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Overview of Competition Law & Related Issues: Some ASIAN Jurisdictions
Overview of Competition Law & Related Issues: Some ASIAN Jurisdictions
lower prices, better quality Conducive to economic and political democracy Apprehension of market failure has prompted 100 countries to enact modern competition laws
Competition Law
Main features of Competition Act
Prohibits Anti-Competitive Agreements Prohibits Abuse of Dominant Position Provides for Regulation of Combinations
fixing, limiting production, sharing markets, bid-rigging Vertical Agreements e.g., tie-in, exclusive supply/ distribution, refusal to deal Cartel regarded most pernicious violation - heavy penalties - criminal offence (lysine, vitamins, graphite
electrodes)
Abuse of dominance
Not dominance, but abuse is illegal Dominance based, not on arithmetical formula,
but on economic factors listed in Acts Abuse includes : discriminatory pricing, limiting production, denying access Examples : Microsoft (penalized Euro 497m)
Mergers
Ex-post action
prohibited worldwide
soon Japan and Korea are leading Competition Authorities of Asia closely followed by Israel, Indonesia, India and Taiwan
Azerbaijan India Indonesia Israel Japan Korea Singapore Sri Lanka Taiwan Bangladesh* Pakistan* Thailand * Not modern Competition Law but MRTP Ordinance of 1970
Brunei Darussalam
China Hong Kong Vietnam
Japan
Assures the interest of consumers
the nation Promote free and fair competition Prohibit cartel Prohibit private monopolization Prohibition of unfair trade practices
Japan (contd. )
Independent of Cabinet
by the Prime Minister with the consent of both Houses of the Parliament JFTC is under the supervision of Diet Total staff 672 Number of Investigators 331 Budget in Billion Yen 7.82 (2004)
Japan (contd. )
Independent Administrative Agency
enacting internal regulations Has quasi-judicial power of implementing hearing procedures [Identical to Indian Law section 7(2), 50, 51, 64 and Chapter IV]
Japan (contd. )
Cartels
JFTC implemented cartel investigation as a result of that from 1079 cases in 1966 it has dropped to 15 in 2000 Detection by FTC Investigation commences Decision at JFTC after investigation Appeal by way of Law suits
Japan (contd. )
Merger Control Mergers are regulated by Antimonopoly Act of Japan (AMA) Threshold one partys assets/turnover of at least US $ 91.6 million and the other partys assets/turnover about US $ 9.2 million in Japan Notification is mandatory when thresholds are exceeded all parties to notify jointly
Japan (contd. )
Merger Control Time taken by JFTC 30 days During merger evaluation, the JFTC may conduct hearing with competitors JFTC may prohibit a merger, allow or modify Appeal lies within 30 days to Tokyo High Court Penalties up to US $ 18,313 and in breach in addition to penalty jail term up to 10 years
Japan (contd. )
Joint ventures
Under Anti Monopoly Act, the founding of a separate joint venture company is evaluated under the 2004 Merger Guidelines
Korea
To promote fair and free competition, to protect
consumers, to prevent abuse of market-dominating positions by enterprises and excess concentration of economic power Has all contours of modern Competition Law Has Chairman, Vice Chairman and Secretary General, 3 Standing Commissioners, 4 Non-standing Commissioners [ Article 37 ]
Korea (contd.)
KFTC is Ministerial level Central
Administrative Organization Quasi-judicial body functions under the authority of the Prime Minister Independent of outside intervention Promoting competition Strengthening consumer rights
Korea (contd.)
Case handling in two stages Examination Deliberation Examination Receipt a report of violation of the law Competition Bureau or Regional Office launches examination Includes investigation, taking statements of relevant parties, consultation with experts and conducting legal reviews
Korea (contd.)
Opportunities are given to parties to voice view points Confidentiality is maintained If legal measures are decided to be taken examiner makes a report and copy of the same is sent to the examinee (opposite party) for objections/comments Examiner sends his/her report together with the objections & comments of the examinee to the Commissioner
Korea (contd.)
Deliberations
Commissioner reviews the report and the objections of the examinee Examinee is notified of the date, hour, venue of the legal proceedings Process involves review of investigation, findings
Examiners statement Examinees statement Investigation in to evidence Examiners final opinion Examinees final statement
Korea (contd.)
Final Order passed by the Commission
Court
Korea (contd.)
