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Despite undoubted difficulties and tensions, the Asia-Pacific region on the whole continues to enjoy an economic ‘miracle’. This ranges, for example, from the ‘commodities boom’ in my country of Australia in the south to the booming economy of China in the north. This considerable force is delivering increased prosperity to the majority of the region’s people – and heightened market competition has been one of its engines.
Competitive markets are a proven path to prosperity. Lack of competition tends to lead to less production, higher prices, and less pressure to improve terms and service. In contrast, competition encourages efficiency and innovation.
If the economic miracle is to continue, there is no magic or mystery to the path ahead: for the region’s economies to grow at their full potential, state authorities and private parties must continue to press for fair trading and competitive markets, for the benefit of all.
Developments have been broad and deep
There have been significant developments and outcomes in competition law and policy in the Asia-Pacific region over the past year. A snapshot of just some of these events gives an indication of the pace, variety and depth of developments.
Several countries have taken steps to develop their competition policies, adopt competition laws or make significant amendments to existing laws or policies. We are seeing more transparency and accountability in competition regimes through greater public engagement and advocacy and broader application of competition laws to government activity.
As China faced inflation and other economic pressures, Premier Wen Jiabao pledged in his annual work report to create an environment for fair competition among private and state-owned businesses. The government continued to develop key instruments, such as price fixing regulations and divestiture guidelines, and policies: for example, just as the year ended, the State Council approved measures to place private hospitals on a similar taxation footing to state-owned hospitals, to encourage a more level playing field.
China’s State Administration for Industry and Commerce signed a memorandum of understanding with the United Kingdom competition regulator the Office of Fair Trading, helping the two nations compare notes on competition issues.
After more than a decade of development, Hong Kong published a draft competition bill, featuring anti-cartel and abuse of dominance provisions. Consultation on the bill continues and it may be some time before any law comes in to force and a competition commission and competition tribunal are up and running.
Indonesia issued regulations on merger notifications. Malaysia passed its Competition Act, prohibiting concerted practices and abuse of dominance, providing for search and seizure powers and making senior company officers liable for corporate conduct. The competition law regime includes a specialist competition tribunal.
The New Zealand authorities continued to consult on the introduction of criminal penalties for cartels and issued a revised cartel leniency policy and guidance on bid rigging and trade associations. The Philippines was another country advancing down the path of developing its competition laws, with legislation debated in its parliament during the year. Thailand began a review of its 10 year old Trade Competition Act.
Agencies, courts and tribunals in the region are imposing greater penalties for competition breaches, most often for cartel activity. Several agencies have had milestone and record outcomes in competition cases or ruled on significant merger proposals.
As a result of Australian Competition and Consumer Commission action, the Federal Court of Australia handed down a record penalty in this country for abuse of dominance, ordering a taximeters and payment services provider to pay A$14 million for hindering competitors. The ACCC also:
- opposed the proposed sale of ExxonMobil’s retailing assets to the Chevron-linked Caltex Australia and the proposed sale of financial services business AXA Asia-Pacific to the National Australia Bank;
- obtained multimillion dollar penalties in cartel litigation against businesses operating in the international air cargo, marine hose and military training systems industries; and
- secured undertakings from supermarket operators to remove restrictive covenants in retail lease agreements that could limit a competitor’s ability to enter a market.
The Competition Bureau of Canada, among other actions, resolved an abuse of dominance case against the Canadian Real Estate Association, giving Canadians the ability to choose which services they want from a real estate agent when selling their homes. It also obtained further penalties against participants in the global air cargo cartel, bringing total penalties in Canada for that cartel to more than C$17 million by the year’s end.
China announced the first fines issued under its Anti-Monopoly Law, for conduct in the food industry, while the Ministry of Commerce’s Anti-Monopoly Bureau released figures stating that it was unconditionally approving about 95 per cent of merger proposals filed.
The Competition Commission of India announced two key firsts, issuing:
- its first fine – against Kingfisher Airlines, for failing to supply requested information during an investigation into its alliance with Jet Airways; and
- its first order in a competition case, announcing that it had rejected complaints that 16 banks had abused their dominance and fixed the price home loan borrowers incur for early repayments.
According to figures compiled by one international law firm in the region, Indonesia levied the third-highest total amount of fines in Asia in the year.
