Jurisdiction - Philippines
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Asia Pacific – Quarterly Competition Regulatory Updates.

11 February, 2015

 

 
MyCC Grants Conditional Block Exemption For Liner Shipping Agreements
 
On 4 July 2011, the Malaysian Competition Commission (“MyCC”) granted a conditional block exemption order (“BEO”) to liner shipping agreements under section 8 of the Malaysian Competition Act (“Act”). The BEO took effect from 7 July 2014.
 
The BEO exempts Vessel Sharing Agreements (“VSA”) and Voluntary Discussion Agreements (“VDA”) made within Malaysia or having an effect on the liner shipping services market in Malaysia from the prohibition on horizontal and vertical agreements contained in section 4 of the Act. However, it does not exempt parties from the prohibition against the abuse of a dominant position contained in section 10 of the Act. Parties must adhere to certain conditions in order to qualify for the exemption, and the exemption does not extend to any inland carriage of goods occurring as part of through transport, nor does it extend to agreements involving elements of pricefixing or price recommendation imposed by parties on transport users.
 
The BEO was issued by MyCC following the application submitted by the Malaysia Shipowners Association, the Shipping Association of Malaysia and the Federation of Malaysian Port Operators Council. In reaching the decision to grant the BEO, MyCC took into account industry studies, consultations with relevant governmental agencies such as the Ministry of Finance, the Ministry of International Trade and Industry and the Economic Planning Unit, and the results from a nationwide public consultation on the issue. MyCC concluded that it was appropriate to grant the BEO after finding that there are significant identifiable efficiency benefits that would offset any potential impact on competition. Moreover, MyCC also found that limiting the scope of the exemption under the BEO by imposing certain conditions would prevent liner operators from eliminating competition entirely.
 
The BEO will be in force for three years from its gazetted date. MyCC will conduct a review of the BEO two years after its date of commencement.
 
In Singapore:
 
The Competition Commission of Singapore (“CCS”) first granted a similar liner shipping agreement BEO in 2006, which was subsequently extended in 2010 and will be in force until 31 December 2015. CCS’s BEO is broader than MyCC’s BEO in several aspects. For instance, while the MyCC BEO excludes inland carriage of goods occurring as part of through transport from the ambit of its BEO, CCS expressly includes such inland carriage of goods in its BEO. Further, whileMyCC’s BEO does not extend to cooperation on rates and tariffs, such pricing coordination is permissible under the CCS BEO. CCS is currently conducting a review of its BEO to determine if it should be further extended beyond 31 December 2015.
 
Infringers Face Bigger Penalties In Vietnam
 
As part of a complete review of Vietnam’s competition law, a new decree, Decree 71, came into force on 15 September 2014, bringing about changes to how competition law infringements will be penalised under the law. In essence, infringers will be looking at stiffer penalties.
 
Decree 71 sets out that maximum penalties can be up to 10% of turnover in the relevant market, and factors like the loss caused by the violation and the duration of the infringement will be considered when the penalties are set. Such penalties are applicable to hardcore violations of competition law such as price-fixing, bid-rigging, abuse of a dominant market position and for mergers that contravene competition law, or mergers that have not been notified as required under the law.
 
Under Article 5 of Decree 71, maximum fines for violations are specified as VND 100m for individuals (SGD 6k), and VND 200m (SGD 12k) for businesses.
 
Decree 71 also specifies that depending on the nature and severity of the violations, the infringing party could have its Certificate of Enterprise revoked. The undertaking could also be subject to a wide range of remedial measures including, inter alia, revisions of contracts, or the restructuring of business activities.
 
In Singapore:
 
The maximum penalty that can be imposed in Singapore for a competition law violation is capped at 10% of a company’s turnover in Singapore for each year of infringement, up to a maximum of three years. In setting penalties, the Competition Commission of Singapore takes a number of considerations into account, such as the seriousness of the infringement, the duration of the infringement, and any mitigating or aggravating circumstances.
 
Hong Kong Competition Commission’s Consultation On Guidelines Closed
 
Hong Kong’s Competition Commission (“HKCC”) issued a set of six draft guidelines in October 2014 for the administration and enforcement of its fledgling competition regime. To date, the Competition Ordinance has been enacted, but has yet to come into force. Three of the guidelines concern specific aspects of substantive competition law: the Guidelines on the First Conduct Rule (“FCR Guidelines”), which deals with the prohibition of anti-competitive agreements and concerted practices; the Guidelines on the Second Conduct Rule, which deals with abuse of market power; and the Guidelines on the Merger Rule. The other three guidelines are concerned with procedural matters: the Guidelines on Complaints; the Guidelines on Investigation; and the Guidelines on Exclusions and Exemptions.
 
