Asia Pacific Competition Law Bulletin November 2018

China > Consolidation of China’s antitrust regulators settled Hong Kong > The upcoming review of the Competition Ordinance India > Supreme Court stays record cartel fine pending appeal > New rules for Indian merger control Indonesia > New Indonesian merger control regime on the horizon Philippines > New guidelines for notification of joint ventures South Korea > Korea fines Japanese capacitor makers USD 32m for price fixing > Treble damages for cartel violations passed in Korea Taiwan > Taiwan antitrust regulator clears 21st Century Fox/Walt Disney deal Thailand > New Thai implementation regulations come into force Vietnam > Draft implementation rules for the new Vietnamese competition law Australia > Australia’s highest court refuses special leave in Yazaki and Pfizer > ACCC consults on the consumer data rules framework Singapore > Singapore imposes record antitrust fine on poultry cartel Asia Pacific Competition Law Bulletin OCT 2018 – NOV 2018 © Copyright 2018 Linklaters LLP. LIN.LAT.1258.18 Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 11 Australia Robert Walker, Lisa Lucak, Sophie Matthiesson, Allens Australia's highest court refuses special leave in Yazaki and Pfizer On 19 October 2018, the High Court dismissed two special leave applications in proceedings brought by the Australian Competition and Consumer Commission (ACCC), resulting in one “win” and one “loss” for the ACCC. One application (brought by the ACCC against Pfizer) related to the old misuse of market power prohibition, while the other (brought by Yazaki against the ACCC) concerned the Full Federal Court's decision to increase the penalty imposed on Yazaki for engaging in exclusionary and cartel conduct. The Pfizer application In the first application, the ACCC sought special leave to the High Court to appeal the Full Federal Court's decision to dismiss the ACCC’s case against Pfizer Australia Pty Ltd in relation to its conduct in the lead up to the expiry of its atorvastatin patent. The Full Federal Court found that Pfizer did not misuse its market power and had not engaged in anti-competitive exclusive dealing. The High Court dismissed the ACCC’s application on the grounds that it raised no question of principle and involved challenges to findings of fact or mixed law and facts by the lower courts. The ACCC's case against Pfizer was brought under the old misuse of market power prohibition, which prohibited companies with substantial market power from taking advantage of their market power for certain anti-competitive purposes. The new misuse of market power prohibition, which became law in November 2017, prohibits a company with substantial market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition. The Yazaki application In the second application, Yazaki Corporation sought special leave to the High Court to appeal the Full Federal Court's decision to increase the penalty imposed on it for engaging in exclusionary and cartel conduct. In 2015, the Federal Court found that Yazaki engaged in exclusionary conduct and its Australian subsidiary, Australian Arrow, engaged in cartel conduct. Justice Besanko ordered penalties of AUD 9.5 million against Yazaki. The conduct related to a tender issued by Toyota Motor Corporation for the supply of wire harnesses to be used in manufacturing Toyota Camrys. The other participant in the cartel, Sumitomo Electric Industries Ltd, cooperated with the ACCC and was not the subject of enforcement proceedings. On appeal from the ACCC, the Full Federal Court increased the penalty to AUD 46 million. The High Court dismissed Yazaki's application as it was not persuaded that the Full Federal Court had proceeded on an erroneous construction of the relevant provisions. The AUD 46 million penalty is the highest penalty imposed for contraventions of the Competition and Consumer Act. Pursuing larger penalties has been an increasing area of focus for the ACCC in light of an OECD Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 22 report in March 2018 that found that Australia penalties for breaches of competition laws were significantly lower than those imposed in comparable jurisdictions. ACCC consults on the consumer data rules framework Following the Open Banking Review, which concluded in December 2017, the Australian Government proposes to introduce an Open Banking regime and a Consumer Data Right (CDR) in July 2019. The CDR, while first applying to the banking sector, is intended to eventually extend to other sectors. The CDR will allow consumers to access certain information held about or related to them by designated organisations, and direct that information to be transferred to accredited third parties. The ACCC is tasked with developing and implementing the CDR rules. On 12 September 2018, the ACCC released for consultation a draft rules framework for the CDR. The framework is intended to outline the “in principle” position the ACCC proposes to make when making the CDR rules. Submissions on the CDR Rules Framework closed on 12 October, and the draft rules are expected to be published in December 2018 and will be subject to a further round of consultations. The CDR Rules Framework provides a useful insight into how the CDR regime will operate in practice, including: > which consumers can access data under the regime; > who is obliged to share data under the regime; > what data sets are required to be disclosed under the regime; > the accreditation criteria for data recipients; > how consent must be obtained for the collection, use and disclosure of CDR data; > authorisation and authentication standards for the data sharing process; and > requirements for reporting and record keeping. There were a number of key issues the ACCC specifically sought stakeholder views on, including: > whether metadata should be within the scope of the regime; > whether rules should be made to govern the concept of reciprocity, that is, the concept that those who wish to receive data at a customer's request must be willing to share equivalent data in response to a customer's request; > whether lower standards or “tiers” for accreditation should be developed and implemented; > the extent to which a consumer should be able to decide whether their redundant data is de-identified or destroyed; > whether the on-selling of data and use of CDR data for direct marketing should be permitted; and > rules around how the disclosure of data to intermediaries, such as outsourced service providers, should operate. