The Evolution of Competition Law in Southeast Asian Countries
(Globalization and Law in Asia: From the Asian Crisis to September 11, 2001)
10-11 April 2003
International Institute for The Sociology of Law
YASUDA Nobuyuki
Graduate School of International Development
Nagoya University
Introduction
Since the early 1990s when the globalization of economy started to swing in full force, legislation of competition law has been becoming more and more important along with deregulation all over the world. The Economic Crisis that hit the East and Southeast Asian countries in 1997-98 exposed the structural weaknesses in the economic systems of these countries. Problems inherent to government-led economy that had so far sustained the rapid growth in this region were revealed, such as collusive links between politicians and businessmen and opacity and exclusiveness in economic systems represented by the infestation of nepotism and cronyism (Yasuda<2002>).
In order to overcome the crisis, IMF and other international agencies urged the governments to reform such government-led and closed economic systems and to take measures for more market-oriented and rational economic and legal systems that would enhance transparency and accountability. The recommended reform measures were primarily targeted at the financial and banking institutions that triggered the crisis as the weakest points in the economic systems along with the modernization of the corporate reorganization and bankruptcy laws, but they also extended to the general reform of the judicial systems as a whole. Particular emphasis was placed on the building and improvement of institutions necessary to the proper function of a market system, which had been rather neglected because of higher priority given to development led by state.
Competition law is the basis for the ensuring of the proper function of a market system[1]. For this reason, competition law has become a focus of attention in the present legislative reform. Since, however, many countries in this region, not only transitional economies such as China, Vietnam and Mongol but also other Asian developing countries, are still in the process of shaping domestic markets, competition policy is expected to serve duel functions, they are, (1) building market institution as its prerequisite, and (2) maintaining and managing this market fairly and efficiently.
In this sense, the Japanese experiences concerning the Antimonopoly Act and competition policy will be useful to these countries. In Japan, the Antimonopoly Act (AMA) was established in 1947, in parallel with the dissolution of Zaibatsu, which contributed greatly to the creation of a free market. Nevertheless, the history of competition law in Japan from 1947 to the early 1980s was featured by continuing conflicts between competition policy and industrial policy, the latter of which was geared toward government-led economic development. Competition policy started to gain a significant foothold only after the collapse of the bubble economy in 1990s, and it is no exaggeration to say that competition policy in Japan has not yet fully established.
It is true that, in light of a growing globalization of the world economy fueled by the recent development of information technologies, these countries in Asia are hardly likely to trace the 50-year history of the Japanese competition policy, although one cannot still deny the significance of the harmonious coordination between industrial policy and competition policy in these countries. Further, from the viewpoint of globalization, discussions of trade and competition issues now being conducted in WTO cannot be ignored. It is well known that Doha Declaration Nov. 2001 of Forth Ministerial Conference instructs the working group established in 1996 at Singapore to clarify some issues on competition law and policy and submit agenda to the Fifth Ministerial Conference in 2004, which will start substantial negotiation on these issues[2]. In connection to these, competition policy is much debated also in OECD and UNCTAD. Moreover, since 1996 APEC (Asia-Pacific Economic Cooperation Conference) has been promoting various international cooperation projects for the improvement of competition policy and law as we examine later.
Consumer protection, which is also an important target of competition policy, cannot be neglected. Especially in developing countries, which have not yet fully developed their market systems, consumer protection may be even more urgent and justifiable than the ensuring of economic efficiency, the prime target of competition policy. This is why many countries started legislating consumers protection law in parallel with that of competition law[3].
In this paper, I will, first, survey briefly the international cooperation in competition law and policy in Asia, secondly, take a bird’s eye view of competition law and policy in ASEAN countries, and finally, make a comparative survey of Indonesian and Thai laws.
I. International cooperation in competition law and policy in Asia
1. Multilateral level cooperation
International cooperation on competition law and policy has a long history. As early as 1940s, the United States advocated that ITO (International Trade Organization), which might have become predecessor to GATT (General Agreement of Tariffs and Trade), tried to incorporate provisions against restrictive trade practices; but ITO subsequently broke down because of the objections from the U.S. Congress. As the result, GATT was established. Its primary aim is the general reduction of tariffs, and emphasized the importance of anti-dumping duties as stipulated in Article 6, but has not yet institutionalized anything against restrictive trade practices.
