Competition law developments in East Asia - April 2016

This month’s editors: Maxime Vanhollebeke, Emir Pohan, Pearl Yeung, Serena Gingell, Michael Kim, Sophie Chen, Yui Ota, Lydia Fung and Ada Lam.

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).

Leniency policies are an effective method by which competition authorities induce participants in an infringement to come forward and report their involvement.  Through the granting of total immunity or a reduction in fines in exchange for evidence that may be instrumental to the initiation or advancement of an investigation, infringements that would otherwise be difficult to detect (such as a secret cartel) are brought to light.  Most jurisdictions in East Asia have adopted leniency regimes (a major exception being Indonesia), which have proven to be valuable investigative tools to uncover and sanction many cartels.

Of these, two countries have taken the concept further.  Beyond immunity and reductions in fines, they offer monetary rewards to persons offering information facilitating the detection and sanctioning of cartels.  Korea introduced a reward programme in 2002, under which it pays up to ₩3 billion ($2.7 million) to informants.  The Korea Fair Trade Commission reported last year that it had been making increased use of the programme, with rewards paid in around 50 cases since its introduction.

A similar reward scheme was introduced in Taiwan in October 2015 and relied on by the Taiwan Fair Trade Commission for the first time this month.  In this case, an informant was rewarded NT$500,000 ($15,000) for the provision of evidence leading to the imposition of fines on container terminal operators that had jointly introduced handling charges in the major Taiwanese ports.  Earlier in the month, the authority had also announced that it would significantly increase the maximum rewards payable under the scheme.  While the Commission lacks aggressive investigation powers (such as to conduct unannounced dawn raids), its leniency policy and informant reward scheme serve as important building blocks that enhance its cartel enforcement efforts.

On 6 April, the Chinese Ministry of Commerce’s Antimonopoly Bureau (MOFCOM) released its quarterly list of unconditionally approved merger cases, which identified 81 unconditional clearances made during the first quarter of 2016.  The number of cases remains high, at similar levels to those observed during 2015.

A review of the parties participating in each case shows that transactions involving foreign firms continue to account for the majority of notified transactions.  However, approximately one-third of notified cases featured purely domestic operators, which represents a significant rise as compared to previous years.

Whereas fewer Japan-based companies have been involved in merger control procedures, Europe and US-headquartered businesses continue to make up the majority of foreign companies involved.

As in previous quarters, around three quarters of all transactions were cleared under the simple case procedure.

While the procedure does not offer a guarantee of expedited treatment, a comparison of the publication date for each simple case against the approval date mentioned in MOFCOM’s quarterly list reveals that clearance was granted on average 27 days after the notification was accepted as complete.  This is slightly shorter than the average length since the new procedure was introduced two years ago.  It is also noteworthy that the length of the procedure in a vast majority of the cases approved during the quarter is below or close to the average, with only one transaction necessitating a protracted review (149 days).  The dispersion has progressively decreased over the course of the last quarters, showing that the regime has now reached maturity.