Competition law developments in East Asia

March 2012

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Introduction

This month’s editors: Maxime Vanhollebeke, Julienne Chang, Zhao Jingjing, Christina Jeong and Lydia Fung.

Below is an excerpt from our monthly Competition Report. More detailed commentary on these issues and other recent competition law developments in the Asian region is to be found in this month’s edition of our report available on a free subscription basis (see further below).

Information exchanges and cartel law in Asia

Perhaps one of the most controversial aspects of EU competition law is the very broad interpretation of the notion of concerted practices to include exchanges of certain information among competitors. In certain circumstances, communication of strategic information among competitors will be considered as an agreement or a concerted practice that has the object of fixing prices or quantities. This even applies where the information is provided unprompted. According to the European Commission’s Guidelines on horizontal cooperation agreements, “when one undertaking alone reveals to its competitors strategic information concerning its future commercial policy, that reduces strategic uncertainty as to the future operation of the market for all the competitors involved and increases the risk of limiting competition and of collusive behaviour.” This explains why such types of information exchanges will normally be considered and fined as cartels under EU competition law.

This very stringent interpretation has led to the application of many fines in Europe on Asian companies which had engaged in information sharing. Until recently, it was unclear whether competition authorities in East Asia would follow a similarly broad interpretation.

In Singapore, the wording of the Competition Commission’s Guidelines on the section 34 prohibition may have indicated that a more effects-based approach would be adopted. However the Competition Commission’s decision fining employment agencies in September of last year very much reflected the broad interpretation under EU law. This month the Commission confirmed this stringent approach when it announced its intention to fine ferry operators for having exchanged sensitive and confidential price information

Korea’s Fair Trade Commission seems to be willing to follow suit. In a decision adopted this month, it imposed significant fines on instant noodle producers for having exchanged information about future price increases. In China, there have to our knowledge not yet been any decisions on the point, but the National Development and Reform Commission’s Regulation on Monopolistic Pricing Practices indicates that the exchange of information about pricing intentions may lead to the establishment of an illegal concerted practice in breach of the Antimonopoly Law.

If this trend is confirmed, companies active in the region may have to reconsider their business practices as risks associated with information exchanges will no longer be a risk specific to the EU.

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MOFCOM conditionally approves proposed acquisition of Hitachi’s hard disk drive business by Western Digital

On 2 March, the Chinese Ministry of Commerce (MOFCOM) conditionally approved Western Digital’s proposed acquisition of Viviti, a wholly-owned subsidiary of Hitachi that controls all of Hitachi’s hard disk drive business.

MOFCOM received Western Digital’s initial notification on 2 April 2011 and initiated merger review on 10 May 2011. On 1 November 2011, Western Digital withdrew its notification on the ground of material changes of facts five days before the expiry of the extended review period; it submitted a fresh notification on 7 November 2011 which was accepted by MOFCOM for review on the same day. On 7 December 2011, the second notification entered into an in-depth review stage which was set to expire on 6 March 2012.

Identifying the global hard disk drive market as the relevant market, MOFCOM reached the same conclusion as it did in its decision to impose conditions on Seagate’s acquisition of Samsung’s hard disk drive business last December. Namely, the transaction is likely to eliminate or restrict competition because the market is highly concentrated with only five suppliers that are subject to little competitive pressure from their customers and their competitors.

In its analysis, MOFCOM took into account the fact that Western Digital had already committed to divest itself of Viviti’s 3.5-inch hard disk drive business as part of the conditional clearance obtained from the European Commission when it reviewed the same transaction. MOFCOM however considered that this divestment was not enough to address all of the anticompetitive effects of the transaction, and went on to impose additional behavioural conditions. Most importantly, and in line with what MOFCOM had decided in the parallel Seagate/Samsung transaction, Western Digital is required to maintain Viviti’s independence so that it remains a separate competitor in the market (this condition will apply for a period of at least two years, contrary to what was the case in the other transaction, where the minimum period of application is of one year). Western Digital and Viviti are also required not to force any exclusive arrangements upon their customers and to maintain their normal pace of innovation after the concentration.

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Table of contents of the full report

Table of contents of our March 2012 report (Issue 40)
Brunei Competition law considered to meet ASEAN requirements
China Western Digital/Hitachi approved subject to conditions
Hong Kong Updated OFTA procedural guidance
Hong Kong Revised competition bill to be tabled in April
Indonesia More bid-rigging cases
Indonesia
Consultation on draft market control guidelines
Japan Adidas ordered to stop resale price maintenance
Japan More JFTC dawn raids in automotive industry
Korea Google/Motorola cleared
Korea
Mobile handsets and instant noodle cartels sanctioned
Korea KFTC raids five-star hotels
Korea
Samsung fined for obstructing investigation
Korea Western Digital/Toshiba cleared
Singapore Sumitomo/Nippon Steel cleared
Singapore
Ferry operators face fines for price fixing
Thailand Call for merger control regime
Read the full report - Please register if you are interested in subscribing to our monthly East Asia competition reports (free subscription).
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