Australia: Second criminal cartel prosecution underway
The Commonwealth Director of Public Prosecutions (CDPP) in Australia has laid criminal charges against Kawasaki Kisen Kaisha (K-Line), alleging that K-Line has engaged in cartel conduct under the provisions contained in Division 1 of Part IV of the Competition and Consumer Act 2010 (Cth). Charges were laid following the Australian Competition and Consumer Commission's (ACCC) investigation into alleged cartel conduct concerning the international shipping of cars, trucks, and buses to Australia between July 2009 and September 2012. The matter was before the Court for first mention on 15 November 2016, at which time the matter was listed for further mention on 7 February 2017.
This is only the second cartel matter in which criminal charges have been laid since the inception of sections 44ZZRF and 44ZZRG into the CCA in 2009, which introduced criminal liability for cartel conduct. The first criminal charges (relating to the same alleged conduct giving rise to the charges laid against K-Line) were brought in July 2016 against Nippon Yusen Kabushiki Kaisha (NYK), a global shipping company based in Japan. NYK pleaded guilty to the charges of criminal cartel conduct. In this first case, NYK pleaded guilty to charges laid under section 44ZZRG. A sentencing hearing in this matter has been scheduled for 11-12 July 2017.
These criminal prosecutions in Australia follow on from investigations and enforcement actions in several overseas jurisdictions, including the United States, Japan and South Africa and China, which have led variously to criminal convictions, jail terms and/or significant fines being imposed.
China gets tough on resale price maintenance, healthcare sectors
Increasingly severe penalties and a (non-exclusive) focus on the pharmaceutical and medical device sectors were hallmarks of the Chinese authorities’ enforcement efforts in the second half of 2016. The following examples illustrate these trends:
In November 2016, the State Administration for Industry and Commerce (SAIC), one of the three Chinese competition authorities, imposed a penalty of approximately USD97 million on the Swiss food packaging company TetraPak for abuse of dominance. This penalty, amounting to 7% of TetraPak’s 2011 revenue in mainland China, was the highest penalty imposed by SAIC to date, and the second highest in the eight-year history of the China Antimonopoly Law. The SAIC held that there were abuses, including imposing exclusivity on a raw material supplier, loyalty rebates and tying packaging materials to the supply of equipment.
In the medical device sector, another of the three Chinese competition authorities, the National Development and Reform Commission (NDRC) imposed (in December 2016) a penalty of USD17.2 million on the Irish medical device maker Medtronic for resale price maintenance. This followed a July 2016 decision by the NDRC imposing penalties totalling USD390,000 on three Chinese pharmaceutical companies for price-fixing the sale of estazolane-active pharmaceutical ingredients.
Hong Kong's competition regime gets off to flying start
Although the Hong Kong competition law only took full effect a year ago (14 December 2015), the Hong Kong Competition Commission (HKCC) has got off to a very active start in its enforcement activities. In only its first 10 months of operation, HKCC announced that it had already conducted six “dawn raids” and received one leniency application, taking many in the local business community by surprise. HKCC has also stated that it expects to take its first case to the Competition Tribunal shortly, and is lining up another four cases. (Unlike agencies in some other jurisdictions such as China and Singapore, HKCC cannot itself impose penalties; only the Tribunal can do so.) Businesses selling goods and services into Hong Kong, as well as local businesses, should take note of this very active enforcement policy.
Malaysia introduces new competition regime for the aviation industry
The Malaysian Aviation Commission Act (the Act) came into effect in 2016. Similar to the Competition Act 2010, the Act contains prohibitions of anti-competitive agreements and abuse of dominance in the aviation market, but more critically, introduces the first sectoral merger control in the country. The regime applies to mergers, acquisitions and creation of full-function joint ventures. "Control" is deemed to exist if there is decisive influence on an enterprise, in particular by ownership or the right to use all or part of the assets of the enterprise; or rights or contracts that enable decisive influence to be exercised with regard to the composition, voting or decisions of the enterprise. The Aviation Commission, which took over the regulation of competition issues in the aviation market from the Malaysian Competition Commission, is expected to issue guidelines on merger control procedures and jurisdictional thresholds soon. In the meantime, the introduction of this sectoral merger control finally acknowledges the importance of merger control as one of the most effective competition policy tools to safeguard changes in concentrated market structures. It remains to be seen if a wider merger control framework will be introduced under the Competition Act 2010.
New Myanmar competition law takes effect February 2017
Myanmar’s first competition law will come into force on 24 February 2017. It is based largely on the EU and UK model, prohibiting anti-competitive agreements, abuse of dominance and anti-competitive mergers. The Competition Commission of Myanmar (CCM) will be able to investigate, prosecute and decide on infringements. Sanctions include up to three years’ imprisonment and a fine of up to approximately USD14,000.