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 33 Concurrently, on 24 September, the government released for consultation the second tranche of exposure draft legislation giving effect to the CDR and the designation instrument for the application of the CDR to the banking sector. The consultation period closed on 12 October. The submissions will inform the Regulation Impact Statement and Privacy Impact Assessment processes. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 41 China Fay Zhou, Liao Xi, and Larry Zhou, Linklaters Consolidation of China’s antitrust regulator settled By recently publishing a set of regulations outlining its internal organisation structure, China’s newly established antitrust regulator, the State Administration for Market Regulation (SAMR), effectively announced that the consolidation process of China’s three antitrust agencies is now complete. This marks an end to a substantial transition process1 and the beginning of a period of enforcement that will hopefully be more efficient, effective and consistent. A new organisation under SAMR Under the newly published Regulations on the Functions, Internal Agencies, and Personnel Arrangements for the State Administration for Market Regulation, SAMR will be organised into 27 internal institutions that will each perform specific functions. Specifically: > The Anti-Monopoly Bureau will enforce the Anti-Monopoly Law and will be responsible for merger review and investigating anti-competitive agreements, abuse of dominance and administrative monopolies. > The Price Supervision and Anti-Unfair Competition Bureau will be responsible for enforcing the Price Law and Anti-Unfair Competition Law and investigating conduct including commercial bribery and trademark infringements. Within the Anti-Monopoly Bureau, merger review responsibilities will be divided by three divisions within the Bureau, each focusing on certain industries. Three other divisions of the Anti-Monopoly Bureau will handle monopolistic agreements, abuse of dominance and administrative monopoly respectively, without distinction between price- and non-price-related cases. No signs of slowing down antitrust enforcement Notwithstanding the organisational transition, SAMR seems to have functioned as usual and has maintained, if not increased, its enforcement activity during the process. > In terms of merger review, SAMR unconditionally cleared 128 merger filings in Q3 2018, a record high in history. The average review time (from case acceptance to clearance) of simple cases in Q3 2018 was 15.5 days, which was an improvement when compared to Q2 (17 days) and Q1 (17.8 days) of 2018. During the consolidation process, SAMR also 1 The institutional reform was announced by the National People’s Congress on 17 March 2018, which involved the consolidation of the antitrust functions of the three existing Chinese antitrust enforcement bodies – merger review under the Ministry of Commerce, price-related antitrust investigations under the National Development and Reform Commission, and non-price related investigations under the State Administration for Industry and Commerce – into a new government agency, SAMR. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 52 issued two conditional clearance decisions, Essilor/Luxottica and Linde/Praxair, each involving complex analysis and remedies. > On the antitrust investigations front, SAMR investigated 12 monopolistic agreement cases and 11 abuse of dominance cases in Q1-Q3 2018 in a broad range of industries, including pharmaceutical, automobile, electronics, semi-conductor and materials sectors. SAMR is also known to have a number of ongoing investigations, including an investigation into Japanese zipper maker YKK Group for alleged abuse of dominance, and an investigation into three semiconductor makers, Samsung Electronics, SK Hynix and Micron Technology, for both alleged price fixing and abuse of dominance in relation to DRAM chips. SAMR’s enforcement record during the transition process is no doubt impressive, especially when one considers the magnitude of institutional and personnel changes involved. It is understood that some former merger review officials have been reassigned to antitrust investigation divisions, while some former officials working on antitrust investigations have picked up merger review duties. It is hoped that this reshuffling in personnel will bring about constructive exchanges in ideas between officials from different enforcement agencies and harmonisation on interpretations of law that the previous agencies have expressed and were difficult to reconcile. Nevertheless, the extent and impact of such synergies on SAMR’s future enforcement remain to be seen. Conclusion The consolidation of China’s three antitrust enforcement bodies has been a remarkable development in Chinese antitrust enforcement. A consolidated agency has long been expected to be the solution to the legacy agencies’ past differences in enforcement priorities and interpretations of law. There is much hope for SAMR to bring about efficient and consistent antitrust enforcement in the long run. It may take some time before SAMR can fully integrate the functions, personnel and practices of the three legacy agencies, especially at local levels. Nevertheless, the effectiveness in implementing institutional changes while maintaining enforcement efficiency can be seen as the first signs of vigour that the new agency will bring into future antitrust investigations. Related links: The Regulations on the Functions, Internal Agencies, and Personnel Arrangements for the State Administration for Market Regulation can be found here (in Chinese only). Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 61 Hong Kong Clara Ingen-Housz, Marcus Pollard and Alexander Lee, Linklaters The upcoming review of the Competition Ordinance As Hong Kong approaches the third anniversary of competition law enforcement in December, there is anticipation as to the contents and direction of the scheduled review of the competition law regime promised by the Government. While the Hong Kong Competition Commission (HKCC) has indicated that it is working on potential proposals for review in light of its enforcement experience so far, the Government has been tight-lipped about its plans for reform. In this article, we look at five key areas that we view to be the key focus for consideration in the coming review. > Standalone private actions. Private damages claims by “victims” of anti-competitive conduct are not possible under the current regime. Although civil claims with competition issues have recently been transferred to the Competition Tribunal (see our discussion on this topic here), “follow-on” actions are presently the only avenue of direct redress for victims of anti-competitive conduct. There has been voices in the Legislative Council and legal community in support of standalone private actions. Notably, the CEO of the HKCC has been vocal for his support for private enforcement actions independent of those of the HKCC, believing that private actions could supplement its enforcement activities. It would remain to be seen how such a standalone right of action would develop in Hong Kong. Even in more developed common law jurisdictions such as UK and Australia, such claims are relatively limited in number. This is mainly due to the evidential burden and resources needed to mount successful actions. > Cross-sector merger control. Currently, merger control in Hong Kong is limited to the telecommunications and broadcasting sectors. Although there are other jurisdictions that only have sector-specific merger control, the lack of a general merger regime has always been an obvious area for reform since the enactment of the Competition Ordinance. The HKCC recognises this and is known to be actively considering reform in this area. However, developing a general regime will likely result in significant debate around notification thresholds, whether the system would be voluntary or mandatory and timelines for review. The Government will also want to take time to consult stakeholders in the business sector on the details of such a regime. As such, a practical timetable from the current administration for reviewing and consulting stakeholders on this area would already be much welcomed. > Pecuniary penalty against individuals. The HKCC has taken the view that the Competition Ordinance allows the HKCC to seek pecuniary penalties against individuals. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 72 This remains a live issue for the Competition Tribunal to determine. In addition, under the law, there is no statutory limit for a pecuniary penalty against individuals, thereby bringing the constitutionality and legal limit of such penalty further into question. Notwithstanding such a lacuna, the HKCC lodged its first enforcement proceedings to seek pecuniary penalties against individuals in early September (see our discussion on this topic here). While the Tribunal’s decision on this issue remains to be seen, the legal basis for pecuniary penalties against individuals will no doubt be bolstered if the legislature sets a statutory limit on the maximum penalties that could be imposed. Removing doubt over the legality of pecuniary penalties against individuals will only serve to enhance the deterrent effect of the competition rules. > Market studies. The HKCC currently does not have statutory powers to compel information or documents for purposes of conducting market studies. The HKCC has suggested that this hampers the effectiveness of its market studies. The HKCC first raised this concern in the context of its auto-fuel market study in 2017 and argued that it should be provided with compulsory information gathering powers that would compel the production of materials when undertaking future market studies. However, the Government only indicated that it will “continue its liaison with the [HKCC]” and did not commit to consider the HKCC’s request for additional powers. The reasons for the Government’s lukewarm response remain unclear. In the absence of strong support, the prospect of enhancing the HKCC’s powers in the coming round of review may be limited. > Statutory bodies exemption. Virtually all statutory bodies in Hong Kong1 are exempted from the city’s competition rules. While most statutory bodies have no significant impact on the local economy, a considerable number of statutory bodies do engage in economic activity and compete with the private sector. The statutory bodies exemption has led to criticisms of unfairness and being contrary to the purpose of creating a level playing field in Hong Kong. Such concerns have been echoed by the HKCC, and the Government had promised the legislature that the statutory bodies exemption would be reviewed three years after full implementation of the law. Given that current competition rules only apply to entities that engage in economic activity, lifting the exemption is unlikely to impact most statutory bodies. The coming review is an excellent opportunity for the HKCC and the Government to improve the competition law regime in Hong Kong. The HKCC will be consulting the Legislative Council after the HKCC reaches an agreement with the Government about the list of issues to be included in the coming review. This is expected by the end of 2018 or early 2019. 1 Only 6 statutory bodies are not exempted from the Competition Ordinance, namely: Ocean Park Corporation, Matilda and War Memorial Hospital, Kadoorie Farm and Botanic Garden Corporation, The Helena May, Federation of Hong Kong Industries and the general committee of the Federation of Hong Kong Industries. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 81 India TT&A Supreme Court stays record cartel fine pending appeal On 5 October 2018, the Supreme Court of India stayed a record penalty imposed on major cement manufacturers pending appeal. The Supreme Court is hearing an appeal from the lower court’s decision, which had dismissed the cement companies’ applications to dismiss the penalties imposed. Given the legal issues involved in the appeal, the Supreme Court’s substantial decision will be an interesting one to watch out for. The cement cartel investigation and the first appeal The origins of the case under appeal can be traced back to an investigation by the Competition Commission of India (CCI) into cement manufacturers and the Cement Manufacturers Association in 2010, which resulted in fines against the companies and the association in 2012. The CCI’s decision was set aside by the now defunct Competition Appellate Tribunal1 in 2015 on procedural grounds. Shortly after that 2015 decision, the CCI re-heard the case against the 10 cement companies and the industry association. The CCI found that the cement manufacturers had used the industry association as a platform for exchanging price and production information and fixing the price of cement. In 2016, the CCI imposed a record fine of INR 63 billion (approx. USD 877 million). The cement makers’ appeal against the CCI’s decision was dismissed by the National Company Law Appellate Tribunal (NCLAT) in July 2018. In dismissing the appeal, the NCLAT noted that there was strong incriminating evidence from the industry association’s meeting minutes and criticized the appellants’ arguments as lacking merit. The NCLAT also dismissed the argument that the CCI applied the wrong standard of proof in its finding. The NCLAT reasoned that the CCI correctly based its finding on a balance of probabilities, because cartel conduct is not a criminal offence in India and the CCI was not obliged to apply the criminal standard which would require proof beyond reasonable doubt. The Supreme Court decision to come The cement companies appealed the NCLAT’s ruling in September 2018 and the Supreme Court granted a stay of the CCI’s fines on 5 October 2018. While the Supreme Court’s stay decision stands in contrast to the NCLAT’s ruling against the cement manufacturers, the direction to require appellants to deposit 10% of the fine in question is not without precedent, as similar directions have been previously made by the Competition Appellate Tribunal, the NCLAT, and the Supreme 1 The functions of the Competition Appellate Tribunal were transferred to the National Company Law Appellate Tribunal. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 92 Court. Hence, it may be too early to tell whether the Supreme Court is amenable to the appellants’ arguments. While the dates for the appeal hearing have yet to be fixed, the Supreme Court’s decision will be a case to watch out for, especially if it makes a ruling on the applicable standard of proof for competition law cases in India. Related links: The Supreme Court’s Order can be found here. New rules for Indian merger control The CCI recently amended its merger rules to clarify and streamline its process for reviewing merger notifications. The amendments came into force on 9 October 2018. Key changes include: > Remedies can be offered at an early stage. Parties to a proposed transaction can now submit voluntary remedy proposals to the CCI during its Phase I review. In mergers where remedies are anticipated, offering remedies at an early stage may significantly expedite the review and avoid a Phase II investigation if the proposed remedies can sufficiently address the CCI’s competition concerns. > Filings can be withdrawn and refiled. Notifying parties can now withdraw and re-file merger notifications made to the CCI. This will be useful when the CCI requires significantly more information than that set out in filed notifications, as parties would have more time to answer the CCI’s requisitions without having the notifications invalidated. The amendments are much welcomed and are hoped to bring about faster disposal of merger filings in India. Related links: The CCI’s amendments to the Combination Regulations are available here. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 101 Indonesia Yolanda Hatapea and Kevin Eduard Matindas, Widyawan & Partners New Indonesian merger control regime on the horizon Indonesian competition law is now close to reaching the final stages of reform. The draft legislation is expected to be finalised soon and ratified by the Indonesian legislature. Once approved, the proposed reforms will bring about fundamental changes to Indonesian competition law, most notably to the current merger control regime. In this update, we take a look at some of the key proposals to reform the merger control regime. Key legislative reforms to the Indonesian merger control regime, as proposed by the Commission for the Supervision of Business Competition (KPPU), include (a) a new mandatory pre-merger notification, (b) higher notification thresholds, and (c) a higher maximum penalty for failure to notify. > A new mandatory pre-merger notification regime. Under the current draft legislation, Indonesian merger notifications will need to be made before completion, which is drastically different from the current post-transaction notification regime. The proposal is for the KPPU to complete its merger review within a 25-working day review window, with deemed approval if no decision is made before expiry of the review period. > Higher merger notification thresholds. The KPPU had been lobbying to revise Indonesia’s merger notification thresholds for a long time, as the thresholds have been in place since 1999. To better reflect current economic conditions, the current proposal is to triple or quadruple the current asset and turnover thresholds, such that an Indonesian filing would be triggered if: > The combined local asset value exceeds IDR 10 trillion (USD 680 million); or > The combined local turnover exceeds IDR 15 trillion (USD 1 billion). > A higher maximum penalty for failure to notify. Under current law, the KPPU can only impose administrative fines of IDR 1 billion (USD 68k) for each day of delaying a merger filing, subject to a maximum of IDR 25 billion (USD 1.7 million). The KPPU is now proposing to peg the late notification penalty to a certain percentage of the value of the transaction. The process to reform the Indonesian competition law regime has been an arduous one, as multiple draft amendments have been tabled before the Indonesian legislature since 2016. The current proposals have recently gained support in Indonesia’s House of Representatives and there is hope that the green light will soon be given by the legislative committee deliberating the current draft, meaning that Indonesian competition law reforms may arrive in 2019. