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!