International Issues Related to UTPs Research Project on Unfair Trade Practices in Select ASEAN Economies First Policy Dialogue Ho Chi Minh City, 12 th September 2012 Douglas H. Brooks Asian Development Bank

Outline UTPs from an international perspective Multilateral Competition Law? Competition Policy and the ASEAN Economic Community

UTPs from an international perspective

Why an international approach to competition is needed… Increased international trade – Not only in goods, but also in services FDI and MNCs Global production networks Further development of competition policies in most countries Note: Figures are average of exports and imports Source: World Development Indicators Online, accessed 23 August 2012

These trends are likely to continue and will lead to conflicts Extraterritoriality and Jurisdiction Consistency of rules Monitoring

Multilateral Competition Law?

Currently, only certain UTPs affecting international trade in goods are governed by multilateral agreements Agreement on Anti Dumping Measures Basically dumping occurs when: P e <P n Agreement on Subsidies and Countervailing Measures o Directly affecting competing industries in the importing country o Other suppliers are effectively crowded out of the country providing subsidies to particular industries o When subsidized goods prevent the entry of other suppliers from accessing markets where subsidized goods are exported

A multilateral competition agreement was attempted (under the Singapore issues in 1996) 1.A commitment to adhere to a set of core principles (transparency, non-discrimination, procedural fairness) in the application of competition law 2.A commitment to enact and enforce a law against hard-core cartels 3.The development of modalities for voluntary coopertation on competition law and policy matters 4.A commitment to support the introduction and strengthening of competition laws and related institutions in developing countries

But this did not succeed… Evenett (2007) Policy space Wrong proponents Single undertaking

Nontheless, efforts towards convergence continue EU and US convergence … ConvergenceSubstantive Differences Objective of competition policy – benefit consumers; protect competition, not competitors Abuse of dominance – excessive pricing prohibition (US intevene significantly less) Cartels as most serious form anti-competitive behavior Evidence – effects oriented in US vs category based assessment in EU Horizontal mergers – high evidentiary standards that mergers will lead to anti-competitive effects Vertical contractual restraints – rule of reason analysis in US vs per se condemnation in EU (ex. Minimum resale price) State intervention – can lead to anti-competitive environment (but stronger legal platform in EU) Definition of dominance – lower bound of 40% market share in EU; shares below 50% inadequate to establish market power in the US Non-horizontal mergers – intervention in conglomerate and vertical transactions in the EU Source: Kovacic (2008)

Convergence is also facilitated through other avenues International Competition Network (ICN) Competition committee of the OECD Regional collaborations – ASEAN, Andean Pact, CARICOM, COMESA Non-government networks, professional associations, academic organizations CUTS

Competition Policy and the ASEAN Economic Community

Competition policy is an important aspect towards the realization of the AEC 2 nd part of the ASEAN economic blueprint aims for a competitive economic region “characterized by sound competition policy, consumer protection…” 1.Members introduce competition policy by Establish network of authorities for coordination and discussions 3.Capacity building for members 4.Regional guideline on competition

But coverage, scope and implementation of ASEAN countries of national competition policy & law vary Competition IssueIndonesiaSingaporeThailandViet Nam Exemptions from National Competition Law Improving production or distribution XXX Promoting technical or economic progress XXX Promoting exports or competitiveness of domestic firms XX Cooperatives X Farmer cooperatives XX State enterprises XX IPR related X International contracts ratified by government XX Safeguard foreign trade and cooperation XX Franchise contracts X Source: Pupphavesa et al, in Plummer and Chia (2009)

Prohibited Horizontal Agreements in National Competition Policy and Law Competition IssueIndonesiaSingaporeThailandViet Nam Prohibited Agreement/Conduct Price Fixing XXXX Production restriction XXXX Sale restriction XXXX Bid rigging XXX Exclusive geographic areas XXXX Quality reduction X Exclusive dealership X Market control XXX Technical development restriction XX Investment restriction XX Dissimilar conditions to different parties XX Obligation irrelevant to contract subject XXX Boycotting XX Source: Pupphavesa et al, in Plummer and Chia (2009)

Prohibited Misuse of Market Power in National Competition Policy and Laws Competition IssueIndonesiaSingaporeThailandViet Nam Prohibited Conduct Predatory pricing XXX Price fixing X Production restriction XXX Market restriction XXXX Distribution restriction XX Technical development restriction XXX Dissimilar conditions to different parties XX Obligation irrelevant to contract subject XX Preventing entry XX Source: Pupphavesa et al, in Plummer and Chia (2009)

Competition policies are relatively recent developments for most ASEAN countries … and governments have had rudimentary and limited experience in handling competition issues, especially of cross boundary nature …as an organization, ASEAN has yet to have an institutionalized arrangement for cooperative work on competition policies and laws (Pupphavesa et al. 2009)

Established practice and policies are still at initial stages Jurisprudence Consolidation American vs European model Challenging, but late comer advantage

19 ASEAN countries, individually and collectively must strive to answer some key questions… Which types of anti-competitive practices should be included in national /regional competition law? Is there a case for a phased introduction over time of measures against different types of potentially anti-competitive practice ? The pros and cons of giving the agency in charge of enforcing measures against potentially anti-competitive practices responsibilities for: (i) undertaking competition advocacy, (ii) enforcing consumer protection law, (iii) enforcing laws against economic concentrations, and (iv) other economic laws. What are the criteria in determining which corporate or state practices should be overseen by competition law. Possible suggestion: potential for anti-competitive impact, prevalence, and pre-requisites for effective enforcement

The gains from an effective and harmonized ASEAN competition policy are considerable Efficiency gains Boost international trade and investments Consumer protection Institutional reform Growth (Pupphavesa et al 2009; Dutz & Hayri 2000)

Summary Competition policies must be developed and implemented with international developments in mind Convergence of national competition policies are needed if the growth benefits of trade are to be sustained ASEAN countries are beginning to consolidate their competition policies The region has less experience with implemention but has a late comer advantage Considerable gains are to be had from improved competition environment in the region

Thank you