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 111 Philippines Perry Pe and Tristan Delgado, Romulo Mabanta Buenaventura Sayoc & de los Angeles New guidelines for notification of joint ventures The Philippines Competition Commission (PCC) recently issued new Guidelines on Notification of Joint Ventures (Guidelines). The Guidelines are a welcomed addition to the PCC’s existing merger control rules, as they clarify how joint ventures (JVs) should be properly analysed for purposes of determining whether a Philippine merger notification is triggered. The scenarios and issues covered in the Guidelines are issues commonly encountered by practitioners. The key clarifications are: > Circumstances where joint control arises are elaborated in detail. Typical situations where joint control arises are recognized in the Guidelines, e.g. board appointments, vetoes to business plans. Veto rights for minority shareholder protection are expressly excluded for joint control purposes. The Guidelines also acknowledge de facto joint control through joint voting rights or commonality of interests between minority shareholders. > Filing requirements for new JVs differ from those for existing JVs. The Guidelines clarify that JV partners to a new JV should notify the PCC as “Acquiring Entities” and provide information of the new JV as an “Acquired Entity”. For deals involving existing JVs, existing shareholders controlling an existing JV and the JV itself should notify as “Acquired Entities”, together with the prospective JV partners as “Acquiring Entities”. > Assets and revenues to be included for threshold computation purposes may also differ. For new JVs, assets contributed to the JV and gross revenues generated by such assets will be used for the size of party test. The same applies to existing JVs, in addition to the JV’s existing assets and revenues. Asset contributions to the JV within one year from the JV agreement must also be included. Asset contributions to the JV that are made upon satisfaction of conditions to a JV agreement may trigger a separate merger notification. The Guidelines provide helpful and focused clarifications that will be useful reference for determining whether a JV will trigger a merger filing in the Philippines. It also includes useful examples to illustrate the application of the principles enunciated in the Guidelines. Businesses contemplating JVs involving the Philippines will no doubt benefit from these Guidelines. Related links The Guidelines can be found here. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 121 Singapore Daren Shiau, Elsa Chen and Scott Clements, Allen & Gledhill LLP Singapore imposes record antitrust fine on poultry cartel The Competition and Consumer Commission of Singapore (CCCS) recently imposed its highest fine to date of SGD 26.9 million (USD 20 million) against 13 fresh chicken distributors for pricefixing and market-sharing. A leniency applicant that satisfied leniency conditions received the highest penalty among the companies fined, as the CCCS had, in its decision, rejected passive participation in a cartel as a mitigating factor in Singapore. The investigation and decision The investigation began in 2014 after a tip-off from a complainant to the CCCS. The CCCS’s investigation found that the distributors allegedly met to discuss prices and coordinate the percentage and time of the price movements between 2007 to 2014. The distributors also allegedly agreed not to compete for customers. The CCCS also said that pressure tactics were allegedly used to keep the distributors in line with the alleged agreements. The CCCS found the distributors’ conduct to have restricted competition on the market for the supply of fresh chicken products in Singapore. This, in the CCCS’s view in turn led to price increases and reduced customer choice, as the CCCS found that the distributors had a combined market share exceeding 90%. The CCCS considered the large size of the industry, high market shares of the distributors, the seriousness and long duration of the conduct, and imposed the record fines. It is noteworthy that after issuing a proposed infringement decision to the companies in 2016, five out of the 13 chicken distributors applied for leniency in exchange for penalty reductions, which reduced the total amount of fines imposed by the CCCS. Key takeaways The general takeaways for businesses and industry associations operating in Singapore are: > Liability for cartel conduct can be found even in the absence of documentary evidence. The CCCS has demonstrated that it will not hesitate to prosecute in the absence of written evidence. In this case, the alleged meetings were not documented and were conducted informally. The CCCS instead sought to establish its case on the basis of interviews with current and former employees of the companies under investigation, as well as customers of the chicken distributors. The CCCS also heavily relied on the evidence from leniency applicants and the whistle-blower. > A successful leniency applicant may nevertheless receive high fines. The highest fine imposed in this case was imposed on a distributor who successfully applied for leniency. