Asia Pacific Competition Law Bulletin Introduction

Transcription

1 Asia Pacific Competition Law Bulletin Introduction Welcome to the 1 st 2018 edition of our bi-monthly Asia Pacific Competition Law Bulletin. As with previous editions, this bulletin has been produced in collaboration with our Linklaters colleagues (China) and our Allens colleagues (Australia), together with expert local law firms around the region: Mori Hamada & Matsumoto (Japan), Rahmat Lim & Partners (Malaysia), Allen & Gledhill LLP (Singapore), Lee & Ko (South Korea) and Tsar & Tsai Law Firm (Taiwan). We hope that you continue to find this newsletter a useful source of information on competition law issues across the Asia Pacific region. In this edition, we look at a number of competition law and policy developments in the Asia Pacific region. As significant changes to the competition law regime in Australia came into effect in at the end of 2017, big changes are coming in Singapore as the competition authority take over consumer protection. There will also be a possible wave of legislative reforms coming in Asia, as South Korea, Japan and Hong Kong may be looking to review their regimes in In terms of antitrust enforcement, the Taiwanese competition authority imposed a record fine on Qualcomm, while Malaysia saw cartel enforcement against sand operators. As for mergers, the last merger filing cleared with remedies in 2017 in China is discussed. Meanwhile, market reviews were conducted in respect of the pharmaceutical and construction sectors in Malaysia and in employment issues in Japan. In Hong Kong, we briefly discuss the set of model Non-collusion clauses for procurement tenders recently published by the Hong Kong Competition Commission and an application seeking clarity on the exclusion of the application of competition law to a set of banking regulations. Australia China Hong Kong Japan Malaysia Singapore South Korea Taiwan

2 Rob Walker and Lisa Lucak, Allens Significant changes to Australia s competition laws come into effect Significant changes to Australia's competition laws came into force in November The changes implement key recommendations of the Harper Panel s review of Australian competition law and policy, including amending the prohibition on misuse of market power, exceptions to cartel conduct and authorisation processes for mergers, introducing a new prohibition on concerted practices, and extending the ACCC's investigatory powers. Key changes to Australia s competition law and policy are as follows: introducing an effects test for the misuse of market power prohibition and the ability to seek authorisation for conduct that would otherwise contravene the misuse of market power provision; removing the formal clearance and Australian Competition Tribunal authorisation options for merger clearance, and introducing a merger authorisation process with the Australian Competition and Consumer Commission as decision maker; expanding the joint venture exception for cartels to apply to: o o cartel provisions contained in joint venture arrangements and understandings (the exemption was previously limited to joint venture contracts); and joint ventures for production, supply and acquisition of goods or services (the exemption was previously limited to production or supply joint ventures). However, additional requirements were introduced that narrow the joint venture exception, including that the cartel provision is reasonably necessary for undertaking the joint venture and the joint venture is not carried on for the purpose of substantially lessening competition; introducing a prohibition on concerted practices that have the purpose, effect or likely effect of substantially lessening competition; amending the prohibition on third line forcing, so that the practice is now subject to a competition test, consistent with other types of supply and acquisition restrictions. Third line forcing is now only prohibited where it has the purpose, effect or likely effect of substantially lessening competition, and no longer involves an automatic breach of Australia s competition law; extending the ACCC s power to require the production of documents, information and testimony to investigations of breaches of court enforceable undertakings and merger authorisation applications; introducing a new defence to non-compliance with a notice to produce documents. If a person has refused or failed to comply with a notice to produce documents, it is now a defence if, after a reasonable search, the person is not aware of the documents; and changing the National Access Regime, including amending the declaration criteria, to provide greater clarity to infrastructure owners and access seekers. 2

3 Related links: For more detailed information of the changes that have taken effect, see Allens analysis of the key changes and guidance note for General Counsel. 3

