efficient antitrust
    enforcement. Take for example the numerous legal
    and practical obstacles to obtaining the
    necessary evidence and imposing appropriate
    sanctions on global cartels. Worse still is the
    risk that, because of different substantive laws
    or administrative practice, two competition
    authorities may issue conflicting decisions in
    relation to the behaviour of a single company."
    (Neelie Kroes, 2008)

9
Current stage of member countries competition
laws and the ASEAN Competition Law
  • Among ASEAN member countries, Indonesia,
    Singapore, Thailand and Vietnam have enacted
    specific competition laws. Malaysia and the
    Philippines are considering the enactment of a
    competition law.
  • The unified ASEAN Competition Law (ACL) needs not
    be the result of harmonization of existing
    competition laws of member countries.
  • The case of EC competition law show that
    achieving harmonization of member countries
    competition laws should not be treated as a
    pre-condition for establishment of ACL
  • The ACL should aim to achieve the best
    competition law principles based on worldwide
    best practices.

10
Steps toward adoption of the unified ACL and the
ASEAN competition law agency
  • First step Formation of "Core Principles"
    through networking discussion.
  • Second step Adoption of the ASEAN Competition
    Law and the ASEAN competition law agency

11
First step Formation of Core Principles
  • Core Principles idea is derived from WTO task
    group on competition law and policy.
  • Nevertheless, Core principles envisaged at WTO
    was very modest.
  • transparency, non-discrimination and procedural
    fairness, and provisions on hardcore cartels.
  • ASEAN need to achieve Core Principles which
    encompass all the key areas of competition law.

12
Formation of Core Principles through networking
discussion
  • Network limited to ASEAN member countries is not
    effective as a learning process. Immersion in the
    existing global networks is imperative.
  • Among ICN (International Competition Network),
    OECD, and UNCTAD, ICN is the most effective
    institution for ASEAN to participate in.

13
ICN Its strong points
  • ICN includes both developed and developed
    countries, whereas OECD is mainly a group of
    developed countries, and UNCTAD focuses on
    developmental aspect of competition law.
  • ICN has already developed wide-range of
    recommended practices on competition law
    principles and enforcement.

14
Hard law rather than Soft law
  • ICN has established soft law for competition
    law, which has no legally binding force.
  • Soft law, by allowing aberration, slows down
    development of harmonization.
  • ASEAN, although making use of ICN, need to
    establish core principles as hard law applied
    to ASEAN member countries.
  • In order to develop the core principles into
    unified ASEAN Competition Law.

15
The ASEAN Competition Law and member countries
competition laws
  • Reaching this stage may take considerable time,
    depending on political will of ASEAN member
    countries.
  • The ACL is applicable to commerce among ASEAN
    member countries, while member countries
    competition laws are applicable to domestic
    commerce.
  • Following the EC merger rule, merger regulation
    tasks need to be divided between ASEAN
    competition authority and domestic competition
    authorities by objective numerical thresholds.
  • It is expected that member countries will
    gradually amend their competition laws so as to
    adopt principles of the ACL.
  • Such expectation is buttressed by the voluntary
    amendments of U.K. and French competition laws to
    copy the EC competition law principles.

16
Envisaged Core Principles of the ASEAN
competition law
  • Need to study from existing international
    institutions model laws, particularly,
    International Competition Network (ICN).
  • Need to be based on sound economic thinking.
  • It is necessary to seek a simple structure. Too
    complicated a structure does not work.

17
Competition process and Consumer welfare as
objective
  • Set the objective as maximization of consumer
    welfare through competition process.
  • Other objectives should be negated.
  • Fair trade or fair competition should not be
    adopted as another objective separate from
    consumer welfare objective.
  • Protection of SME by itself should not be set as
    objective of competition law.
  • SMEs are protected by regulation of exclusionary
    conduct exercised from the consumer welfare
    objective.

18
Exemptions should be avoided
  • Consumer welfare objective necessitates eschewing
    exempted sectors.
  • Flexible rule of reason is sufficient.
  • Allowing exempted sectors elicits political rent
    seeking
  • Sector specific rules contradict cross-sector
    nature of competition law.
  • EC type block exemptions should be avoided.
  • State created dominant companies should not be
    exempted from competition law
  • State action defense should be interpreted
    narrowly.

19
Horizontal Agreement
  • Agreement among competitors.
  • Hard core cartels need to be treated as per se
    illegal, and should be penalized.
  • Price fixing, bid-rigging, and other limited
    number of restraints which predominantly aim to
    restrain competition.
  • Other agreements should be analyzed by rule of
    reason.
  • Market Power threshold
  • Efficiency consideration

20
Vertical Agreement (or restraint)
  • Market power threshold
  • Abuse of dominant position type regulation.
  • Including price restraint (resale price
    maintenance) .
  • Intra brand competition restraint.
  • Exclusion of a competitor by a dominant company.
  • Efficiency defense needs to be admitted.

21
Unitary exclusionary conduct
  • Market power threshold.
  • Abuse of dominant position type regulation.
  • Exploitative abuse regulation should be
    eschewed.
  • Bigness itself should not be punished, in order
    not to discourage growth and innovation.
  • exploitative abuse regulation leads to price
    controls.
  • Efficiency defense needs to be admitted, based on
    the consumer welfare objective.

22
Mergers and acquisitions
  • Merger notification procedure.
  • Follow the ICN recommended practices.
  • Nexus.
  • Notification threshold on turnover amount (not on
    market share).
  • Review periods.
  • Substantive review.
  • Substantial market power.
  • Coordinated effect.
  • Unilateral effect.
  • Safe harbors on market share (and concentration)
    thresholds.
  • Market power presumptions based on market
    concentration and/or market shares should be
    allowed to be rebutted.
  • Efficiency defense.

23
Conclusion
  • ASEAN eventually needs a unified competition law,
    since it aims to achieve a single market.
  • First step is setting up core principles.
  • Core principles need to be developed learning
    from world-wide best practices.
  • Second step is setting up ASEAN Competition Law
    and the ASEAN Competition Agency.

  • Thank you!
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