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 132 This was notwithstanding the fact that the distributor had been cooperative and forthcoming during interviews and had provided sufficient information and evidence to fulfil leniency conditions. Businesses subject to an investigation by the CCCS may need to manage their expectations for receiving a deep discount in fines when deciding to apply for leniency. > Passive participation in a cartel will not be regarded as a mitigating factor. In this case, a number of distributors argued that they were merely minor and predominantly passive participants in the cartel. Aside from making factual findings to the contrary, the CCCS firmly rejected arguments in its decision that passive participation in the cartel conduct should be taken as a mitigating factor. Instead, the CCCS aligned itself with the position taken by the European Commission, which requires passive participants to demonstrate that it “actually avoided applying the anti-competitive agreement by adopting competitive conduct in the market”.1 Allen & Gledhill represents one of the respondents in the CCCS’s investigation. Related links: The CCCS’s Decision can be found here. 1 Paragraph 29 of the European Commission’s Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, Official Journal C 210, 1.09.2006. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 141 South Korea Hwan Jeong, Bryan Hopkins and YS Ahn, Lee & Ko KFTC fines Japanese capacitor makers USD 32m for price fixing The Korea Fair Trade Commission (KFTC) recently imposed penalties in a total of KRW 36 billion (USD 32 million) on 9 Japanese companies for fixing the prices of capacitors. The decision is not only a conclusion to a four-year long investigation of the KFTC, but is also a stark reminder of how competition authorities can cooperate internationally in investigations into global cartel cases. A global cartel in Korea In 2014, the KFTC launched the investigation by a series of dawn raids against the Japanese manufacturers of capacitors, which are small components used to store energy in electrical devices. The investigation found that executives and senior managers of the Japanese firms had been meeting from as early as 2000 until 2014 to discuss and agree on plans to fix prices and exchange pricing data relating to capacitors. There was also evidence that the persons involved were aware of the impropriety of their actions, as messages that read “Read and delete it” and “Be careful not to disclose the e-mail” were used. The alleged conduct is said to have affected KRW 736 billion in capacitor imports to South Korea, as the companies involved accounted for 60-70% of the aluminium capacitor market and 40-50% of the tantalum capacitor market. The KFTC fined the companies on the basis of relevant sales in South Korea. In addition, the KFTC has plans to refer four companies and a company executive to the Korean Prosecutor’s Office for criminal prosecution. International cooperation between competition authorities An interesting feature of the KFTC decision is that it expressly acknowledged its cooperation with other competition authorities at an early stage of its investigation and noted that its fines on the Japanese capacitor makers were imposed at around the same time as those in the US, EU, Japan, Taiwan and Singapore. It is notable that investigations and dawn raids in those jurisdictions all coincided with the KFTC’s dawn raid in 2014. Conclusions to those investigations were more staggered, as Taiwan, Japan and Singapore imposed fines in 2015, 2016 and 2017 respectively, while fines in the US and EU came in 2018. Similar investigations against the Japanese capacitor makers in China are known to be ongoing. This case is a rare example of how competition law enforcers can cooperate internationally with their peers in other jurisdictions. The importance of cooperation between competition agencies in Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 152 investigations was emphasized by the KFTC Chairman at a recent international conference in Seoul. It will be interesting to see if international cooperation amongst competition law enforcement agencies will be more common in the future. Related links: The KFTC press release can be found here (English) and here (Korean). Treble damages for cartel violations passed in Korea An amendment to the Monopoly Regulation and Fair Trade Act was recently passed to allow treble damages in private action claims involving cartel conduct. The amendment is expected to bring about US-style private enforcement of Korean antitrust law when it comes into force in September 2019, complementing ongoing discussions about reforms to public law enforcement in Korea. Under current law, a party injured as a consequence of a cartel violation can only recover his actual damages in private proceedings against cartel members. The amendment will empower Korean courts to award three times the injured party’s actual damages. Leniency applicants, however, will not be subject to treble damages, and will only be jointly liable for actual damages resulting from cartel activities. The rationale behind the amendment is to encourage private challenges to cartel violations, and in turn, deter cartels, while preserving the incentive for leniency applicants to report cartel activity to the KFTC. This is in line with the KFTC’s agenda for cracking down on cartel enforcement generally. The amendment is welcomed as a first step for the coming overhaul of the Korean competition law regime, as proposals in the legislative pipeline include reforms on public antitrust law enforcement and plans to introduce “class action” for cartels later this year. Businesses operating in Korea are advised to keep abreast of these coming developments. Given the risk of treble damages from private actions, companies should also strengthen internal compliance programmes and report cartel activity as soon as possible. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 161 Taiwan Matt Liu and Elvin Peng, Tsar & Tsai Law Firm Taiwan antitrust regulator clears 21st Century Fox/Walt Disney deal The Taiwan Fair Trade Commission (TFTC) recently cleared the proposed acquisition of 21st Century Fox by The Walt Disney Company. The decision is an interesting example of how high post-merger market shares may nevertheless result in merger clearance in Taiwan. Also, it shows that, when more than one relevant market is involved, the TFTC will consider the overall impact of the proposed transaction on all affected markets. The proposed transaction involved Walt Disney buying 21st Century Fox, including its film and television studios, cable entertainment networks and international TV businesses. The TFTC defined the relevant markets as the film distribution market and the satellite broadcasting market. The TFTC considered that, after the proposed transaction, the combined entity will become the market leader in the Taiwanese film distribution market in terms of market share. Nevertheless, the TFTC considered that the deal would not have an adverse impact on competition in the market, because: > The combined entity will need to compete with other domestic and foreign major film distributors, and most of major film distributors are from the US. > In Taiwan, there are plenty of large, experienced movie studio chains that have the option to choose which film distributors to deal with and to decide on the movies genres to be screened and show times. > Aside from the combined entity, domestic film makers will still have sufficient local or foreign film distributors to choose. For the satellite broadcasting market, the TFTC decided that the proposed transaction will not adversely affect the competition on the satellite broadcasting markets, because: > The parties’ market share in that market will drop after the transaction, as 21st Century Fox will divest part of its satellite broadcasting channels before the closing. > There are a number of satellite broadcasters competing with the parties on the market. > The TFTC also noted that the deal will not raise barriers of entry as a result. Related links: The TFTC decision is available here (in Chinese only). Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 171 Thailand Pornpan Chayasuntorn, Wilailuk Okanurak and Kimdara Chamlertwat, Linklaters New Thai implementation regulations come into force Thailand’s new competition law regime finally came into force on 2 November 2018. Long awaited secondary regulations were recently published by the Office of Trade Competition Commission (OTCC) to implement Thailand’s new Trade Competition Act B.E. 2560 (2017) (New Act). Although merger control is not yet covered in these new regulations, the regulations officially mark a new era of competition law enforcement replacing the country’s 18-year old trade competition law regime. We take a look at the new regulations. After a long public consultation process in June 2018, on 4 October 2018, the OTCC finally published the final versions of five secondary regulations to implement the New Act. The regulations outline the general principles underlying the OTCC’s future enforcement of the New Act. > Guideline on determining relevant market scope and market share. In this Guideline, the OTCC outlines its approach to defining the relevant market and the factors that will be taken into account when defining the scope of the relevant market, namely demand substitutability, supply substitutability and potential competition. The OTCC has also indicated that it may consider market shares in terms of volume of supply, turnover, volume of production or production capacity as the context requires. > Guideline on the criteria for determining business operators having a relationship with each other in terms of policy or control. This Guideline sets out the OTCC’s approach in determining whether a business entity has a policy or controlling relationship over another entity for purposes of the New Act. In essence, the OTCC considers that such relationship exists if an entity: (a) can make decisions on the guidelines, policy, management, operational control of another business entity; (b) holds shares in another entity with voting rights exceeding 50% of the total voting rights issued in that other entity; (c) controls a majority vote of the shareholders in a shareholders’ meeting of another entity; (d) has power, directly or indirectly, to appoint or revoke half or more than half of the directors of another entity; and/or (e) has control in terms of (b) to (d) above at any level of the corporate group (i.e. as the ultimate controlling entity). Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 182 > Guideline on determining restrictive conduct of business operators that have a market dominant position. This Guideline provides the OTCC’s approach to certain types of business conduct that may harm competition if carried out by a business operator with a dominant position in the market. Specifically, the OTCC discusses in detail restrictive conduct such as below-cost pricing, tying and bundling, margin squeeze, refusals to deal and exclusive dealing, as well as types of conduct that may be considered as an unreasonable business intervention, all of which are prohibited under the New Act. > Guideline on determining conduct that causes damage to other business operators. In this Guideline, the OTCC describes certain types of business conduct that may cause damage to other business operators through superior market or bargaining power, or through restrictive pricing or supply conditions that may obstruct other businesses from conducting their business. > Guideline on determining cartel conduct of business operators that monopolises, reduces or limits competition in the market. This Guideline sets out the OTCC’s approach to typical types of cartel conduct, including price fixing, market sharing, bid rigging and output restrictions, as well as other conduct that may harm competition. The OTCC also discusses the possible exemptions that may apply to conduct that may otherwise be categorised as cartel conduct or other conduct