It was through the discussions in UNCTAD (United Nations Conference on Trade and Development) established in 1964, that restrictive trade practices came again into the limelight. However, the discussions were focused, at least in their early stage, on how the government should regulate the anti-competitive practices of Trans-national Corporations (TNCs) through its intervention, but not through market competition. They were closely related with the regulation of TNCs and the promotion of technology transfer[4]. In the 1980s, however, the objections and resentments to TNCs on the part of developing countries somewhat receded, and competition policy started to be placed in the general trend toward less governmental intervention and deregulation as typified by the promotion of structural adjustment. This trend was also the basic attitude of OECD (Organization of Economic Cooperation and Development)[5]. In the 1990s, against the backdrop of the collapse of socialist states and the transition toward the new regimes, deregulation and its integration into competition policy became one of the most important agenda in these countries. In 1998, OECD published together with the World Bank a comprehensive report on competition law in developing countries (WB/OECD: 1998)[6].
Meanwhile, the discussions in the Uruguay Round of GATT were expanded to include not only trade of goods but also that of services and intellectual property. WTO (World Trade Organization), established as an outcome of the rounds of GATT, started pushing the promotion of competition as an important agendum to deregulate trade policy of the member. Item Twentieth of the Singapore Ministerial Declarations of WTO, adopted on 13 December 1996, declared that the ministers agreed to establish a working group “to study issues raised by Members relating to the interaction between trade and competition policy, including anti-competitive practices, in order to identify any areas that may merit further consideration in the WTO framework”. The working group, which included not only representatives from member countries but also representatives from UNCTAD, OECD, APEC and ASEAN, reported to the General Council of WTO (1998)[7] in September 1998 and subsequently after further investigation WTO (1999) in June 1999 as a background paper of its Secretariat.
WTO (1999a) was submitted to the General Council as its final report on 11 October 1999. This report, based on the analysis of the Asian Economic Crisis, emphasized the necessity of competition law and policy as well as that of transparency of market, and called for international cooperation in providing a basis for competition law and policy in developing countries. Despite the disorders caused in its Seattle Ministerial Meeting in December 1999, WTO will most certainly play an important role in multi-lateral cooperation on competition law and policy.
As mentioned above, the Forth Ministerial Conference at Doha in 2001 instructs this working group to examine core principles including transparency, non-discrimination and procedural fairness, and provisions on hard core cartel, ways of handling voluntary cooperation on competition policy among WTO member governments, and support for progressive reinforcement of competition institutions in developing countries through capacity building. Based on the report submitted by the Working group, the Fifth Ministerial Conference in 2004 will start negotiating the cooperation of competition law and policy among members[8].
2. Cooperation at Regional Level--APEC
Regional cooperation on competition law and policy among APEC economies started with its 1994 annual meeting held in Bogor. “Deregulation and Competition” was among 15 action plans agreed upon in this meeting[9]. The APEC meeting on competition law and policy held on 24 to 25 July 1995 in Auckland confirmed about competition law and policy that the coordination between competition, trade and investment is necessary for the promotion of economic growth in the globalization of the economy and emphasized the necessity of technological assistance to developing countries. Competition policy was also one of the Agenda of Collective Action Plans adopted in the Osaka meeting (OAA) held in the same year[10].
The implementation reports on OAA for competition policy were delivered at the annual meetings held in Manila, 1996, Vancouver ,1997 and Kuala Lumpur, 1998. A meeting on competition law and policy and deregulation was held every year before the annual meeting in the same country to discuss various matters concerning competition legislation[11]. Since 1997, the Japan Fair Trade Commission (JFTC) has held in Thailand a technology cooperation seminars on competition policy as part of APEC/Partnership for Progress (PFP), and initiated a similar seminar every year until 2001. In 1997, a training course in competition law for APEC members was held in South Korea. The Taiwan Fair Trade Commission started in the same year to provide a database[12] on competition law and policy in APEC economies in its homepage. APEC has also actively participated in the debates of the working group on trade and competition of WTO in 1996.
