The Harmonisation
of ASEAN
Competition Laws and Policy from an Economic Integration Perspective
By
Dr. Lawan Thanadsillapakul
III.
- SURVEY OF ASEAN LAWS RELATING TO UNFAIR COMPETITION
1.
Overview
Currently,
only Indonesia and Thailand have a systematic set of competition laws
and policies. Other ASEAN countries apply particular elements of anti-trust
law or anti-monopoly laws. This section surveys, country by country,
ASEAN laws relating to unfair competition and analyses whether those
laws are effectively enforced to control anti-competitive business practices.
· Brunei Darussalam has no specific legislation pertaining
to the regulation of all aspects of competition. However, the economy
is open and market-oriented and efforts are being made to increase competition,
in accordance with the domestic situation and WTO commitments. These
efforts include deregulation and corporation as well as privatisation.
Brunei reviews the regulatory frameworks governing individual industrial
sector on an on-going basis, with a view to boosting overall economic
competitiveness. It is currently elaborating and developing its competition
law. As the representative of Brunei put it, there is no "one size
fits all" solution in competition systems. Brunei is considering
whether a comprehensive single regulatory body or sectoral regulations
best fit the country's economic structure, and how properly to implement
the competition rules from grassroots up.
·
Cambodia likewise does not have a fully-fledged competition
law. However, the Royal Government of Cambodia Policy promotes fair
competition. For example, the law on marks, trade names and acts of
unfair competition contains a section prohibiting unfair competition
in this area. Article 56 of the Constitution of Cambodia, which was
adopted in 1993, stipulates that Cambodia shall adopt the market economy
system, and the preparation and process of this economic system shall
be determined by the law. (17)
·
In Indonesia, before 1999, there were no laws relating to unfair
competition, monopoly formation or passing-off which may affect rights
in relation to industrial property in this country (probably a legacy
of the Soeharto regime during which the almost all business was controlled
and owned by the Soeharto family). Unfair competition was only dealt
with in Article 1365 of the Civil Code, which provided that offenders
whose conduct injured other people were obliged to pay compensation
and, under Article 382bis of the Criminal Code:
... "Anyone who deceives the public or someone else with a purpose
to obtain, maintain or add to his own benefit or that of his or another
person's company, will be punished because of his unfair competition,
with imprisonment for a maximum 16 months or fine of a maximum nine
hundred rupiahs, if such acts injure his competitors or another competitor
who competes with his competitor".
However,
a fine of 900 rupiahs (approximately US$ 0.11 was plainly ineffective
when applied to a dominant company, nor was the penalty of 16 months
imprisonment appropriate or realistic. In addition, the Civil Code failed
to give a clear definition of the compensation and the offending companies
would find it easy by exercising their powerful influence on the courts
concerned to get away with a minimum amount.
On
5 March 1999, Indonesia enacted Law No. 5 of 1999 (18) concerning the Prohibition of Monopolistic Practice and Unfair Business
Competition, which has been effective since 5 September 2000. The substantive
aspects of the law prohibit certain agreements, activities and abuse
of a dominant position. Agreements thus prohibited include oligopoly,
price fixing, price discrimination, predatory pricing, resale price
maintenance, market division, group boycotts, cartels trusts oligopoly,
vertical integration, exclusive dealing concerning re-supply, tying,
reciprocal dealing, exclusive dealing, and agreements with foreign parties
that may result in monopolistic practices and unfair business competition.
Activities that are prohibited include monopoly, market control, predatory
pricing, determining production and other costs, conspiracy to rig bids,
obtaining competitor's business secrets and impeding production and
marketing of competitors' products. The law also prohibits abuse of
a dominant position, interlocking boards of directors, cross-share holding
and mergers, consolidation and acquisition that may result in monopolistic
practices or unfair business competition.
None
of the provisions on mergers, consolidations and acquisitions have so
far been implemented because the regulations required by the Act have
not yet been formulated. (19) In addition, the determination
of restrictive business practices that may result in monopolistic practices
and unfair business competition, being based on market structure, certain
practices that might be legal in an non-concentrated market are likely
to be pronounced illegal in a concentrated market where it is easier
for business firms to exercise market power.
Law
No. 5 provides exemptions for activities and agreements intended to
implement applicable laws and regulations, agreements relating to intellectual
property rights, standard setting, joint ventures for research and development,
international agreements ratified by the government, export agreements,
activities of small-scale enterprises and activities of co-operatives
aimed at serving their members. Also products or services produced or
carried out by companies or government-appointed actors such as State-owned
companies or similar institutions, and public products or services produced
or rendered by actors approved by the law will be exempt from the application
of Law No. 5.
