International Issues Related to UTPs
Research Project on Unfair Trade Practices in Select ASEAN Economies
First Policy DialogueHo Chi Minh City, 12th 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: Pe<Pn
• Agreement on Subsidies and Countervailing Measures o Directly affecting competing industries in the
importing countryo Other suppliers are effectively crowded out of the
country providing subsidies to particular industrieso 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 continueEU and US convergence …
Convergence Substantive 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
2nd 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 20152. Establish network of authorities for coordination and
discussions 3. Capacity building for members4. Regional guideline on competition
But coverage, scope and implementation of ASEAN countries of national competition policy & law vary
Competition Issue Indonesia Singapore Thailand Viet Nam
Exemptions from National Competition Law
Improving production or distribution X X X
Promoting technical or economic progress X X X
Promoting exports or competitiveness of domestic firms X X
Cooperatives X
Farmer cooperatives X X
State enterprises X X
IPR related X
International contracts ratified by government X X
Safeguard foreign trade and cooperation X X
Franchise contracts X
Source: Pupphavesa et al, in Plummer and Chia (2009)
Prohibited Horizontal Agreements in National Competition Policy and Law
Competition Issue Indonesia Singapore Thailand Viet Nam
Prohibited Agreement/Conduct
Price Fixing X X X X
Production restriction X X X X
Sale restriction X X X X
Bid rigging X X X
Exclusive geographic areas X X X X
Quality reduction X
Exclusive dealership X
Market control X X X
Technical development restriction X X
Investment restriction X X
Dissimilar conditions to different parties X X
Obligation irrelevant to contract subject X X X
Boycotting X X
Source: Pupphavesa et al, in Plummer and Chia (2009)
Prohibited Misuse of Market Power in National Competition Policy and Laws
Competition Issue Indonesia Singapore Thailand Viet Nam
Prohibited Conduct
Predatory pricing X X X
Price fixing X
Production restriction X X X
Market restriction X X X X
Distribution restriction X X
Technical development restriction X X X
Dissimilar conditions to different parties X X
Obligation irrelevant to contract subject X X
Preventing entry X X
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
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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