The Asian Financial Crisis in 1997 had the effect of accelerating the cooperation on competition law among APEC economies. In the Workshop on Competition Policy and Deregulation held in April and May 1999 in Christchurch New Zealand, Thailand and Peru made reports on competition law, which were the first attempts ever made by developing countries, and APEC (1999)[13] was submitted to the Larders Meeting on 13 September 1999 in Auckland, which was a comprehensive study on the promotion of competition legislation in developing countries.
To this Meeting the “PECC Principle for Guiding the Development of a Competition Policy Framework for APEC economies” was submitted by the Pacific Economic Cooperation Council. Based on this proposal, the Leaders adopted the “APEC Principles to Enhance Competition and Regulatory Reform”, which, although not legally biding, urged the economies to enact competition laws. The Principles acknowledged the strategic importance of the promotion of competition to the enhancement of market economy and the sustaining of growth, and set down the competition policy principles of indiscrimination, comprehensiveness, transparency, and accountability. The economies agreed in this meeting on reappraisal of regulations to curb competition, corrective actions against anti-competitive practices, introduction of competition mechanisms, promotion of competition policy, and economic and technical assistance to developing countries in carrying out these objectives.
In November the same year, the Asia-Pacific Antimonopoly Policy Meeting was held in Canberra, to which South Asian countries such as India and Pakistan participated together with the APEC members. In this meeting Australia proposed the establishment of a “Resource Center” to promote international cooperation on competition law (Yamashita2000). The meeting held in Thailand in March 2000, which was sponsored by the Australian Competition and Consumer Committee, set up a steering committee for the establishment of the Resource Center.
Further in 2000, the APEC agreed with OECD to start “the APEC-OECD Co-Operative Initiative on Regulatory Reform”, a joint effort of the APEC Competition Policy and Deregulation Group and the OECD Programmes on Regulatory Reform. This project had Workshops at Shinzhen, China[14] in 2002 and Merida, Mexico in2002[15].
II. Legislation of competition laws in Asian countries
1. Prehistory: Regulatory competition law
The first attempt to enact the competition law in Asia was made in 1925 in the U.S. ruled Philippines: “An Act to Prohibit Monopolies and Combination in Restraint Trade”, which was an imitation of the Sherman Anti-Trust Act. However, this act has never been effective in practice.
For practical purposes, therefore, The “Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade” (Act No.54 of 14,1947) (AMA) of Japan may be called the first competition law in Asia. This Act, which was enacted in occupied Japan with the aim of democratizing Japan’s economic system, was strongly influenced by the U.S. Anti-Trust Act. Since, however, industry policy to foster development of its economy was given higher priority in the postwar recovery period of the Japanese economy, AMA had not played a very significant role until the 1970s[16].
With the above two exceptions, the first wave of the introduction of competition law into Asian countries started in the late 1960s and continued into the 1970s. In this period, developing countries tried to tighten regulations against TNCs and domestic giant family concerns. In certain countries, competition law was used not so much for the purpose of promoting market competition as with the objectives of controlling prices for consumer protection and of taking advantage of these big firms’ activities in order to accelerate economic growth. To sum up, competition law in this period was not in line with competition policy as it should be. The “Monopolies and Restrictive Trade Practices Act, 1969” (MRTPA), of India is a typical example of regulatory model of competition law which aims to foster economic growth through the government control. The main aim of this Act was to regulate and direct the Industrial Houses that had great power in the Indian economy, which was still basically a planned economy[17]. Pakistan followed same regulation by enactment of “Monopolies and Restrictive Trade Practices Ordinance” in 1970, of which basic structure is same as Indian predecessor.
In 1975, South Korea laid down the “Act Concerning Stabilization of Price and Fair Trade”, which basically aimed at price controls and therefore was not in the mainstream of competition law. The “Price Fixing and Anti-Monopoly Act, 1979” of Thailand was, as shown by its title, a law with price controls in view.