As its first decade ticked over, the Indonesian competition regulator, the KPPU, investigated the cement industry for cartel activity, fined airlines for fixing fuel surcharges, ruled the pharmaceuticals business Pfizer had breached the law in its distribution arrangements for blood pressure drugs and published guidance on cartels, to combat the problem of continuing misunderstanding in the business community about pricing discussions in trade associations.
The Fair Trade Commission of Japan took initiatives ranging from prosecuting cartels in the ¥200 billion a year domestic electrical wiring cables industry to clearing a proposed online search partnership between Yahoo! Japan and Google. It also raided the offices of retailer Toys ‘R’ Us to investigate whether it had abused its bargaining position to force suppliers to accept lower prices.
According to law firm figures, the country continued to levy the highest fines in the Asian region for anti-competitive conduct, ahead of South Korea.
Competition law developments in the Republic of Korea ranged from significant fines for 19 international airlines for colluding on surcharges to smaller fines for 11 local soju brewers, who had argued their conduct was influenced by local tax policies. The Korean Fair Trade Commission also fined the nation’s two-largest airlines more than 10 billion won in total for abusing their dominance to hamper low cost competitors, while Korea’s Supreme Court ruled that resale price maintenance complaints should be reviewed under a ‘rule of reason’ approach and not viewed as per se breaches.
The New Zealand Commerce Commission pursued cartels in such industries as freight forwarding, waste oil and online tyre sales, and considered mergers and alliances in such industries as air travel.
The Competition Commission of Singapore released its first abuse of dominance decision, finding that entertainment ticketing business SISTIC has breached competition laws through exclusivity agreements with venues. Other CCS investigations included a probe into allegations of bid rigging in the construction industry, a problem which appears to continue to plague the sector worldwide.
In Taiwan, the Fair Trade Commission fined paper suppliers for collusion and the lawyers’ professional body the Taiwan Bar Association for forbidding members from offering legal counselling via private websites.
Vietnam’s Ministry of Industry and Trade brought down a decision to levy the nation’s first competition fines: finding after an 18 month investigation that 19 companies had colluded to fix car insurance prices.
Cooperation and convergence
Competition is catching. The region has made advances over the last year towards greater economic integration and more open, competitive markets.
Long standing institutions such as the Association of South East Asian Nations and the Asia-Pacific Economic Cooperation forum continue to feature in this movement, along with newer initiatives such as the Trans-Pacific Partnership Agreement and steps towards the prospect of a regional Free Trade Area. Breaking down trade barriers and making it easier for people and businesses to interact and move across borders remain key avenues for advancing competition.
Coordination on international cases has become more frequent and important, and practices are increasingly converging.
International cartels in particular can be difficult to detect and investigate. Through sharing information and taking similar approaches to leniency applications, agencies are increasing their ability to detect and respond to cross-border cartels, in the interests of consumers and businesses alike. For example, the international effort to tackle the air cargo cartel has continued in countries ranging from South Korea to Australia.
Institutions such as the International Competition Network continue to provide opportunities for increased cooperation and information sharing between competition agencies.
Australia and New Zealand have gone as far as to make cross appointments to their respective competition authorities, with an Australian Competition and Consumer Commission commissioner becoming an associate member of the NZ Commerce Commission and the NZCC’s chairman becoming an associate member of the ACCC.
Competition law capacity building in the region continues. For example:
- the ASEAN Secretariat has developed Regional Guidelines on Competition Policy, as part of the commitment by member states to have all introduced nationwide competition policy by 2015 where it is not already in place;
- in 2010, the Organisation for Economic Cooperation and Development’s Korea Policy Centre convened regional workshops on a range of topics including cartel detection and competition issues in the banking sector;
- the ICN continued to assist regional authorities through its Advocacy and Implementation Network Support Program; and
- Japan played host to the annual global ICN cartels workshop while authorities including the Taiwan Fair Trade Commission and the Indonesian Commission for the Supervision of Business Competition hosted regional capacity building conferences.
The work goes on
Now to the year ahead. Each country in this diverse region ultimately faces its own set of economic challenges. But community and business leaders and institutions can help their nation and their neighbourhood by continuing to encourage competition – through such measures as healthy compliance, effective law enforcement and thoughtful policy development.
The region’s billions of people deserve no less.