The
Law is enforced by the Commission for the Supervision of Business Competition,(20) an independent organisation free from Government influence or that of
other parties. However, there are some "loopholes" in the
Law that need to be closed. For example, State-owned companies or institutions
are exempt from the law, likewise business approved by the law. Such
exemption may be approved at the discretion of the official authority.
State-owned companies may become involved in anti-competitive business
transactions since they do not come within the law.
·
Again, Laos has no comprehensive competition policy or specific competition
law and lacks the authorities to give specific attention to ensuring
fair competition.(21) The country has been engaged
upon a substantial transition from a centrally-planned to a market-oriented
economy since 1986, and a privatisation policy and relevant liberalisation
programme have been introduced in this connection, the results of which
are claimed by the Laotian government to have been satisfactory to some
extent.(22) However, Laos still maintains price surveillance
of some strategic products such as food and fuel.
Currently,
Laos is in the process of elaborating and developing its competition
law and policy. The government is preparing a Decree on Anti-Monopoly
and Competition Policy.(23) However, competition law
and policy are a rather complex issue and Laos faces the fundamental
problems of weak institutions, lack of experience and no competition
culture.
·
Malaysia has no specific law against unfair trading practices. There
are piecemeal provisions contained in particular statutes such as the
Hire Purchase Act 1967, the Price Control Act 1946, and the Control
of Supply Act 1961 that give consumers some limited protection in specific
situations or transactions. In particular, Section 28 of the Malaysian
Contract Act 1950 renders void all covenants in restraint of trade.
However, there are no criteria by which to judge whether the covenants
in question are reasonable, or if they are harsh or onerous or too wide.
Apart from the above restriction, there are no controls or regulations
referring to contracts on exclusive dealing, monopolisation, and franchises
or resale price maintenance. Where mergers are concerned, there are
various requirements to be complied with in take-overs and mergers,
but these relate to the regulation of the shareholdings of corporations
in Malaysia. Section 179 of the Companies Act 1965 prescribes a Panel
on Take-overs and Mergers to provide guidelines on the acquisition,
take-over and merger of companies. There is no significant imposition
of fines or punishment for firms engaging in unfair competition. Contracts
involving such conduct, insofar as they do not infringe any of the specific
laws mentioned, are valid and enforceable.
Part
4
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(17) Reported by Mr. PICH RITHI,
Deputy Director-General, Ministry of Commerce, the representative of
Cambodia to ASEAN in the ASEAN Conference on Competition Law and Policy
held on 5-7 March 2003, at Bali, Indonesia on the topic of "Competition
Awareness and Attitude in Cambodia".
(18)
Law of the Republic of Indonesia No. 5/1999 dated March 5, 1999: Prohibition
against Monopolistic Practices and Unfair Business Competition. The
objectives of the law focus on: safeguarding the public interest and
increasing the national economic efficiency as a means of increasing
public welfare; establishing a conducive business climate through the
arrangement of fair business competition, thus guaranteeing the certainty
of equal business opportunities for large, middle, and small business
actors in Indonesia; preventing monopolistic practices and unfair competition;
and promoting effectiveness and efficiency in business activities.
(19) Law No. 5 of 1999 requires that bans on mergers
and acquisitions take effect only after implementing regulations have
been issued.
(20)
The Commission was set up by the Law No. 5, Articles 30-37, Chapter
VI. Its functions are to supervise business actors in conducting their
business activities and to execute the law.
(21)
Reported by Mr NOKHAM RATTANAVONG, Acting Director General of Economic
Research Institute for trade. Ministry of Commerce, Laos PDR.
(22)
There is evidence that of 777 registered companies in the Laos PDR,
only 7% were State-owned enterprises. Also in September 1995, the Laos
PDR adopted a managed floating exchange rate system. In turn, the market
could set the prices for most products.
(23)
The draft Decree prohibited unfair competition and restrictive business
practices that included (a) discriminatory pricing, (b) fixing compulsory
conditions, directly or indirectly, requiring other business operators
who are customers to restrict services, production, purchase or distribution
of goods, or restricting opportunities in selling or purchasing goods,
receiving or providing services, or obtaining credits from other business
operators, (c) suspending, reducing or restricting services, production,
purchase, distribution, deliveries or importation without justifiable
reasons, or destroying or causing damage to goods in order to reduce
volume to below market demand levels, (d) intervening in the operation
of business of other persons without justifiable reasons. The draft
decree also prohibited monopoly, collusion, bid rigging, abuse of market
domination, and other practices reducing competition, or restriction
of competition.
