Reaching milestones: ASEAN competition law developments in 2022

August 2022  |  SPECIAL REPORT: COMPETITION & ANTITRUST

Financier Worldwide Magazine

August 2022 Issue

This article, which serves as a quick update on competition law developments in the Association of Southeast Asian Nations (ASEAN) region, discuses two key significant developments: the proposed revision of the Malaysian Competition Act 2010 to, among other things, include a merger control regime, and Cambodia’s enactment of its competition legislation.

Malaysia

In April 2022, the Malaysia Competition Commission (MyCC) announced wide-ranging proposals to amend the Malaysian Competition Act 2010. Expected to come into force in October 2023, the amendments would, if the bill passes, introduce a long-awaited general merger control regime to one of the largest economies in the ASEAN region. The MyCC has only recently concluded its public consultation on the proposed changes to the Competition Act 2010.

Although sectoral regulators such as the Malaysian Aviation Commission and the Malaysian Energy Commission can already challenge industry mergers, Malaysia’s general antitrust enforcer does not have the power to do so under the Competition Act 2010.

If passed by the legislature, the MyCC’s latest proposals will implement a hybrid merger control notification regime with both mandatory and voluntary aspects. In most jurisdictions, notifications are purely mandatory — parties are required to notify mergers that exceed certain market share thresholds and seek prior approval for the transaction. In voluntary jurisdictions, including Australia, neighbouring Singapore, and the UK, merger parties can notify potentially anticompetitive mergers but there is no penalty if they fail to do so — however, fines and directions, including unwinding orders, may be imposed on the merger parties if an implemented merger is subsequently determined to be anticompetitive.

Malaysia’s hybrid system would not only mandate that merging parties who exceed market share thresholds notify their transactions for approval, but also simultaneously allow mergers that fall below those thresholds, which have the potential to substantially lessen competition in any market in Malaysia, to be notified voluntarily for clearance. Practically-speaking, merger parties would have to conduct two self-assessments: an assessment to ascertain if the mandatory notification thresholds are crossed, and a competitive assessment to ascertain if the merger would lead to a substantial lessening of competition in Malaysia. This may lead to increased compliance costs to businesses, as well as commercial uncertainty if a limit on the MyCC’s powers to review completed mergers is not introduced.

That said, it is encouraging to see that the merger notification assessment timelines proposed by the MyCC appear to be reasonable. For example, under the proposed rules, after the expiry of the 120-working day merger review period, the merger will be deemed approved and the requirement to suspend consummation of a merger will be lifted. The MyCC’s proposal to clear a merger within the first 40 working days, during the initial ‘Phase 1’ review period, is also particularly welcome as not every merger requires in-depth assessment. While it is a matter of implementation whether the timeline will be generally adhered to, clear timelines promote legal certainty and encourage investment.

Currently, section 34 of the Competition Act 2010 prohibits threats and reprisals against whistleblowers. The section provides, among other things, that no person shall subject any person to any ‘commercial or other disadvantage’ as a reprisal against the person from making a complaint to the MyCC or cooperating with the MyCC. The proposed changes to the Competition Act 2010 include specifying situations which amount to a ‘commercial disadvantage’ to include, among others, a refusal to trade, a termination of a contract or a refusal to renew a contract.

While the current provision is certainly useful to safeguard the MyCC’s enforcement efforts and protect legitimate complainants or parties assisting on an investigation, a key concern in respect of the proposed changes is that specifying situations that amount to such reprisals may encourage complaints which are unfounded. There is also an increased risk that section 34 can be abused to initiate investigations against business rivals or entities which legitimately exercise their right to terminate services or refuse to renew contracts.

Other amendments will also expand the MyCC’s general investigation and enforcement powers. Among the changes is the introduction of a settlement procedure to provide for the power of the MyCC to adopt a settlement when an enterprise admits liability for an anticompetitive agreement or an abuse of dominant position. Such improvements are welcome, as they introduce additional flexibility for the more efficient resolution of cases.

Cambodia

Another notable development in the ASEAN region is Cambodia’s enactment of its competition legislation, the Law on Competition. The legislation had been in development since 2006 and was finally signed into law on 5 October 2021. As part of their adoption of the ASEAN Economic Community Blueprint in 2007, the ASEAN member states agreed to endeavour to introduce competition policy in all member states by 2015. Following the passage of competition laws in Brunei, Laos and Myanmar, Cambodia is the final ASEAN member state to do so.

The new law covers the three central pillars of competition law — anticompetitive agreements, abuses of dominance, and anticompetitive business combinations. The competition law prohibits activities that significantly prevent, restrict or distort competition in the market, regardless of whether the activities are conducted in or outside the country. Penalties for violating the law include written warnings, suspension of business licences, financial penalties, and notably, imprisonment.

The Cambodia Competition Commission (CCC) was formally established in February 2022. Its primary roles include developing Cambodia’s competition policy, advising on draft legislation and regulations, issuing decisions, orders and interim measures, and imposing fines. Given the infancy of the CCC, we anticipate that it will build up its capacity and rules of enforcement by first issuing guidelines or similar types of regulatory instruments. We expect that the CCC will shed light on important details, such as business combination thresholds and notification procedures, sometime in the future.

The adoption of a competition law serves as an important step toward promoting fair and honest competition in Cambodia.

Conclusion

With all 10 ASEAN member states having competition laws in place, what remains to be seen is how ASEAN will deal with the differences in the legal frameworks and procedures of its member states.

Cooperation efforts between the competition regulators in the ASEAN member states have increased, in line with their commitments under multilateral trade agreements, including the Regional Comprehensive Economic Partnership Agreement (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The competition provisions in Chapter 13 of the RCEP seem to take a broad-brush approach to regional cooperation. While the RCEP includes obligations for member countries to adopt or maintain competition laws and regulations that prohibit anticompetitive activities and to establish or maintain authorities to implement its competition laws, at the same time, it recognises the differences in the capacity and national regimes of RCEP countries.

On the other hand, the CPTPP appears more prescriptive, imposing obligations in key areas such as procedural fairness in competition law enforcement and transparency.

Differences in the competition laws and their enforcement between ASEAN member states, such as the availability of leniency regimes, the criminalisation of competition law infringements, and divergences in merger notification and the treatment of vertical restraints continue to increase the cost of doing business in the region where multinational businesses must comply with different sets of competition rules.

Notwithstanding, the efforts by ASEAN’s competition authorities to develop their enforcement powers and capabilities, as well as cooperative efforts, should be lauded. ASEAN member states are currently developing the Guidelines for Sharing Merger Cases and will be setting up the ASEAN Information Portal on Merger Cases, which will serve as an initial step toward enhancing competition enforcement cooperation, to effectively deal with cross-border commercial transactions.

 

Corinne Chew is a director, Low Jia Rong is an associate and Zhu Zhuohui is a practice trainee at Drew & Napier LLC. Dr Chew can be contacted on +65 6531 2326 or by email: corinne.chew@drewnapier.com. Mr Low can be contacted on +65 6531 2769 or by email: jiarong.low@drewnapier.com. Ms Zhu can be contacted by email: zhuohui.zhu@drewnapier.com.

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BY

Corinne Chew, Low Jia Rong and Zhu Zhuohui

Drew & Napier LLC

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