4 Fay Zhou Behavioural remedies back in fashion? MOFCOM s decision in HP s proposed acquisition of Samsung s printer business In October 2017, the Ministry of Commerce ( MOFCOM ) gave conditional clearance on HP Inc. s proposed acquisition of Samsung Electronics printer business. The conditions are all behavioural, including fair and reasonable terms of sales for A4-size printers, a bar on further acquisitions in the relevant market, a commitment not to bundle A4-printers with other products, and to limit compatibility within third party consumables or to state that third party consumables are not compatible. HP also committed not to engage in false or misleading promotions. All remedies are in place for a period of five years. MOFCOM defined A3-size and A4-size laser printers as two separate relevant national (China) markets noting significant price differences, complementary functionalities and difficulties in switching from supplying A4-size printers to A3-size printers. MOFCOM declined to further segment the market, for instance based on printer features. For consumables, MOFCOM acknowledged the differences between original equipment manufacturer consumables and third party consumables in terms of price and performance, but did not find them to be in separate markets, based on the overwhelming consumer view of these consumables as highly substitutable. MOFCOM identified the following potential anti-competitive effects: high market shares for the combined entity, at 50-55% in the market for A4-size printers, with the transaction eliminating the competition between two direct competitors; and HP having the incentive and ability to foreclose competition in the A4-size printer consumables market, based on high market shares in the corresponding A4-size printer market. This decision ends a busy year for MOFCOM, which has imposed behavioural conditions on six deals in 2017 (see Dow/DuPont, Agrium/Potash, Hamburg Süd/Maersk, Siliconware Precision Industries/Advanced Semiconductor Engineering, and Broadcom/Brocade). 4

5 Clara Ingen-Housz, Marcus Pollard and Alexander Lee Model Non-collusion clauses published in Hong Kong As part of its advocacy campaigns on bid-rigging and market sharing, in December 2017, the Hong Kong Competition Commission (the Commission ) published a set of model non-collusion clauses and a non-collusive tendering certificate for procurement tenderers. The model clauses and certificate are intended to serve as easily accessible references for procurement officers looking to maximise competition among bidders. The clauses provide language that can be incorporated into tender invitation documents, certifications on independent bids, and even formal contracts entered into with the successful bidder. The clauses set out a mandatory requirement for bidders to sign a non-collusive tendering certificate as part of their tender submission. Signing the certificate means that the bidder confirms the bid was developed independently. While analogous certificates issued by other competition agencies, such as the model Certificate of Independent Bid Determination developed by the Canadian Competition Bureau, simply requires confirmation that the submitted bid was arrived at without communication with any competitor, the independence required in the Commission s non-collusive tendering certificate is that the bid must not to be prepared with any agreement, arrangement or communication with any person (including any other tenderer or competitor). Recognising that an absolute prohibition on reaching agreements or arrangements, or communicating with other persons would be unworkable, the model certificate goes on to provide exceptions to such prohibition, by allowing bidders to reach agreements or arrangements, or communicate with the procuring organisation, a joint venture partner, consultants or sub-contractors, professional advisers, insurers or brokers, and banks. Curiously, suppliers are left out of such exception. The Commission does not explain how bidders can submit a bid without first communicating with their suppliers, e.g. regarding their costs for supplying the product in question in case the bidder wins the tender. Strictly speaking, a bidder who legitimately obtains quotes and agrees to buy a product from a supplier on the condition of winning the tender would be contravening the non-collusive tendering certificate, as the bidder would have already communicated and reached an agreement with another person regarding prices, factors used to calculate prices, terms of the bid, and the bidder s intention to submit a bid for the tender in question. Arguably, including the Commission s non-collusive tendering certificate could have the effect of deterring bidders who realise that it would be commercially impossible to comply with the terms of the certificate. Though pragmatic bidders may not be deterred by the language, considering that the Commission may not have intended to exclude any communications with suppliers, the situation generates some level of legal uncertainty. It is noteworthy that the model clause and certificate were not the result of any public consultation prior to publication. One way to tame it is for the bidder to include a disclaimer in the bidding documents that communications have been had with the supplier in order to articulate the terms of the bid. Notwithstanding the above curiosity, the Commission s publication is a welcomed one, as it attempts to provide practical assistance to those hoping to reduce bid-rigging, and generally raises awareness about the risk of bid rigging. It also addresses the concern amongst the Hong Kong public that bidrigging in the city remains rampant and unchecked, especially in the residential building maintenance 5

