Antitrust in Asia has become a key consideration for international businesses operating in the region, according to Freshfields Bruckhaus Deringer.
Changes in the region’s competition law landscape in the past five years have seen key regional markets entering the realm of enforcement – particularly Hong Kong and a host of ASEAN members – and existing competition regimes being strengthened at an unprecedented pace.
At the same time, enforcement activity has intensified significantly in key markets such as China, Japan and South Korea, with regulators becoming more robust and exploring new targets for future enforcement.
These are among the findings of a new Freshfields publication, Antitrust in Asia: the Business Impact of Fast-Evolving Competition Laws.
“Undeniably, the center of gravity of global competition law enforcement has shifted closer to Asia,” said Alastair Mordaunt, partner and co-head of Freshfields’ Asian antitrust, competition and trade practice. “While there are still huge variations across the region in terms of economic and political development, we are seeing Asian markets take a much more vigorous and sophisticated approach to competition law enforcement, and companies should take notice.”
New enforcers, greater enforcement
In the short time since its competition law came into force, China has established itself as one of the world’s most active competition law regimes, intervening in global transactions and aggressively pursuing infringements by domestic and foreign companies.
Well-established authorities such as the Japan Fair Trade Commission (JFTC) and the Korea Fair Trade Commission (KFTC) have grown increasingly robust. The KFTC imposed total fines of US$760m in 2016, for example – almost double that of the US. In 2017, it imposed a fine of around US$900m on Qualcomm. Singapore and India have also evolved markedly.
In Hong Kong, one of Asia’s youngest competition law regimes, the Competition Commission is proving to be a serious enforcer. In the medium term, a number of highly sophisticated competition authorities will likely emerge in Asia.
Cartels, leniency and whistle-blowers
Cartels remain an enforcement focus in most Asian jurisdictions, including China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia and the Philippines. Indonesia’s KPPU levied a record fine of approximately US$9m in a poultry cartel case in 2017.
Bid-rigging is one of the most commonly targeted types of cartel behavior. Most Asian jurisdictions have adopted leniency programmes, which have proven to be surprisingly effective in obtaining key evidence to combat cartels, particularly in Japan and South Korea.
Targeting new theories and adding new tools
As Asian competition authorities become more sophisticated, they are taking on more complex cases, which in turn require enhanced enforcement powers. A number of them have developed a remarkable enforcement record against non-cartel types of antitrust infringements such as abuse of dominance.
Some regulators have also demonstrated a strong interest in novel antitrust issues involving the digital economy and intellectual property rights. In 2015, China imposed its largest-ever antitrust fine of RMB6.1bn (approximately US$975m) on Qualcomm for abusing its dominance by charging discriminatory royalties for access to certain standard essential patents (among other issues).
More recently, Taiwan fined Qualcomm US$774m in relation to the same issue. Asian competition authorities are also taking on cases involving other complex theories of harm. The JFTC recently took the unprecedented step of challenging Amazon’s ‘most favored nation’ clauses in its agreements with retailers.
Merger control broadening and deepening
Merger control enforcement has become increasingly active in a number of Asian jurisdictions. Of the 1,936 transactions cleared by China’s Ministry of Commerce since 2008, for example, around 70 per cent were reviewed since 2013. Not only are more transactions being reviewed, but the scope of reviews is also broadening: certain Asian regulators have shown willingness to intervene in foreign-to-foreign transactions when their domestic markets or national interests are at stake, sometimes even blocking deals that all other jurisdictions had cleared.
Regulators are also monitoring and getting stricter about late and missed filings. The Taiwan Fair Trade Commission, for example, can now fine companies up to US$1.7 million for a missed filing, while Indonesia’s KPPU has in recent years issued a fine of US$600,000 for a late filing against a non-Indonesian company.
With enforcement becoming more active and more sophisticated, merger control in Asia has become a key consideration for transacting parties around the globe.
Active international co-operation and co-ordination
Co-operation among competition authorities globally has never been as active as it is today, and Asia is no exception. Over the past few years, Asian competition authorities have been engaging in regular bilateral and multilateral meetings with their foreign counterparts both within and beyond Asia, to discuss general issues in competition law as well as specific cases.
As competition authorities in Asia have gained experience, they have become more confident in joining competition authorities in other regions to crack down on multijurisdictional infringements when there is a local connection. Companies can no longer assume that Asian regulators will take a back seat when European or American authorities are involved in a global investigation.
“With competition regimes emerging and strengthening in Asia, companies doing business here will need to invest more resources to ensure compliance with the region’s diverse laws and enforcement practices,” said Kaori Yamada, partner and co-head of Freshfields’ Asia antitrust, competition and trade practice. “Appropriate training, policies, procedures and internal reporting mechanisms can all mitigate the risk of infringement, but in-house legal teams need to keep these under constant review to keep pace with the region’s rapidly evolving landscape.”