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A remarkably different scenario confronts the Asia-Pacific region in the year ahead, compared with the outlook just 12 months ago.
Last year, countries were threatened by the contagion of a rapidly spreading global financial crisis, the speed and severity of which few predicted. Countries faced the prospect of recession, the collapse of leading banks and periods of protracted economic instability.
Amid such uncertainty, I expressed genuine concerns in the last edition of the Asia-Pacific Antitrust Review about the risk of competition policy reform being set aside by governments not wanting to impose any additional pressures on struggling businesses. My hope then was that in a decade's time, when we looked back on how countries responded to the crisis, we would see it as a catalyst that led to an outbreak of competition policy reforms throughout the Asia-Pacific region.
Certainly, the region has responded positively to the challenges laid before it by the financial crisis. However, risks remain in achieving steady economic recovery and continued competition policy reform. As the World Bank's chief economist for the East Asia and Pacific region, Vikram Nehru, warned:
'Some governments in the region will have the fiscal space to sustain fiscal stimulus until recovery is on a firmer footing. The time to begin removing monetary accommodation may come earlier, however, especially given concerns about asset price bubbles.'
Looking beyond 2009, Mr Nehru said countries in the region could still grow rapidly even if growth in the advanced economies was slow. To take advantage of the growth potential ahead, countries needed to resist protectionism, remain open and become more and not less integrated with regional and global economies.
Despite these cautionary notes, in the past year the region did not experience the predicted deep recessionary crisis, and countries have responded strongly to the need to get on with competition reforms. As the Asian Development Bank reported in January 2010, 'South-East Asian economies are recovering faster than expected from the global economic crisis but in the longer term will need to make financial, fiscal and structural adjustments to buffer themselves against future shocks.'
Part of this faster-than-expected recovery might well be put down to the competition reforms introduced after the Asian financial crisis of the late 1990s, when billions of dollars were slashed from the economies of the region.
And it is encouraging that these competition reforms have continued to be implemented. In developed economies like Japan, Australia and New Zealand, there have been a series of strong competition law reforms.
The Japanese government has endorsed sweeping changes to that country's competition law, including substantial improvements to its leniency programme and a new pre-merger notification system. New rules designed to catch more mergers were introduced.
In Australia, the government introduced criminal sanctions for serious cartel conduct which provide for a dual criminal and civil cartel enforcement regime that will allow proportional punishment.
The New Zealand government has recently released a discussion paper seeking comments on a proposal to introduce legislation to criminalise cartels, following the lead of the United States, the United Kingdom and, more recently, Australia. New Zealand has also seen substantial regulatory reforms to its telecommunications sector.
Some of the developing competition agencies in the region also made strong progress during the past year. Countries including the Philippines, China, Korea, India, Malaysia and Vietnam have taken relatively major strides in embracing more competitive economies.
The Philippines' Senate has approved a new Competition Act, which prohibits business cartels and monopolies. It defines and imposes penalties for business cartels, monopolies, monopoly power or abuse of market power through price fixing and price discrimination, bid rigging, limitation and control of markets, agreements to limit and or control markets and tie-in arrangements.
Malaysia has been finalising its competition law with its possible introduction into parliament in 2010. This development coincides with increasing cooperation amongst ASEAN members as they seek to promote competition policy reforms across the ASEAN region by 2015.
The activity has gone beyond law reform. Many countries like China, India and Indonesia have over the past year taken steps to implement their competition laws with the establishment of new guidelines. Following the introduction of the Anti-Monopoly Law in 2008, Chinese competition authorities have issued a number of guidelines outlining the approach to anti-competitive conduct.
In particular, the Ministry of Commerce (MOFCOM) has detailed its merger control procedures under the 2008 Anti-Monopoly Law, and State Administration of Industry and Commerce (SAIC) has published draft guidelines on abuse of dominance and monopolistic agreements. In addition, the National Development and Reform Council (NDRC) released draft regulations for dominant companies' pricing practices, including 'worrisome' provisions on excessive pricing.
Indonesia last year introduced a new regulation for merger and acquisitions. This new regulation and the accompanying guideline will put the Business Competition Supervisory Commission (KPPU), as regulator, in a position to deal effectively with consolidation concerns in the Indonesian market.
After resolving a number of technical issues with the implementation of its competition law, the Competition Commission of India (CCI) has taken important steps in implementing the Competition Act 2002. The CCI, launched in March 2009, now has a full-time chairman and is going full steam ahead.
Apart from competition reform, countries have also been very busy with enforcement against both high-tech and low-tech companies, inside and outside the financial sector. The breadth of enforcement is a strong indicator that competition agencies have been very active.
Several countries have initiated enforcement actions for the first time. Singapore's competition law came into force in January 2006 and last year took it took its first infringement decision against a company for price fixing. The Competition Commission fined 16 coach operators and their trade association for fixing the price of tickets. India, Pakistan and Vietnam over the past year have all taken on significant competition cases, which continue to consolidate the development of competition law in those countries.