6 sector. The notion of including a non-collusion clause in tendering documents is a solid one, because, if potential bidders realise that the entity calling for tenders is alert to potential bid-rigging, that may help deter collusion in the responses to the tender already. The move is in line with other competition authorities issuing standardised tools to help procurers curb bid-rigging activity is commonplace in other countries. As mentioned above, the Canadian Competition Bureau developed a model Certificate of Independent Bid Determination for use by tendering authorities. More recently, the UK Competition and Markets Authority published a free cartel screening tool to help identify potential bid-rigging behaviour in procurement exercises. It is hoped that the Commission can expand its advocacy efforts in providing more helpful, pragmatic guidance to the general business community in the future. Related links: The model non-collusion clauses can be found here. 6

7 Clara Ingen-Housz and Alexander Lee Regulator to mull over application of competition law on banking regulations In December 2017, a number of banks and financial institutions made an application to the Commission seeking a decision that the Code of Banking Practice (the Code ) is excluded from the rule prohibiting anti-competitive agreements and concerted practices affecting competition in Hong Kong (the Application ). The Application seeks to clarify whether compliance with the Code is a legal requirement imposed under the Banking Ordinance, and therefore fulfils the statutory requirements for an exclusion from the prohibition in Hong Kong. The statutory definition of legal requirement refers to a requirement imposed by a statute or national law in force in Hong Kong. In its guidelines, the Commission has interpreted this to mean that the legal requirement must eliminate any margin of autonomy on the part of the undertakings concerned compelling them to enter into or engage in the agreement or conduct in question. While compliance with the Code is not strictly required under the Banking Ordinance, the banks argue that the Code is in effect mandatory in nature due to the potential consequence of non-compliance, including the possibility of the Hong Kong Monetary Authority suspending or revoking the bank s licence to operate in Hong Kong. The Commission is now seeking comments on the Application until 15 February Related links: The non-confidential version of the Application can be found here. 7

8 Kenji Ito and Aruto Kagami, Mori Hamada & Matsumoto JFTC published the result of public consultation on potential amendment to its administrative surcharge system The Japan Fair Trade Commission ( JFTC ) recently published the result of a public consultation on changes to its administrative surcharge system. The public consultation was conducted from April to June 2017 following the publication of a report by a JFTC study group. Under the Anti-Monopoly Act of Japan, fines are calculated by multiplying a certain fixed percentage by the value of sales of the products or services at issue for the period of the violation concerned for up to three years from the date at which the conduct ceased. The JFTC has almost no discretion in determining the relevant sales and cannot take into account factors, such as the seriousness of the violation or the parties cooperation. The report proposes to consider the following amendments: enabling the JFTC to impose fines based on an artificial sales figures, when companies do not have sales in Japan following anti-competitive market sharing; increasing the three-year limit to ten years; increasing the percentage used as a multiplier; and enabling the JFTC to take account of cooperation as well as obstruction of investigation in setting the level of surcharge. The result of public consultation revealed that, while some saw the benefits of allowing the JFTC some discretion in determining the level of fines, others criticised the proposal for not clearly setting out how the basic amount of sales would be calculated under the new regime. Many were positive about the idea of giving credit to companies who cooperate, but some noted that the reduction rate and the extent to which companies need to cooperate with the investigation should be clearly defined. Many voiced concerns from a due process point of view. The report concluded that there is not enough evidence to support the formal introduction of attorney-client privilege into the JFTC s investigative process. Many industry organisations and practitioners raised concerns that interviewees should be allowed to be accompanied by their lawyers during JFTC interviews. The JFTC stated that it would take the results of the public consultation into account when drafting the final amendments, which are expected to come out in Related Links: The result of public consultation can be found here (only in Japanese). 8

9 JFTC organized a study group to discuss the application of Anti-Monopoly Act to employment matters In the past few months, a study group of the Japan Fair Trade Commission has been studying the potential application of the Anti-Monopoly Act to employment matters, such as non-poaching agreements among competitors. Historically, the JFTC has not been active in enforcing competition rules against employment matters. This was mainly due to the ministerial division of work between the JFTC and the Ministry of Health, Labor and Welfare. The Anti-Monopoly Act applies to enterprises and there has been a long debate as to whether an employee constitutes an enterprise for purposes of the Anti-Monopoly Act. The study group was set up to discuss the issue from a broad perspective, taking into considerations the technological and sociological changes that are affecting the modern employment market, and without resorting to categorical interpretation of the Anti-Monopoly Act. The study group has been holding monthly meetings and a report is expected to be published at the end of the process. The report will be shed light on what course of action the JFTC might be taking in the future, at the intersection of employment law and competition law. The JFTC published the minutes and presentation materials from each meeting of the study group. Related links: Minutes and presentation materials can be found here (in Japanese). 9