that may harm competition. The Guidelines cover topics that are typically expected from competition law agencies. Although the OTCC’s approach to law enforcement under these new Guidelines remains to be seen, the approach described by the OTCC is similar to those of overseas competition law authorities, such that overseas precedent will likely be of great value in interpreting the requirements of the New Act. In any event, the Guidelines will be important guidance for complying with the requirements under the New Act and businesses operating in Thailand should take note. Apart from the aforementioned Guidelines, the OTCC also carried out a public consultation on draft merger control regulations in September. Although those regulations were originally scheduled to be published in early October, the OTCC is taking time to consider the many comments received during the consultation. Related links: The OTCC’s Guidelines can be found here (in Thai only). Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 191 Vietnam Linh Bui and Linh Nguyen, Allens Draft implementation rules for the new Vietnamese competition law In connection with the enactment of the new Law on Competition in June 2018 (New Law), the Vietnamese Government recently introduced a draft of the Decree guiding the implementation of the New Law (Draft Decree). The Vietnamese Competition and Consumer Protection Authority (VCA) recently hosted a two-day workshop to discuss and collect opinions on the Draft Decree. In this update, we discuss some of the hot topics covered in the workshop. New notification thresholds for merger filings A key change under the New Law is the introduction of new thresholds for merger notifications. When the New Law comes into force in July 2019, market shares will no longer be the only test for triggering a merger filing in Vietnam, and the parties’ total assets or turnover on the Vietnamese market and the value of the transaction will have to be considered as well. The specific thresholds proposed under the Draft Decree are: > total assets or turnover on the market of Vietnam of a party to the economic concentration stated in the audited financial statement for the year immediately preceding the year of notification is VND 1,000 billion (USD 43 million) or more; > transaction value of the economic concentration is VND 500 billion (USD 21.5 million) or more; or > combined market share in the relevant market of the enterprises participating in the economic concentration in the financial year immediately preceding the year of notification is 30% or more. Given that the proposed filing thresholds are relatively low when compared to those in many overseas jurisdictions, it would be reasonable to expect a substantial increase in the number of merger notifications in Vietnam. If the proposed filing thresholds are adopted, transactions involving a large player on the market may easily trigger a merger filing. Interestingly, the representatives of the VCA attending the workshop made oral comments that confirmed the wide scope of the test in Vietnam. Specifically, it was mentioned that internal corporate restructurings will not be exempted from the filing requirement, even though this point is not clearly set out under the New Law or the Draft Decree. Also, the officials clarified that the assets and turnover of the parent entities of a special purpose vehicle used in a transaction will have to be considered for Vietnamese merger notification purposes. Asia Pacific Competition Law Bulletin: Asia Pacific Competition Law Bulletin: OCT 2018 - NOV 2018 OCT 2018 – NOV 2018 202 Merger review process The merger review under the New Law will be a two-phase process instead of the current singlephase process. Nevertheless, the Draft Decree set out a fast-track review mechanism where certain mergers can be cleared at the preliminary review phase without proceeding to the official review phase. For instance, a merger would be eligible for clearance at the preliminary review phase if the combined market share of the parties to the transaction in the relevant market is less than 20%. Definition of “control” Under the New Law, only acquisitions conferring “control” would trigger a merger filing in Vietnam. The Draft Decree provides that “control” for such purposes is where the acquirer has: > more than 36% of charter capital of the acquired enterprise or ownership at a level (provided by law or charter) sufficient to make decisions on important matters on financial policies, appointment/dismissal of management personnel and operations of the company; or > the right to make decisions on important matters on financial policies, appointment/dismissal of management personnel and operations of the company under a pre-acquisition contractual arrangement of the parties. This definition is relatively vague and ambiguous and, to some extent, conflicts with the Vietnamese Law on Enterprises. Particularly, shareholders of a joint stock company holding more than 35% voting shares (rather than more than 36% of the charter capital, which includes the value of both voting shares and non-voting shares) would already have de facto veto rights on certain important corporate matters of the company. This definition is expected to be reconsidered by the VCA in the next draft of the Draft Decree. Criteria for assessment The Draft Decree purports to provide guidance on the criteria it will use to assess the “significant competition restraining impact” of an agreement in restraint of competition and the “significant market power” of a dominant player in the market. However, the criteria set out in the Draft Decree appears to be somewhat subjective and open to interpretation by the authority. It is hoped that the guidance in this respect will also be improved upon in the next draft of the Draft Decree. Alternatively, the new Vietnamese competition authority, the National Competition Commission, may consider publishing reference precedents on its website to assist parties assessing whether their transactions trigger a merger filing in Vietnam.