Philippine Competition Commission to be even more active in 2017
The Philippine Competition Commission (PCC), established in February 2016 as the chief competition law regulator under the Philippine Competition Act (the Act or the PCA), ends its first year with a notable list of accomplishments. The PCC was quick out of the blocks and issued comprehensive implementing rules regulations (Regulations) within three months and came into force in June 2016. The Regulations provide the procedural framework for the PCC's enforcement activities, including the mandatory merger control regime. The PCC’s merger unit has seen a lot of activity in 2016. By December, it has reviewed approximately 70 notified deals, with an aggregate transaction value of more than PHP1 trillion: 40 of those deals were notified under the transitional notification procedure while the remaining 30 deals were notified under the new, mandatory filing regime. Most of the deals have been cleared after a routine assessment during phase 1 review period. The one exception is Philippine Long Distance Telephone Company Inc. and Globe's PHP70 billion acquisition of San Miguel Corporation's telecommunications subsidiaries, which generated substantially more debate. The merging parties originally notified the deal under the transitional rules, but the PCC disputed their application and requested it to be resubmitted for a comprehensive review under the Regulations. The jurisdictional dispute is still being litigated through the national courts and a hearing before the Court of Appeal is expected early 2017. The PCC intends to build on the current enforcement momentum during 2017. It will formulate guidelines to implement its nascent leniency program and develop its other enforcement mechanisms provided under the PCA. To this end, the PCC intends to build up its capacity through recruitment and training. It has announced plans to build a 200-strong team of lawyers and specialist economists by the end of 2017.
Taiwan announces new filing thresholds and exemptions for mergers
Amendment to Pre-Closing Merger Filing Revenue Thresholds On 02 December 2016, the Taiwan Fair Trade Commission (TFTC) introduced a new limb to the pre-closing merger filing thresholds to incorporate the merging parties’ combined worldwide revenue. As from 02 December, a merger filing obligation will be triggered in the following circumstances:
- All parties participating in the transaction have combined worldwide revenue exceeding TWD40 billion in the preceding fiscal year AND at least two parties have Taiwan revenue exceeding TWD2 billion in the preceding fiscal year; OR
- Either party participating in the transaction has Taiwan revenue exceeding TWD15 billion in the preceding fiscal year AND the other party has Taiwan revenue exceeding TWD2 billion in the preceding fiscal year.
Additional Types of Transaction Are Exempt from Notification Obligation On 18 July 2016, the TFTC issued a formal ruling to exempt internal restructuring or reorganizations from the scope of Taiwan’s merger filing regime. Specifically, the following types of transactions are exempt from the merger control regime:
- an enterprise transfers a part of or the entire voting shares or capital contributions of a third-party enterprise that are in its possession to other enterprises, and the parties in the combination are controlled by the same enterprise
- an enterprise combines with other enterprises that are controlled by, or control, the former
- an enterprise combines with other enterprises, and the parties in the combination are controlled by the same enterprise
- an enterprise transfers a part of, or the entire, voting shares or capital contributions of a third-party enterprise that are in its possession to other enterprises that are controlled by, or control, the former
Thailand to pass new competition law in 2017
On 11 October 2016, the Thai Cabinet approved the new draft Trade Competition Act (the Act), which will supersede the current Trade Competition Act B.E. 2542 (1999). The draft law is going through the parliamentary process and recently passed the first reading stage. It is expected that the new Trade Competition Act will come into effect during the course of 2017. The new Act will introduce important substantive and procedural changes, which should reinvigorate competition law enforcement in Thailand. From a procedural perspective, the Office of the Trade Competition Commission (the Commission) will be an independent state agency no longer under the auspices of the Department of Internal Trade of the Ministry of Commerce. Future commissioners will be appointed by a new nominations committee rather than as political appointments on the basis of selection criteria designed to enhance its independence and operational status. The Trade Competition Commission will be granted enhanced investigation powers similar to those enjoyed by the police officials. The Commission will also have the power to prosecute an entity/person on foot of an official complaint and the power to directly impose administrative penalties rather than apply for court order. The new draft also provides for greater sanctions, including criminal penalties (imprisonment and fine) and higher fines (subject to a maximum 10 percent of the corporate group’s Thai turnover in the prior year). The more important substantive changes include a proposal to change the merger control regime from a pre-closing approval requirement to a post-closing notification obligation. The new Act will also introduce stronger provisions prohibiting cartel-type conduct among independent competitors and will change the criteria for determining dominance to just market share thresholds. Certain sectors, including telecommunication and energy industries, which are regulated by other sector-specific legislative regimes, will be exempt.