10 Raymond Yong and Penny Wong, Rahmat Lim & Partners MyCC accepts undertaking from sand operators In September 2017, the Malaysia Competition Commission (the MyCC ) had accepted undertakings given by a group of sand operators in Kelantan. The sand operators were alleged to be in a price fixing arrangement involving the prices of sand for the territories of Kota Bharu, Pasir Mas, Tanah Merah and Machang in the state of Kelantan. The sand operators had undertaken to rescind the issued price list of sand and to terminate any other anti-competitive behaviour in relation to the price list. The sand operators also had to issue a press release of the undertakings provided to the MyCC in various major newspapers. Related links: A copy of the press release is available here. MyCC holds Public Consultation on the Market Reviews for the Pharmaceutical and Construction Industry The MyCC held public consultations on its market reviews on the pharmaceutical and construction industry in November to December Soft copies of the reviews were made available on the MyCC website. The purpose of the market review is to identify the market structures, supply chain and competition level in the relevant industries. Upon conclusion of the reviews, the MyCC will publish a final report of its findings and recommendations. Related links: A copy of the press release is available here. 10

11 Daren Shiau, Elsa Chen and Scott Clements, Allen & Gledhill LLP Competition Commission of Singapore to oversee consumer protection in 2018 By the second quarter of 2018, the Competition Commission of Singapore (the CCS ) will be formally restructured to include a consumer protection function. The Competition Act and the CPFTA The Competition Act, Chapter 50B of Singapore (the Competition Act ) deals with the anticompetitive conduct and mergers, which are not related to merit, innovation or efficiency. Examples include cartels, abuse of dominance and mergers which reduce competition. The Consumer Protection (Fair Trading) Act, Chapter 52A of Singapore (the CPFTA ), currently administered by the statutory board, SPRING Singapore ( SPRING ), under the Ministry of Trade and Industry Singapore ( MTI ), deals with unfair trade practices that result in a consumer being deceived or misled, or which take advantage of a consumer who is not in a position to protect his own interests. Examples of unfair trade practices include misrepresentation, use of small print to conceal a material fact from the consumer, and exerting undue pressure on the consumer to enter into a transaction. Both the CPFTA and Competition Act bring benefits to consumers, but in different ways. The Competition Act has traditionally adopted a total effects approach as opposed to a consumer effects approach. A total effects approach is premised on the notion that free market forces will lead to an efficient allocation of resources which will, in turn, promote the total welfare of an economy. The CPFTA protects consumers from misleading or deceptive tactics that some businesses use when consumers enter into transactions with them. Benefits of the restructuring This restructuring will reinforce the CCS focus on ensuring that Singapore markets function well, with robust and fair market practices that benefit both businesses and consumers. The consolidation is expected to bring about greater synergy in ensuring the proper and efficient functioning of Singapore markets. The restructuring is part of the merger of SPRING, and International Enterprise Singapore, also a statutory board under MTI, to form a new agency called Enterprise Singapore. In his speech on 5 September 2017, Minister for Trade and Industry (Industry), Mr S Iswaran, announced that Enterprise Singapore will be formally established in the second quarter of Related Links: Mr S Iswaran s speech can be found here. 11