Recent decision on Cartel On 25 May 2005 KFTC imposed a corrective order of approx. 114 million US$ as surcharge on three telecom operators KT, Hanaro Telecom and Dacom - for fixing price in local call market Hanaro received a 49% reduction in its surcharge for providing co-operation in cartel investigation
Israel
The Israeli Antitrust Authority
Headed by Controller
Appointed by the Government on the
recommendation of the Israeli Minister of Trade and Industry Comprises a Legal Department, Economic Department and Criminal Investigation Department It has broad powers to initiate and conduct criminal investigations of alleged violations of the RTPs, as well as to initiate administrative inquires Tribunal acts a Court of Appeal
RTP All mergers are notified and are reviewed by the Authority Thresholds Notifications are mandatory
globally barred from closing or implementing the merger until approval is obtained from the Authority Timetable Authority must review merger notifications within 30 days, commencing from the date of receipt by Authority; failure to do so will constitute approval of the merger notification
Criminal proceedings before District Courts Authority can initiate proceedings before Competition Tribunal for de-merger Aggrieved party may file appeal before Tribunal Tribunal may uphold the findings of the Authority, modify or set aside Appeal from Tribunal is available before the Supreme Court
Failure to notify, delay in notifying or failure to observe condition constitutes a criminal offence Three years imprisonment may become five years in case aggravating circumstances Fine up to about US$ 443,312 for an individual and double for a body corporate
Leniency Programme
Section 46 of the Indian Law
investigation KFTC reduced surcharge to the tune of 49% in case shown in the previous slide is an act of leniency Cartels are secret understanding between and among competitors in the same level of business to fix price and make unlawful profits Japan is considering leniency up to 100% [new amendment proposals of 2004]
Leniency concept
Indian Evidence Act, 1872
accused, corroboration with material particulars in criminal cases Pardon granted to such co-accused or accomplice by courts Same principle applies in case of leniency towards co-accused in cartels
Indian Competition Act, 2002 at paragraph 3 states that the Commission will be a quasijudicial body Japanese and Korean Commissions are also quasi-judicial bodies
1 2 3 4
Supreme Court of India in AIR (37) 1950 SC 185 at page 195 para 25 observed as to what constitutes a quasi-judicial body The Court held
Existing disputes between parties and presentation of the same If dispute is a question of fact, ascertainment of fact by evidence/arguments If dispute is of law then submission of legal arguments by parties Decision on the dispute on the basis of facts, evidence and law of the land
reference, information etc. of a violation of some provisions of the Competition Act It immediately gives rise to a dispute between parties Parties submit respective facts in support of their contentions with supportive evidences Commission weighs facts, evidences and decides disputes The two basic ingredients, as decided by Supreme Court of India in 1950, are fulfilled
implementing co-operation agreements/arrangements Exchange of concepts for minimizing cross border violations e.g. international cartels
and tools, accounting methods, legal principles Japanese Competition Authority had over 1000 professional manpower in 2004 Associations of Indian Chambers of Commerce and Industry emphatically stress professional manpower for the Indian Competition Authority
Funding of Commissions
Mostly through governments May affect autonomy and independents If affects, contradicts one of the basic
UCAR International Inc in 1995 took part in international price fixing conspiracy. Graphite Electrodes are used in manufacturing of steel. A federal jury of the Philadelphia convicted the Company and paid fine of US$ 110 mn after being pleaded guilty of price fixing
All important Lysine producers of the world doubled the international price of Lysine for three years. Lysine is a feed additive for poultry. During the continuance of the conspiracy, the cartel raised prices on over US $ 1.4 bn in global sales, which implied overcharging of US $ 140 mn
Hoffmann-La Roche & Lonza AG, BASF, DegussaHuls Agand Merck KGAA of Germany and RhonePoulenc of France led a global conspiracy to fix price of vitamins, allocate markets, supply contracts and sales apart from bid-rigging on several occasions. Majority colluding firms admitted the conspiracy. Roche agreed to pay US$ 500mn. Five executives of Lonza agreed to cooperate in the investigation and paid fine of US$ 10.5 mn. BASF paid a fine of US $ 225 mn but Rhone-Poulenc through leniency programme escaped punishment because it supplied most of the evidence
Important Observations
Accountants have a very significant and
major role in investigation Under Indian Law they have been statutorily allowed to present cases before Commission Their association, in a given case, would not end at the level of Commission but would continue till finally disposed of at the level of Appellate Court Accountants are eligible to become Members too a challenging career opportunity
Thank you
cci-manas@nic.in