Competition law and the Asean Economic Community

As the 29th ASEAN Summit in Laos comes to a close, it is worth considering the developmental trends for competition law within the Asean Economic Community.

Back in November 2015 in Kuala Lumpur, the AEC Blueprint 2025 was adopted by the ASEAN member states.  The aims of the Asean Economic Community, or AEC, is based upon economic integration and the creation of a single market; ASEAN aims to attain the characteristics we see in the European Union such as the free movement of goods and people, and the reduction or elimination of import tariffs between member states.

It should be noted that rather than an overnight implementation, the adoption of the AEC Blueprint 2025 represents just another step in the gradual introduction of policies facilitating free trade within member states (the first blueprint was adopted in 2007).  Tariffs within ASEAN member states, for instance, are already at virtually 0%.

Member state leaders converged in Laos on the 6th of September 2016 for the 29th ASEAN Summit. A crucial issue on the table is China’s claim on the South China Sea: Source.

Beyond internal benefits however, the motivation for the AEC also involves pushing ASEAN into the global stage.  While its 10 member states have individually small economies, when combined they represent the 7th largest in the world, and the 3rd largest in Asia, behind only China and India.  By being economically integrated, the argument goes, ASEAN member states may protect themselves from having their individual vulnerabilities exploited, and instead present a single and cohesive voice.

Competition Law and the AEC

One of the pillars of the AEC in achieving economic integration is a competitive, innovative and dynamic ASEAN market.  This necessarily involves a discussion of the member states’ respective competition laws and their interplay with one another.

At present, the state of competition policy in ASEAN remains fragmented and uneven.  Although all member states, save for Cambodia, have implemented a comprehensive statutory framework, for many of them competition law remains a relatively new concept.  Malaysia’s Competition Act 2010, for example, only came into force in 2012, while only a year has passed since the Philippines Competition Act 2015 and the Laos Law on Business Competition were enacted.  Thus, earlier adopters such as Indonesia and Singapore would have a vastly greater experience and knowledge of competition law.

Another issue relates to the differing substance and standards of their respective competition laws.  Market share thresholds, for example, is an important measurement in determining whether or not a breach of competition law has occurred.  In abuse of dominant position cases, the market share indicates whether or not dominance exists.  For agreement cases, much also depends on the market share of those involved.  To illustrate the differences; in Malaysia and Singapore, anti-competitive agreements between competitors with a combined market share of up to 20% will not be pursued.  However, in Indonesia the threshold is stated to be 75%.  We see differences in dominance cases as well, where Malaysia’s MyCC views a 60% market share as indicative of dominance, while Indonesia sets the threshold at 50% (with a higher threshold of 75% where it involves joint dominance).  Another important factor of variation is the procedural aspect of merger control, where different time-lines from notification up till decisions may make or break mergers.  Dominance thresholds are also influential on what is an acceptable post-merger market share.

Beyond adding an extra layer of complexity, the differing competition laws result in an increase in the uncertainty of doing business.  This is due to the possibility of overlapping jurisdictions and conflicting decisions by the member states’ respective competition authorities.  Thus, conduct that is legal in Indonesia due to its higher threshold may be illegal in stricter Singapore and Malaysia.

The future: Harmonisation and Cooperation

Accordingly, there have been calls for the harmonisation of competition law within ASEAN.  However, harmonisation is unlikely to come from the creation of a single competition authority.  Unlike the European Union’s member states, who have all agreed to the primacy of European Union law (and thus its competition law as well), the member states of ASEAN retain more sovereignty over their laws and borders.  A softer approach has been taken by ASEAN member states, by adopting the ASEAN Regional Guidelines on Competition Policy.  The guidelines set out certain standards for competition law and policy, and serves as a reference of best practices which national competition laws should strive to achieve.  Critics of the softer ‘ASEAN way’ argue however that without a more prescriptive set of rules and a binding element the aim of the single market is unlikely to be achieved.

Singapore Trade Minister Lim Hng Kiang urges closer ties between competition authorities
Singapore Trade Minister Lim Hng Kiang urges closer ties between competition authorities: Source.

As we are unlikely to see a supranational authority within ASEAN in the near future, advocates of harmonisation have sought for more dialogue and cooperation between national enforcement agencies.  The aforementioned AEC Blueprint 2025, for example, seeks to establish a regional cooperation agreement between national enforcers to deal with cross-border transactions.  Such an agreement would facilitate the exchange of information and coordination of enforcement against international cartels.  Cooperation agreements, like those between the European Union and United States, also facilitate the avoidance of conflicting decisions by ensuring a clear channel of communication between national enforcers leading up to the final stages of parallel investigations.

While strict harmonisation of competition law within the AEC remains a lofty ideal, it must be kept in mind that these things take time.  In the interim, for competition law practitioners and businesses operating within ASEAN, awareness of the intricacies of the various competition regimes will continue to be a crucial expertise. 

Further reading:

(1) Haniff Ahamat & Nasarudin Abdul Rahman (UIMM)

(2) Luu Huong Ly (NUS)

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Author: Mervyn Lai

Lawyer. Competition Law LLM (Distinction) University of Glasgow.

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