China gets tough on failure to notify mergers; conditionally clears Dow/DuPont merger
The Ministry of Commerce of China (MOFCOM) has stepped up enforcement action against failure to notify reportable mergers ("gun-jumping") with six enforcement decisions published in the second quarter of 2017. Recently, there have been more enforcement actions against multi-step mergers. In May 2017, Meinian OneHealth received a penalty of CNY 300,000 (USD 43,509) for gun-jumping in its acquisition of Ciming Health Checkup. In this multi-step acquisition, Meinian OneHealth implemented all the steps except the last one before it notified the merger. Similarly, OCI received a penalty of CNY 150,000 (USD 21,751) in a multi-step merger when it did not notify its takeover of Tokuyama Malaysia until the first step of the merger was completed. On 2 May 2017, MOFCOM conditionally cleared the Dow/DuPont merger, with similar remedies imposed by the European Commission previously. The parties were required to divest certain of DuPont’s businesses related to pesticides for rice, including related R&D organizations. Behavioural remedies were also imposed, requiring the parties to supply certain herbicides in China, and prohibiting the parties from requiring Chinese distributors to sell exclusively seven herbicides. For petrochemical products, Dow was required to divest its acid copolymers and ionomers business. In the decision, MOFCOM shared similar concerns with the European Commission that the merger would remove the parties’ incentives in innovation, in the absence of such remedies.
Hong Kong Commission recommends government intervention in auto-fuels market; new Commission CEO appointed
In yet another step away from Hong Kong's previously famous non-interventionist, free-market policy, the Competition Commission has recommended increased government intervention in the auto-fuels market. The recommendations were enshrined in a report on the Competition Commission's study into Hong Kong's auto-fuel market, and have led the government to consider implementing some of the Commission's recommendations. The recommendations included (a) using land lease terms in government land grants to mandate the types of fuel that local fuel companies supply, (b) intervention to control the manner in which prices and discounts are displayed, and (c) increased government intervention in respect of fuel storage facilities, including a proposed access regime to compel access to privately owned facilities (in essence, a proposal to introduce the highly controversial "essential facilities" doctrine into Hong Kong, which has been rejected in the United States because it "requires antitrust courts to act as central planners"). Click here for further details. Separately, a new CEO has been appointed to the Competition Commission, who is due to take office on 2 September 2017. The new CEO is Mr. Brent Snyder, whose previous position was Deputy Assistant Attorney for Criminal Enforcement in the U.S. Department of Justice. He will replace Ms. Rose Webb. Click here for further details.
Japan updates guidelines on distribution arrangements
By: Junya Ae
On 16 June 2017 the Japan Fair Trade Commission published amendments to its guidelines on distribution arrangements. The objective is to provide clearer guidance on how competition law applies to such arrangements, given the developments in e-commerce and online trading since the guidelines were first published. Click here for further details.
Malaysia extends for two years its block exemption for agreements between container shipping lines
By: Lydia Kong
On 21 June 2017, the Malaysia Competition Commission (MyCC) granted an extension of two years for the block exemption (BEO) of certain container liner shipping agreements from the competition law, namely:
- vessel-sharing agreements between liner operators in which the parties agree on the operational arrangements relating to the provision of liner shipping services; and
- voluntary discussion agreements between liner operators in which parties exchange and review commercial issues relating to market data, supply and demand forecasts, international trade flows and industry trends, and voluntary and non-binding guidelines within Malaysia,
which are entered into in Malaysia or have an effect on liner shipping services in Malaysia. The extension of the BEO is subject to the condition that the agreements do not contain any element of price-fixing, price recommendation or tariff imposition by any person on transport users. Click here for further details.
Philippines gears up for full application of Competition Act on 8 August 2017
By: Michael Macapagal and Charles Veloso
Although the Philippines Competition Act entered into force on 8 August 2015 for arrangements and conduct entered into from that date (and the merger control provisions have been applied since February 2016), it allowed a two-year transition (or "grace") period for agreements and conduct which had been entered into before 8 August 2015. This grace period will expire shortly, on 8 August 2017, so that the Act will now apply to all agreements and conduct. It is thus important for businesses, which have not done so already, to urgently review their existing arrangements and conduct to ensure they comply with the Philippine Competition Act and its implementing rules and regulations. If you would like us to assist you in your review, please contact Christina Macasaet-Acaban, whose contact details are at the end of this newsletter. In preparation for 8 August, the Philippine Competition Commission (PCC) recently released its draft Rules of Procedure, which will apply to all investigations, hearings and proceedings of the PCC, except matters involving mergers and acquisitions. The draft Rules set out the procedure for administrative proceedings for violations of the Philippine Competition Act and guidelines for the imposition of administrative penalties or remedies, including fines, injunctions, disgorgement, adjustment or divestiture. The PCC has invited the public to submit their comments on the draft Rules and conducted public consultations across the Philippines. The PCC is aiming to release the final version of the Rules shortly before 8 August.
Taiwan amends its merger control procedures
By: Sonya Hsu
The Taiwan legislature has made certain amendments to the merger control rules, effective from 14 June 2017. The amendments are as follows:
- The review period has been extended: the review periods of 30 days for Phase I and 60 days for Phase II are now expressed in working days, not calendar days.
- The Taiwan Fair Trade Commission can now consult publicly on the proposed merger during the review period, and engage research institutions for economic analysis and opinions. In a hostile takeover, it can disclose the merger filing to the target company and seek its views.
Thailand sets timetable for Competition Law reforms
By: Narumol Chinawong and Pornapa Thaicharoen
As reported in our last quarterly newsletter (April 2017), Thailand has embarked on major reforms to strengthen its competition law, including setting up a new competition authority, criminal sanctions for cartels and abuse of dominance, and a new merger control regime. Click here for further details. On 7 July 2017, Thailand passed legislation setting out a timetable for the reforms. The new competition law will take effect on 5 October 2017. Within 270 days of that date (ie by July 2018) the new Trade Competition Commission must be established, and within 365 days of that date (ie by October 2018), the implementing regulations, relating to such matters as merger control and determination of dominance, must be introduced. Watch this space for further details in due course.
Vietnam proposes significant reforms to strengthen its competition law
By: Tuan Minh Le and Chi Anh Tran
Vietnam is consulting on proposed significant reforms to strengthen its competition law. The highlights are as follows:
- Introduction of a leniency programme for cartellists. This implies an increased commitment to fight cartels.
- Currently, dominant position is defined as either having a market share of 30 per cent or more, or being “capable of substantially restraining competition”. Under the new law, this capability part of the test will be replaced by a new test of having “significant market power”.
- Replacement of the existing market share-based threshold for prohibiting mergers with a prohibition of mergers which have a significant negative impact on competition. The new rule will apply to horizontal, vertical and mixed mergers, not just horizontal ones, as at present.
- The introduction of new thresholds for the mandatory pre-notification of mergers: (a) either party holding a market share of at least 20 per cent or having total annual revenue of VND 500 billion (about USD 23 million) or more in the year prior to the transaction; or (b) the value of the transaction is at least VND 300 billion (about USD 13 million).
- Consolidation of the two existing competition authorities – the Competition Council and Competition Authority – into a single body – the National Competition Commission.
The finalized draft law is expected to be submitted to the National Assembly in October 2017 and adopted in May 2018. Ii