Competition enforcement in South East Asia set to increase in 2019

Written on 7 Mar 2019

If it has not already, competition compliance should figure as a key consideration for businesses operating in South East Asia. In this update, we review the notable competition enforcement activities undertaken in the region in 2018 and discuss why we expect the trend to increase in 2019.

Active competition enforcement in 2018

2018 was a watershed year for competition law enforcement in South East Asia. A high-profile merger between ride-hailing platforms, which triggered swift enforcement action and inquiries by the Competition and Consumer Commission of Singapore (CCCS), the Philippines Competition Commission (PCC), the Malaysia Competition Commission (MyCC), the KPPU (Indonesia’s competition authority), Vietnam Competition and Consumer Protection Authority (VCCPA) and the Vietnam Competition Council (VCC), is a good case in point that businesses ought to pay greater heed to merger control rules and competition law compliance in the region.

Some of the notable ASEAN merger control enforcement activities in 2018 include the following:

  • Indonesia. As Indonesia's notification regime involves mandatory post-completion notification, the KPPU actively monitors mergers and acquisitions that were not notified. Based on publicly available information, the KPPU imposed fines on four late merger notifications.
  • Philippines. The PCC conditionally approved the Chelsea Logistics/KGLI-NM merger after it nullified a related merger involving Chelsea/Trans-Asia Shipping Lines. The PCC also imposed a fine of PHP 22.8 million (about €380,000) as the merger parties failed to notify the merger in December 2016. While the PCC approved the AXA-XL merger, it imposed its first fine for late notification under the Philippines' mandatory merger notification regime.
  • Singapore. The CCCS has moved 14 merger notifications to phase 2 review since the merger control regime began in 2007. Four of these 14 were moved to phase 2 review in 2018 alone. Of those four merger notifications, the CCCS unconditionally cleared the Essilor/Luxottica merger, proposed to block the Wilhelmsen/Drew Marine merger (which was subsequently abandoned), and is still conducting a phase 2 review of a clinical laboratories merger between Innovative and Quest. One other merger application was withdrawn.

ASEAN competition agencies have also become considerably active in the enforcement of cartel and abuse of dominance cases in 2018. Some of the notable matters include the following:

  • Indonesia. The KPPU issued an abuse of dominance infringement decision concerning cargo and postal tariffs relating to airport service. It also won two appeals against its decisions in the garlic importation cartel and the tyre cartel before the Supreme Court.
  • Malaysia. The MyCC issued an infringement decision against seven tuition and day-care centre operators for engaging in price fixing, and issued a proposed infringement decision against Dagang Net for abusing its dominant position in the provision of trade facilitation services in Malaysia. The MyCC also announced that it is currently investigating companies allegedly involved in anti-competitive conduct in the markets for tyres, beverages and chicken eggs.
  • Philippines. Of the nine investigations initiated by the PCC, seven are ongoing and two have been closed. It is currently investigating alleged anti-competitive conduct in the markets for rice, energy and fuel as "these basic goods disproportionately harm the poor".
  • Singapore. The CCCS issued two cartel infringement decisions: one in relation to a local cartel involving the sale and distribution of fresh chicken, and another concerning the global cartel involving aluminium electrolytic capacitor manufacturers. Fines totalling around S$ 46.45 million (about €30 million) were imposed for both cases. It also issued a proposed infringement decision against hotel operators for engaging in anti-competitive information sharing, and conditionally cleared a notified joint venture in respect of poultry slaughtering services.

New competition agencies gearing up for enforcement

The Lao Competition Commission and Myanmar Competition Commission were officially established in 2018, while Thailand's new Office of Trade Competition Commission (OTCC) and the Competition Commission of Brunei Darussalam (CCBD) were re-established and formed, respectively in 2017. As younger competition authorities in the ASEAN region have gone to great lengths to ramp up on their technical capacities, we expect them to become increasingly active and sophisticated in their enforcement initiatives.

For example, the OTCC published its first order against a food packing operator entering into anti-competitive agreements and abusing its bargaining power against its supplier, even if it did not impose a financial penalty in this instance. The OTCC also consulted on and issued guidelines which clarify how it will enforce the new Trade Competition Act. In Brunei's case, while the competition provisions in Brunei's Competition Order 2015 have yet to commence, the CCBD has powers to conduct market reviews. The Chairman of the CCBD announced at a recent ASEAN competition law workshop that as the construction sector plays an "important role in the socio-economic development", it is "critical to …. ensure that the business environment in the construction sector is functioning efficiently and free from anti-competitive activity", thereby making clear where the CCBD's initial priorities will lie.

Upcoming legislative changes to enhance the effectiveness of competition enforcement

Upcoming legislative changes will give the competition authorities more teeth in driving their efforts to enforce competition law more effectively, and ultimately lead to more enforcement activities in the region closely aligned to international best practices.

Some of the anticipated legislative changes include the following:

  • Philippines. The PCC is aiming to roll out its Leniency Program in January 2019 which will likely generate leads for cartel investigations. The PCC is also expected to gain dawn raid powers with when its proposed "Rules on Inspection Orders" is endorsed by the Supreme Court.
  • Indonesia. It is widely expected that amendments to the Indonesian Competition Law will be passed in 2019. Key amendments include providing the KPPU with extra-territorial powers to enforce the law against foreign entities whose business activities affect competition in Indonesia, and the introduction of a leniency programme.
  • Vietnam. Vietnam's updated competition law will come into force from 1 July 2019. The updated competition law provides for, amongst other things, extra-territorial application, and will merge the VCCPA with the VCC.

Cooperation arrangements between ASEAN competition authorities to contribute to more enforcement activities

We expect to see greater cooperation between ASEAN competition authorities in 2019, which will in turn generate more leads for competition enforcement. At the regional level, the ASEAN Competition Enforcers’ Network was formed to facilitate cooperation on competition cases and to serve as a platform to better handle cross-border cases in the region. At the bilateral level, the cooperation MoU between Singapore's CCCS and Indonesia's KPPU will lead to greater enforcement cooperation between the two competition authorities, and will become a reference for cooperation between ASEAN competition authorities in the future. For more information, please refer to our earlier article on "Competition Enforcement Cooperation to intensify in ASEAN".

How we can help

Our competition practice boasts extensive enforcement and regulatory experience at the CCCS. Harikumar and Lip Hang share a combined competition law enforcement experience of 16 years at the CCCS. We advise on all aspects of competition law in Singapore, providing specialist competition expertise right from the start, including identifying and dealing with any challenges along the way to minimise potential threats to your business operations. From carrying out initial market analysis to preparing submissions and dealing with the CCCS, we will drive the engagement with the CCCS and other ASEAN authorities in a strategic manner. We also have in-house competition economic expertise and have developed close relationships with specialist economists. In appropriate cases, we will work seamlessly with them to develop your case through dedicated analysis and robust economic evidence. OC Queen Street’s competition practice is part of the Osborne Clarke’s wider international network. Our competition practice understands the ASEAN competition law landscape, while Osborne Clarke’s teams in Europe have the expertise to assist our clients who require advice and representations at the national level or before the European Commission.

We will also continue to monitor enforcement trends through 2019, and will hold special briefings and issue updates to discuss their implications in greater detail.

Please do not hesitate to contact us if you like to discuss how these developments may potentially affect your business operations in Singapore and the wider South East Asia region.