The guidelines are intended to set out how HKCC and the Communications Authority (“CA”) intend to interpret and give effect to the relevant provisions in the Competition Ordinance. Notably, as is reflective of the development of competition law in Hong Kong from sectoral regulation, section 159 of the Competition Ordinance provides for the CA to have concurrent jurisdiction with HKCC. The CA may perform the functions of HKCC where the undertakings concerned are licensees under the Telecommunications Ordinance or the Broadcasting Ordinance.
 
HKCC had called for feedback on the draft guidelines, which were met with a somewhat lukewarm response. The general sentiment appears to be that, while HKCC has provided significant guidance and clarification through the guidelines, concerns remain over some areas.
 
For instance, the FCR Guidelines state that HKCC will deem resale price maintenance (“RPM”) to be an infringement of the First Conduct Rule by object. Where certain conduct is presumed to be anti-competitive by object, the burden of proof becomes, in effect, reversed. It is not open, under such circumstances, to the undertaking(s) concerned to argue that the conduct does not restrict competition. Instead, the onus shifts to the undertaking(s) in question to demonstrate that their behaviour can be justified on grounds such as efficiency. The question, therefore, is whether or not RPM is a class of activity which is so inimical to the competitive process that such a presumption ought to stand against it.
 
Commentators have also called for more information on procedural issues such as the investigative process, specific timelines, and details on how HKCC will assess cases before it. Calls have also been made for HKCC to adopt a clear position on whether or not foreign jurisprudence will be persuasive when reviewing compliance with the First Conduct Rule, and in assessing the availability of an exclusion under Schedule 1 of the Competition Ordinance. That being said, it has been acknowledged that the procedural guidelines have generally fared well in providing guidance on technical aspects, such as HKCC’s investigative powers and how they will be exercised.
 
The deadlines for consultation have since elapsed, in November and December 2014, for procedural guidelines and substantive guidelines respectively. The Competition Ordinance is expected to come into force in 2015.
 
In Singapore:
 
The Competition Commission of Singapore (“CCS”) has similarly relied on the issuance of guidelines to state its policy on the administration and enforcement of the Competition Act (Cap. 50B). CCS has also published less technical documents, targeted at smaller enterprises without access to in-house legal advice, as well as consumers.
 
Philippines Competition Legislation Close To Enactment
 
The Fair Competition Act 2014 ( “Fair Competition Act”) in the Philippines, as of 17 December 2014, was pending in the House of Representatives, having been passed by the Senate of the Philippines. To be enacted as law, the Fair Competition Act needs to be returned to the Senate for the production of what is known as its final enrolled form, which will then be submitted for the President’s assent.
 
The Philippines does not presently have a general competition regime, relying instead on sectoral regulation to safeguard the competitive process in key industries such as energy and telecommunications.
 
The Fair Competition Act includes prohibitions, with provision for criminal sanctions, on anticompetitive agreements and abuses of dominant position, merger regulation, and provides for its implementation and enforcement with the creation of “an independent quasi-judicial body”, the Fair Competition Commission (“FCC”).
 
The FCC will have investigative or inquisitorial powers, and may apply such remedies as, inter alia, “the imposition of price controls, issuance of injunctions, requirement of divestment, and disgorgement of profits”, or impose “sanctions, fines or penalties for any non-compliance with or breach of” the Fair Competition Act. The Office for Competition (“OFC”), under the Department of Justice, will retain “exclusive authority for the criminal enforcement” of the Fair Competition Act, and “shall seek to advance the antitrust jurisprudence” in the Philippines “through its litigation and participation in the activities of the Executive Branch and in regulatory and legislative processes.” The Fair Competition Act, at this point in time, does not set out the circumstances under which parties will be prosecuted, and therefore how the powers of the FCC and the OFC will be separated in practice.
 
Entities found to have violated the Fair Competition Act will be imposed with fines of between ten million Pesos (SGD 299,300) and fifty million Pesos (SGD 1.5m) for natural persons, and between two hundred and fifty million Pesos (SGD 7.5m) and seven hundred and fifty million Pesos (SGD 22.4m) for legal entities such as, but not limited to, companies. Non-compliance with FCC orders, and/or the supply of incorrect of misleading information, will attract fines of not less than ten million Pesos (SGD 299,300) for each violation. Criminal penalties include fines of up to seven hundred and fifty million Pesos (SGD 22.4m), or imprisonment of up to ten years, or both, at the discretion of the court. Criminal liability may arise from both non-compliance with the substantive provisions of the Fair Competition Act, and noncooperation or obstruction during the course of investigation by either the FCC or the OFC.
 
In Singapore:
 
Violations of the Competition Act (Cap. 50B) do not give rise to criminal liability, although obstruction of officers from the Competition Commission of Singapore in the course of their investigations could constitute a criminal offence.
 
Drew & Napier 

For further information, please contact: 

Cavinder Bull, Director, Drew & Napier

[email protected]

 

Chong Kin Lim, Director, Drew & Napier

[email protected]

 

Scott Clements, Drew & Napier

[email protected]

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