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).
Procedural sanctions on the rise
Competition authorities in East Asia do not hesitate to impose very significant monetary sanctions on companies for competition law infringements. Their decisions have wide-ranging effects on a company’s finances and reputation. Authorities will usually make their final decision in a case after a detailed review of relevant market and commercial information, often gathered by way of invasive investigation techniques such as detailed information requests, dawn raids and witness hearings. To ensure full engagement and cooperation from parties under investigation, competition authorities have the power to impose pecuniary sanctions for failure to cooperate (this is the case for example in China and Korea) or to seek the imposition of criminal sanctions for obstructing investigations (this is the case for example in Hong Kong, Malaysia and Singapore).
In recent years, the Korean competition authorities have not hesitated to impose sanctions on companies or individuals that had sought to conceal or destroy information that was relevant to their investigations. More recently, their counterparts in China have followed suit. They sanctioned defendants for manipulating financial data in an investigation conducted in Hainan Province in 2013, and for refusing to provide any information in a case in Anhui Province in 2015. This month, it was reported that procedural fines were imposed to sanction particularly egregious conduct that occurred during a dawn raid. The defendant’s staff actively hindered the investigation by discarding hard disk drives containing relevant information and preventing their recovery by inspectors.
While fine amounts have so far remained modest, competition authorities in the region appear increasingly intent on sanctioning defendants who obstruct their investigations.
Competition Commission of Singapore clears Nissan’s acquisition of a controlling stake in Mitsubishi
On 6 February, the Competition Commission of Singapore (CCS) published its decision of 23 January to clear Nissan Motor’s proposed acquisition of a 34 per cent stake in Mitsubishi Motors.
The CCS agreed with the parties that the transaction qualifies as a merger in accordance with Section 54(2)(b) of the Competition Act as Nissan Motor would become the largest shareholder of Mitsubishi Motors and acquire sole control over Mitsubishi Motors.
Consistent with the approach adopted by the European Commission in recent decisions, the CCS decided that it was appropriate to conduct a competitive assessment based on a narrow basis, with separate markets for the wholesale supply in Singapore of respectively (i) minicars; (ii) small cars; (iii) medium cars; (iv) sports utility vehicles; and (v) pick-up trucks.
With respect to passenger vehicles, the CCS noted that the parties were not close competitors and that their combined market shares in the relevant market segments (i.e. minicars, small cars, medium cars and sports utility vehicles) were below the CCS’s indicative thresholds above which a transaction may give rise to competition concerns. With respect to pick-up trucks, the parties’ combined market share is much higher, ranging between 60 per cent and 70 per cent with the three largest suppliers accounting for more than 90 per cent of the market. Notwithstanding these high market shares, the CCS considered that the transaction is unlikely to create significant concerns. The CCS first noted that in respect of pick-up trucks, there is a considerable degree of market share volatility from one year to another. Current high market shares may therefore not be a reliable indicator of market power. The CCS noted that the parties would continue to face strong competition from other suppliers including Daimler, Hyundai, Isuzu, PSA and Toyota. The CCS also noted that the barriers to entry and expansion were not overly high. New brands of passenger vehicles have entered Singapore in recent years and there would be little cost for them to also supply light commercial vehicles by making use of their existing passenger vehicle distribution network. The CCS also took comfort from the fact that the parties’ customers (distributors and large corporate end-customers) have strong countervailing buyer power to rule out significant competition concerns.
Table of contents of our February 2017 report (Issue 97)
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OFAC revokes so-called U-turn authorization for Cuba-related financial transactions
OFAC published a final rule that modifies the Cuban Assets Control Regulations to revoke the so-called "U-turn" authorization.