How Asean can harmonise competition law – Cenuk Sayekti

The Asean Economic Community (AEC) came into effect in December 2015 and will gradually allow the free flow of goods, services, investment and skilled labour among its members.

One pressing issue that may arise from the regional free market is cross-border cases regarding competition law. To face this, member states need to harmonize their competition laws to avoid extraterritorial jurisdiction conflicts.

The recent development of competition laws in Asean is a positive sign, where all Asean members have passed their respective competition laws, with three members enacting theirs at the last minute before the implementation of the common market.

Asean has published its Regional Guidelines on Competition Policy as a non-binding statement to implement and develop a competition policy in the context of each member state. The guidelines are used as a standard for member states to draft their competition laws so that they have similar regulations and policies on competition.

Unfortunately, diversity among the competition laws remains even after the guidelines were signed.

Harmonisation is an old issue in economic integration to avoid non-tariff barriers. To date, the EU is the most successful economic integration that has harmonized national competition laws.

This was achieved in two forms: cooperation among member states and fully integrated member national laws into a community law. A fully integrated competition law is definitely beyond Asean leaders at this early stage.

Meanwhile, cooperation is stated in the Asean Regional Guidelines on Competition Policy as an approach the member states can take to promote a competition culture.

However, it is unclear on what level Asean states will cooperate and how they will implement cooperation.

Even so, a cooperation agreement is one possible way to harmonise different competition laws of the member states.

To do so, Asean at least needs to harmonize three different fields of competition law: legal substance, procedural law enforcement and competition law authority.

First, the legal substance of the competition law. This includes whether particular business conduct is prohibited according to per se illegal or rule of reason. The member states should have similar perspectives on whether a prohibition is per se illegal or rule of reason.

Second, procedural law enforcement. A different approach could create a disjunction between the community and its domestic legal systems. This would also pose a higher risk of extraterritorial conflict between national legal systems in the community.

The likelihood of extraterritorial application of such national laws increases when a country’s enforcement agency has broad powers to prosecute foreign anti-competitive behaviour, while the host country refuses to abide by the rules.

In Asean, the procedures of enforcing the competition law among member states are varied. The first countries to enact a competition law, such as Indonesia and Thailand, have had experience with enforcement since 1999.

Other countries such as Myanmar, Laos and the Philippines enacted their laws at the end of 2015. In setting up competition law enforcement, the member states have made different decisions as to whether anti-competitive conduct amounts to a civil, administrative or criminal wrongdoing.

These differences will affect the types of investigative and enforcement powers applicable if it comes to cross-jurisdiction. One of the differences is merger notification. There are numerous differences among Asean states, including the character of merger notification, whether mandatory or voluntary.

These differences may result in various methods of competition law enforcement. Overall, of six member states, only four have merger control regimes that mandate the submission of notifications to the competition authority.

Indonesia itself confirms that firms are to submit voluntary pre-notification and mandatory post-notification for a merger.

Third, competition law authority. A different approach used by the competition law authorities to investigate cases may also get different results. This is linked to the legal substance of the competition law. Prohibitions based on per se illegal principle should not have economic analysis to prove that the conduct lessens competition.

On the contrary, prohibitions under the rule of reason principle demands economic analysis. These two sets of investigation lead to different decisions.

Member states should also discuss who has the power to investigate cross-border cases. The core of extraterritorial jurisdiction conflict lies in this matter.

To start cooperation, member states may consider several things.

First, cooperation should oblige each member state to promote competition by addressing anti-competitive practices in its territory and by adopting and enforcing such means or measures as it deems appropriate and effective to counter such practices.

Second, cooperation may mention achieving effective competition law enforcement outcomes.

Third, member states should also recognise the importance of confidentiality with respect to this cooperation.

Fourth, the parties should be obliged to cooperate where appropriate on issues of competition law enforcement, including in the exchange of information, notification, consultation and coordination of enforcement matters that are cross-border in nature. – The Jakarta Post, March 8, 2016.

*Cenuk Sayekti is a School of Law lecturer at Lancang Kuning University, Pekanbaru, Riau.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.