12 Yong Seok Ahn and Bryan Hopkins, Lee & Ko Potential changes to KFTC powers proposed In November 2017, the Korea Fair Trade Commission ( KFTC ) issued an interim report setting out potential reforms to the overall enforcement of antitrust laws in Korea. The interim report was prepared by a task force specially set up by the KFTC in September 2017, which will be submitting a final report to the National Assembly in connection with proposed reforms to South Korean antitrust enforcement. The interim report covers issues involving civil enforcement, administrative enforcement and criminal enforcement, namely: The right of private injunctive relief. The task force recognised there to be a need for the Monopoly Regulation and Fair Trade Act ( MRFTA ) to be amended to provide private injunctive relief. However, it is also considering whether to limit the availability of private injunctive relief to unfair trade practices of companies, or make it generally available for all antitrust violations. In any event, if such amendment were to be made, the task force believes that agency, distributorship and franchise laws should also be amended to provide for injunctive relief as well. Punitive damages including the right of private parties to demand treble damages. The task force indicated that it is considering whether to amend the MRFTA to provide for punitive damages. It is also studying whether to extend punitive damages, to other areas, such as distributorship laws, as well. The interim report also indicated that the issue of generally increasing punitive damages to treble damages or even greater is still being internally debated. Increase in administrative fines. The task force found that the current maximum administrative fines are still too low to have a deterrent effect. It is of the view that the upper limit of administrative fines applicable to MRFTA violations should be doubled. If reforms are passed to such effect, the maximum fines would be as follows: Maximum fines for Percentage of relevant volume of commerce Current Proposed Cartels 10% 20% Unfair Trade Practices 2% 4% Abuse of market power 3% 6% Sharing authority with local governments over certain issues. The KFTC task force acknowledges that the KFTC should delegate some of its investigative rights to municipal governments, particularly in the franchising area whereby registration and management of franchise information from franchisors to franchisees shall be handled by local governments. 12

13 The task force also proposes to establish a dispute mediation committee at the local government level to handle franchise, distribution, agency and subcontractor disputes. Sharing the KFTC s exclusive right to refer antitrust cases to the Prosecutor s Office. Under the current MRFTA, only the KFTC can bring antitrust violation cases to court through the Prosecutor s Office. The KFTC has been pressured to give up its right to exclusive referral authority to the Prosecutors Office. The task force acknowledges that the KFTC s exclusive referral authority should change and proposes either to (i) abolish its exclusive right entirely; or (ii) abolish its exclusive right only in respect of franchise law, distributor law and agency law. The task force is still studying whether to abolish the KFTC s exclusive referral authority in respect of subcontractor laws and advertising laws. Save for increasing the upper limit of administrative fines and abolishing the exclusive right to make referrals to the Prosecutors Office, the other three issues are still subject to further study. As all such changes require amendments to the MRFTA, it remains to be seen whether any of the proposals discussed in the interim report will be implemented. 13

14 Matt Liu and Elvin Peng, Tsar & Tsai Law Firm Taiwan Fair Trade Commission imposes record fine on Qualcomm After two years and eight months of ex officio investigation, the Taiwan Fair Trade Commission ( TFTC ) made a resolution in October 2017, finding that Qualcomm Inc. ( Qualcomm ) had abused its monopolistic position in the CDMA, WCDMA and LTE mobile communication standard baseband chipset market. As a result, the TFTC imposed a fine of NT$23.4 billion on Qualcomm, which is the highest fine that the TFTC has ever imposed on a single company. The abuses that Qualcomm was found to have engaged in were: (1) refusing to license its standard essential patents ( SEPs ) to other chipmakers and further requesting them to sign an agreement with unfair terms, (2) adopting a no license, no chips policy for mobile phone manufacturers, and (3) entering into an exclusive rebate arrangement with a specific company. The TFTC found that such conduct harmed fair competition in the baseband chipset market and violated Subparagraph 1 of Article 9 of the Taiwan Fair Trade Act. In order to eliminate unfair competition in the market and promote fair competition in the domestic mobile communications industry, the TFTC demanded Qualcomm to: cease application of the anti-competition provisions in the existing agreements with rival chipmakers and mobile phone manufacturers; notify rival chipmakers and mobile phone manufacturers that they may request to renegotiate the relevant patent license-related agreements; and report to the TFTC the status of such renegotiations. Qualcomm s patent licensing model in mobile communications was also found to be illegal. Such finding is consistent with previous investigations conducted by other competition authorities. The Chinese and Korean competition authorities imposed a high fine on Qualcomm in 2015 and 2016 respectively. It is quite clear that the TFTC is attempting to rectify Qualcomm s abuses by prompting chipmakers and mobile phone manufacturers to renegotiate their patent license-related agreements. Such decision will likely have a significant impact on such domestic baseband chipset makers, mobile phone OEMs and contract manufacturers. This is also the TFTC s first decision relating to SEPs licences. The decision is generally in line with decisional practices of other competition agencies, and provides relief for other domestic manufacturers suffering a similar unfair treatment. On 22 December 2017, Qualcomm filed an administrative suit against the TFTC over the heavy fine. Related Links: The TFTC s press release can be found here (in Chinese). 14