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Trans-ASEAN competition regulator remains distant dream but needed to attract investment

2013-07-19 From:Financial Times, July 15, 2013    [Large Medium small]
The Association of Southeast Asian Nations (ASEAN) needs to consider setting up a trans-ASEAN super competition regular to avoid losing foreign investment to China and India, Asian Competition Forum executive director Mark Williams said.

Foreign investors find it more attractive to deal with a single authority than with 10 different ones, Williams told participants at the 3rd ASEAN Competition Conference held in Singapore last week. The event, organised by the Competition Commission of Singapore (CCS), included officials from regulatory bodies across Southeast Asia.

As the ASEAN member states embrace competition law, they face the challenge of having to strike a balance between tailoring the law to meet country-specific needs and ensuring broad regulatory harmony with the rest of the region.

Multinational companies investing in ASEAN member countries find the differing regulatory frameworks confusing, Williams said. For example, the same violation could lead one member state to enforce a criminal penalty and sentence a company executive to jail, while in another country the company might be fined 10% of its total turnover, while yet another country might reward the company under a leniency programme for confessing its anticompetitive behaviour.

“Businesses are waiting to understand what we will do next and what will be our policy direction, especially after 2015,” Muhammad Nawir Messi, chairman of Indonesia’s competition watchdog Komisi Pengawas Persaingan Usaha (KPPU), told PaRR on the sidelines of the conference. Each ASEAN member state has until 2015 to pass a comprehensive competition law.

ASEAN countries need to start exploring a regional common understanding and a way to coordinate their policy in order to provide the right signal to the investing community, Messi said.

Singapore’s Minister for Trade and Industry, Hng Kiang Lim, also pushed for a common ASEAN platform, saying in his keynote address that inconsistency in competition regulations could impose additional costs on international businesses.

The need to comply with different competition laws across the 10 different jurisdictions can be a challenge, Rodyk & Davidson LLP partner Gerald Singham told PaRR.

The European Union may be a good model for ASEAN to follow, as it would prevent uncertainty and discrepancies with the increasing number of cross-border mergers, several practitioners told PaRR.

Under the EU regime, if a merger is significantly large and could affect multiple countries, then the European Commission has jurisdiction to review the deal. However, when the deal is smaller and affects just one country, then it comes under the purview of the individual member state’s competition regulator, Jones Day partner Nick Taylor noted.

However, few practitioners envisage the possibility of ASEAN adopting a super-competition watchdog role within their professional lifetimes. “Each of the member states is at a different stage of development,” Singham said.

Andre Gan, the head of Baker & McKenzie’s Asia Pacific competition practice, told PaRR it will take a big shift in the ASEAN philosophy before all member states give up their individual national competition regulations in favour of a central super-regulator.

“ASEAN is a loose grouping of nations, which have a policy of not intervening in the affairs of other ASEAN member states,” Gan said.

The existence of a trans-ASEAN competition law and regulator would require various compromises, which could at times conflict with national development policies of the member states, Gan said. He said he does not envisage the ASEAN region following the EU in the short- to medium-term.

There is currently no consistency in merger filings, as some states like Malaysia do not even have a merger review process. However, the Malaysia Competition Commission (MyCC) is rethinking to introduce a merger control regime as deal activity in the country has seen a major uptake, chief executive Shila Dorai Raj previously told PaRR.

The introduction of a single merger filing regime across ASEAN states will take a long time, given the lack of consistency on filing thresholds, practitioners and regulators told PaRR.

For example, the Vietnam Competition Authority (VCA) cannot block a merger unless the combined market share exceeds 50%. However, VCA’s deputy head, Chau Giang Pham, told PaRR that the regulator has proposed amendments to the merger review regulations.

Taylor pointed out that even though in the EU there is a central enforcement agency (the European Commission), the EC has left each individual country to decide on its own when deals are below specific thresholds for centralised decision-making. So even in the EU there is no uniformity in merger filing regulations, he noted, citing how the UK has adopted a voluntary merger review regime as opposed to France and Germany, where it is mandatory.

Each ASEAN country has until 2015 to come up with a comprehensive competition law, which should adhere to basic values. Only then will the various member states be able to build linkages between their different national systems, similar to the connections Europe has gradually adopted over the years, Taylor told PaRR. He was previously a senior Asia-focused competition expert with the Organisation for Economic Co-operation and Development (OECD).

ASEAN will have to decide whether or not to set up a single enforcement agency or opt for a standard filing process across all member states, Taylor said. Either way, it cannot do so unless all states decide to include merger review filings and align their thresholds, he added.
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