Australia: First criminal cartel conviction; important judgment on what constitutes illegal collusion

While criminal cartel provisions have existed in Australia's Competition and Consumer Act (CCA) for a number of years, August saw the first criminal conviction for a cartel offence. The conviction was against Nippon Yusen Kabushiki Kaisha (NYK), a Japanese shipping company that pleaded guilty to price collusion in shipping vehicles to Australia. The AUD 25 million fine (approximately USD 19.6 million) was the second highest ever issued under Australian competition law, in spite of incorporating a 50 percent discount for an early guilty plea, reflecting NYK’s cooperation with the investigation.

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In September, the Full Federal Court unanimously confirmed the findings of the Federal Court’s earlier decision against the Australian Competition and Consumer Commission (ACCC) in respect of an alleged cartel in the supply of eggs. The ACCC had alleged that a number of Australian egg companies, through an industry association, attempted to induce egg producers to reduce the number of eggs for supply in Australia. The court held that the intended conduct fell short of the required “contract, arrangement or understanding” under the CCA. The court found that the association's intention was to bring to the attention of its members the oversupply of eggs, and for each member to act independently from that point. This was held to be part of the role of an industry association – bringing profitability to the mind of its members – rather than a concerted attempt to engage in cartel conduct.

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China consolidates and updates merger rules

In September, China's Ministry of Commerce (MOFCOM) published for consultation a draft regulation consolidating and updating its merger notification rules. Key points in the draft are:

  • Interrelated transactions are treated as one concentration for China merger control purposes. This means that (consistently with previous MOFCOM decisions in such cases) parties need to notify before they implement the first of the interrelated transactions, although it does not in itself meet the filing threshold, as long as the overall transaction does.
  • Turnover for joint ventures: The turnover of an entity jointly controlled by a number of undertakings involved in the concentration is to be apportioned equally among the controlling business operators.

Regrettably the draft does not provide any further clarification than the existing rules on the meaning of "control" for the purpose of triggering the filing obligation, so it will remain unclear in certain situations whether filing is required.

The consultation period closed on 9 October 2017. MOFCOM has indicated that it is aiming to issue the new regulation in final form by the end of 2017.

Hong Kong Commission brings case against construction and engineering companies alleging price-fixing, market-sharing; issues limited block exemption for container shipping lines

In August, the Hong Kong Competition Commission brought proceedings in the Competition Tribunal seeking penalties against ten construction and engineering companies. The case concerns alleged price-fixing and market-sharing in the provision of renovation services at a public housing estate in Hong Kong.

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Also in August, the Commission issued a limited block exemption order for agreements between container shipping lines. The lines had applied for a block exemption for both vessel-sharing agreements (VSAs) — agreements whereby the lines share capacity — and voluntary discussion agreements (VDAs), whereby they share certain commercial information, including prices. The Commission issued a block exemption for VSAs — up to a market share limit of 40 percent on any given route — but rejected the application in respect of VDAs.

This contrasts with the more lenient approach of Singapore, which in 2015 extended its block exemption regulation for both VSAs and VDAs (subject to certain conditions) for five years to the end of 2020, raising concerns about whether Hong Kong's container port might lose business to Singapore as a result.

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Japan preparing reforms to penalty system and leniency policy 

The Japan Fair Trade Commission (JFTC) is drafting amendments to its system for imposing penalties and its leniency policy under the Japanese Antimonopoly Act, taking into account the recommendations in a report by an expert study group that it commissioned. Among the reforms it is considering are: expanding the turnover base for the calculation of penalties from turnover in the products affected by the infringement to total turnover in the relevant market; allowing penalties to be calculated on the basis of turnover during the whole period of the infringement rather than just the last three years (as is presently the case); and extending leniency (in the form of reduced penalties) to all persons providing relevant information and cooperating in the investigation, not just the first five applicants.

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Philippine Competition Commission issues procedural rules for investigations; draft rules on merger filings

The Philippine Competition Commission (PCC) has issued its rules of procedure covering investigations of anti-competitive agreements and abusive conduct, including guidance on the imposition of penalties and other remedies. The rules do not cover the PCC's leniency policy: these are expected to be the subject of a separate set of rules.

The PCC has also issued for consultation a draft set of detailed procedural rules for assessing merger filings: these rules are expected to be issued in final form this month. If the relevant provision in the draft is retained in the final version, the parties will be required to notify the merger within 30 days after executing the definitive agreements, prior to any acts of consummation (unlike the current position whereby the parties have to file before executing the agreements).

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Thailand Competition Law reforms take effect

On 5 October 2017, significant reforms to the Thai Competition Law took effect. These reforms, reported in the April 2017 issue (click here for further details), include:

  • higher penalties of up to 10 percent of turnover (it is not yet clear how this turnover will be assessed)
  • clarification that criminal sanctions can be imposed for cartel conduct and abuse of dominance
  • a new mandatory merger control regime (the thresholds are still to be set)

The new competition authority is to be set up by July 2018, and the implementing regulations are to be adopted by October 2018.

The new competition authority will be able to take action against anti-competitive arrangements and abuses of dominance, which are currently taking place. It is therefore important for businesses operating in Thailand to have systems in place to ensure they comply with the new law. Mergers and acquisitions are unlikely to require to be notified until such time as the filing thresholds are promulgated. Any further developments will be reported in the next issue.

Vietnam amends proposed New Competition Law

As reported in the July 2017 issue, Vietnam is proposing significant reforms to its Competition Law. In September, the latest draft of the new law was published. Among the changes from the previous draft, the following are particularly noteworthy:

  • Further details are provided on the criteria that the National Competition Authority (NCA) will use when assessing whether an agreement will have substantial anti-competitive effects.
  • The government is tasked with setting thresholds for mandatory filing of mergers based on:

(a) the parties' combined assets in Vietnam

(b) the total revenue of either the parties in Vietnam

(c) the total value of transactions

  • It is no longer proposed that the NCA will be an independent agency, but that it will remain a government department under the Ministry of Trade.

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