Pakistan's antitrust regulator began assessing the prevalence of collusion in 15 industries, including sugar, cement and automobiles, and imposed penalties amounting to A$93 million on 20 cement manufacturers involved in cartels.
India's Monopolies and Restrictive Trade Practices Commission (MRTPC) launched a probe against 10 cellular service providers, including state-owned ones, for allegedly charging customers for short messages (SMSs) that were not delivered.
China's merger regime is continuing to deal with challenging competition matters despite its relatively short existence. In its first case, MOFCOM blocked Coca-Cola's proposal to acquire Chinese Huiyuan Juice Group saying it would have an adverse impact on competition. Despite a revision of the proposal, MOFCOM did not allow the merger.
MOFCOM also dealt with a number of other significant international mergers, which included imposing conditions on plastics company Mitsubishi Rayon in its acquisition of UK-based Lucite International Group Ltd, claiming the deal raised anti-competitive concerns because the combined company would have a 64 per cent market share in China for methyl methacrylate. Following an antitrust review, MOFCOM also approved the proposal of US carmaker General Motors to buy part of Delphi Corp.
In Australia, the federal court this year ordered Singapore-based APRIL Fine Paper Trading Pte Ltd, and a related company, APRIL International Marketing Services Australia Pty Ltd, to pay penalties totalling A$4 million for breaching the price-fixing provisions.
After the two companies agreed to admit certain facts for the purposes of the proceedings, the court ordered APRIL Fine Paper Trading to pay A$3.25 million for its involvement in fixing the price of copy paper and uncoated woodfree folio paper when selling to customers in Australia. APRIL International Marketing Services Australia will pay A$750,000 in penalties for its ancillary involvement.
The fine paper cartels and their prosecution are important, particularly in the Asia region, as they highlight the need for increased cooperation amongst competition authorities. Many of the affected businesses were based in Asia.
There has also been a range of cartel prosecutions in Japan, including cartels involving air freight companies, ductile cast-iron pipes, five cathode-ray tube makers (fined approximately A$37 million) and Nintendo DS game machines. After a three-year investigation, the Korean Fair Trade Commission (KFTC) found that US wireless chip technology company Qualcomm had abused its dominant position in the market for Code Division Multiple Access (CDMA) mobile phone chips and fined the company US$208 million. Local beverage makers, including Coca Cola Korea, were fined A$880,830 for price fixing. In Vietnam, a state-owned airplane petrol supplier was fined more than US$168,000 for violating Vietnam's Competition Law in an unprecedented trial.
Indonesia's KPPU launched a probe into 13 airlines over a potential price-fixing cartel on their fuel surcharge. The KPPU also took action against French supermarket chain Carrefour, which was ordered to divest its 75 per cent stake in local retailer Alfa Retailindo, but the KPPU lost the matter on appeal.
The newer competition agencies are continuing to successfully confront big issues in their economy. A number have been very successful in pushing the boundaries and tackling hard-core anti-competitive agreements that are damaging to consumers and their own economies. These enforcement activities are proof that the region is strengthening its free-market economies rather than relying only on selected companies to drive economies and export growth.
Cross-border mergers continue to highlight the importance of cooperation - particularly as market structures change and consolidations occur in areas such as pharmaceuticals and technology, as a result of the global financial situation.
International cooperation and coordination have also been instrumental in bringing cartelists to justice.
Japan and Australia have pursued air cargo cartelists, with Japan fining 12 international air freight companies a total of US$91.8 million and Australia taking proceedings against six airlines, resulting in penalties totalling A$41 million.
Following landmark action against marine hose manufacturers in the United States and the United Kingdom, Australia, Korea and New Zealand have been very active in pursuing similar cartelists. The KFTC has imposed a corrective order and a total of about A$535,000 in surcharges on five marine hose manufacturers, and Australia is pursuing allegations of rigged bids.
These international cases are no longer the exception but are becoming the norm. In future, antitrust agencies will not have the luxury of dealing in isolation with illegal cross-border activities.
A greater appetite for antitrust policy in the region and consequent enforcement actions only reinforces the need for greater co-ordination and cooperation between countries
One group facilitating this cooperation is the International Competition Network (ICN), which is dedicated to developing practical tools to improve domestic and international competition policy and practice. The ICN has a membership of 107 competition agencies in 96 jurisdictions. It provides Asian countries with a valuable opportunity to network and learn from the collective experience of agencies from around the world as they are drawn more deeply into the global market.
As John Fingleton, CEO of the United Kingdom's Office of Fair Trading, noted recently, we can learn from history and the robust economic evidence linking competition to productivity growth. We need to resist pressure to bail out failing firms, or to subsidise only a select few, to ensure that today's solutions do not inadvertently become tomorrow's problems.
The Asian region is gleaning through experience the fact that international cooperation and coordination divides the task and multiplies the likelihood of success.