Cross-border anticompetitive practices and global supply

chains: Challenges for developing

countries

Cross-border M&A: WD’s acquisition of Hitachi’s hard disk drive business

Hard-disk drivers Thailand, China

Power supplies China

Memory chips Korea, US

Microprocessor US

Liquid-crystal display Korea,Japan,China

HP’s global sourcing map Post-merger market share

Merger review by jurisdictions

Approval conditional on the divesture of production assets for 3.5 inch HDD (Nov 2011)

53.2

46.8

0

47.2

31.6

21.2

0 20 40 60

WD/ HGST

Seagate

Toshiba

2.5 inch3.5 inch

Main issues in dealing with cross-border M&A

• A cross-border M&A normally engages many jurisdictions.

• When it involves a key component in global supply chains, the effect can easily cover the entire globe.

• Therefore, one of the key issues is how to coordinate merger reviews conducted by different jurisdictions.

• From the perspective of developing countries, a big challenge is how to address their competitive concerns with limited resources and capabilities.

• Risk of non-notification by merging parties – risk being much higher in jurisdictions with voluntary notification system.

• Notification preference for “priority” jurisdictions.

• Timely filing of the transaction and respect for local legislation in mergers between foreign companies.

Notification

Challenges faced by developing countries

• Challenges for small economies like Singapore in mergers between large foreign firms:

• Submission of notifications based on data filed to other jurisdictions.

• Difficulty in distinguishing the specific effects of the merger in the country concerned when merging parties are involved in a wide range of activities globally.

Notification

Challenges faced by developing countries

• Difficulties in collecting information, questionnaire distribution and gathering

• Language of communication and data

Access to information

Challenges faced by developing countries

Remedies

• Difficulty in enforcing and monitoring remedies.

• Differences in approaches of competition authorities to remedies – these do not block the merger.

A way forward

• Young competition agencies must first strengthen their capacities by dealing with domestic mergers, from which they could gain experience.

• Given their limited resources, young competition authorities need to give priority to those international mergers which significantly affect their market.

• Promote formal cooperation (Bilateral/regional cooperation agreements).

• Informal cooperation is important and seems to work well.

Suppliers of the Specified CRTs Customers of the Specified CRTs

Japanese manufacturers Japanese manufacturers of CRT televisionsof CRT televisions

５５ parent companies etcparent companies etc.. out of the 11 companiesout of the 11 companies（（ located in located in Japan, Korea, Chinese Taipei etc.. ） ）

Overseas Manufacturing Subsidiaries etc.Overseas Manufacturing Subsidiaries etc.（（ substantial production bases of CRT

televisions in the Southeast Asian Region ））

６６ subsidiaries etc. out of thesubsidiaries etc. out of the 11 companies11 companies（（ substantial production bases of CRTs

in the Southeast Asian Region ))

① At “CRT Meetings”,jointly setting the minimum target prices

etc. of the Specified CRTs

④ Selling the Specified CRTs in accordance with ③ （（ Note ２））

② Negotiating and determining prices etc. of the Specified CRTs in

accordance with ① （（ Note １））

③ Giving instructions to sell the Specified CRTs in accordance with the determined prices in the negotiation of ②

⑤ Selling almost all the CRT televisions

ThailandPhilippinesViet NamIndonesiaSingapore Malaysia

Giving instructions to purchase the Specified CRTs in accordance with the determined prices in the negotiation of ②

International cartel cases

Main issues in dealing with international cartels

• The last two decades have seen a great success in prosecution of international cartels by the US and the EU.

• However, there has been little enforcement activity on the part of developing countries,

- even though international cartels also affect developing countries.

• International cartelists are usually MNCs located in developed countries, which creates huge problems in obtaining evidence.

• International cartelists make strategic choices of leniency applications.

• Even in follow-on investigations, no leniency applications were filed (Korea).

No leniency

Application

• Cartels come to their attention only after other’s enforcement

• Informal information by the US helped it to decide whether to launch an investigation (Brazil)

Initiation of

Investigation

Challenges faced by developing countries

• In many cases, there is no branch or subsidiary in developing countries.

• In response to investigations, one of cartelists closed its office (Turkey)

No physical presence

• Official decisions open to the public do not contain material information due to confidential concerns.

• KFTC benefited from US court decisions in its early case (Korea)

Material

evidence from others

Challenges faced by developing countries

• Where it has a certain legal effect, it could be a serious issue.

• An option is to have a formal help from foreign authorities (Chile).

Service of document

• When the period has passed, no legal action can be taken.

• So the case could collapse or end without fines (Japan)

Period of exclusion

Challenges faced by developing countries

A way forward

• A jurisdiction cannot entirely rely on others’ enforcement.

• Given its scarce resource, a young authority needs to focus on international cartels which create specific harm to its market.

• The first priority is to establish an effective leniency program.

• A young authority must step up its enforcement efforts against domestic cartels, from which they could build up reputations and capabilities.

• Informal cooperation should not be underestimated. An idea is to set up an intelligence network based on what is already available.

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