Competition
Law, Part 10
In
fact, ASEAN countries have been aware of this sensitive issue and have
already promoted the small and medium firms in the region preparing them
to be ready in competing with extra-ASEAN firms. See Joint Statement on
East Asia Co-operation, 28 November 1999, Manila, The Philippines. Also
each individual ASEAN country has set up Small and Medium Firm Networks
to promote and strengthen S&M enterprises, for example, Malaysia set up
the Small and Medium Industry Development Office, The Philippines set
up the Bureau of Small and Medium Business Development to help promote
S&M enterprises. See Muchlinski, P. T. “A Case of Czech Beer: Competition
and Competitiveness in the Transitional Economies” (1996) The Modern Law
Review. Vol. 59: 5 (September), pp. 658-675. The dispute was settled by
the agreement of 4 September 1911, whereby the US brewer was granted exclusive
use of “Budweiser” name in North America, while the Czech brewer was granted
the name for the rest of the world. But it did not confer any right or
imposed any restrictions on any part with the regard to the use of the
name in Europe, nor did it prevent any party from establishing an exclusive
right to use the Busweiser trade name as part of its trading style in
any European country. The Czech Republic has become a party to an EU Europe
Agreement (EA), which entered into forced on 1 February 1995 to ensure
greater convergence between EU economic laws and the national law of the
non-EU contracting states, as a precondition for any future application
for membership. Muchlinski argued that “Maximum foreign shareholding limits
in national laws have tended to be relaxed. The most promising avenue
for regulation in competition law, in that a level of foreign ownership
that may create an anti-competitive concentration can be legitimately
challenged without upsetting the logic of free market policies. See Muchlinski
(1996: 59). For instance, the issue can be brought to the Regional Merger
Task Force, within the spirit of the Regional Merger Regulation, consumer
groups can request that the Task Force review a concentration combination
of a sound ASEAN legal and economic systems can be viewed as favourable
created factor endowments (18) that can
affect ASEAN’s competitiveness positively in the international trade and
investment sphere.
1.4
The Bases of ASEAN Regional Competition Law
In
the modern globally integrated world economy it is not only private enterprises
but also governments that engage in competition (Porter, 1990). In ASEAN
countries in particular they have widely implemented strategic policies
in the trade and investment sphere. In this respect, government plays
an important role, as Petersman (1993: 35) pointed out:
"By
means of industrial policies aimed at enhancing economies of scale
and positive externalities of national industries, strategic trade
policies aimed at shifting rents away from foreign to domestic industries,
or by means of investment policies designed to attract scarce foreign
capital through tax incentives and favourable investment conditions."
Therefore
markets are imperfect in many ways. Two different kinds of competition
laws are thus required. The one is competition law for private restraints
of competition and market failures, which are abuses of market power,
externalities and asymmetries in information. The second is competition
law for governments so as to limit government failures, which may affect
the supply of public goods and created endowments/comparative advantages.
Fair
competition should aim to protect less-organised firms, such as small
and medium firms, in entering the market while protecting public interest
and consumers in a liberal economy. Competition rules may need to be evaluated
to determine how far or to what extent competition rules should regulate
the behaviour of firms. For instance, in some business areas merged lines
of business or operators might provide more adequate and effective operation,
more varieties of products, more available services, including advanced
research and technological development that individual separate smaller
firms/operators are unable to undertake(19).
Therefore there is a concern that competition rules may be applied so
as to protect smaller firms at the expense of larger, irrespective of
efficiency. It is a very difficult decision whether collaboration or competition
in a particular market leads to a better use of resources. While competition
is desirable in lessening economic power, businessmen believe that in
some industries resources are put to better use if competition is limited.
Therefore collaboration or natural monopolies may sometimes occur responding
to the achievement of economies of scale. For instance, if a firm has
merely expanded its plant in good time to meet an expected increase in
demand, so that it is unprofitable for other firms to enter the industry,
there is no objection to its monopoly (Korah, 1968: 64)(20).
Many markets can be supplied only after considerable capital investment
is made or technology developed.
On
the other hand, if capital requirements are a hindrance to the entry of
small and medium firms into the market and one goal of competition is
to enable small firms to compete in the market, then entry barriers exist
on the ground of financial constraint. Hence there are not barriers to
the entry of an equally efficient firm in this case where a huge investment
is required, but obviously small and medium firms are unable to compete
with bigger firms. Is this regarded as unfair competition? Therefore the
evaluation of whether there is unfair competition requires the consideration
of the public good: an enhanced distribution system, provision of goods
and services, reduced cost of operation, a technological lead or reduced
capital requirements of those fields of business considered. It is noted
that a small firm protected only for such reasons is not in a position
to hold its customers or suppliers to ransom except in the short term
(Korah, 1997a).
Part
11
________________________________________________________
(18)
International competition among firms is influenced not only by "natural"
production factor endowments, but also by government-determined conditions
of competition as discussed the "created" and "natural"
endowments.
(19)
For instance if a single plant or a merged enterprise that can process
all the spent nuclear fuel in the region substantially more cheaply than
could smaller plants, it would be unprofitable for a second firm to establish
a smaller plant. Also see the fact in KEWA (1976) Cc.M.L.R.D15.
(20)
Korah, 1968: 64, she also concluded that "it is so much cheaper to
produce a product in a large plant that can be continuously used than
in many smaller ones, that one or two plants of the minimum. |