Transcript Cross-border anticompetitive practices and global supply chains: Challenges for developing countries

Cross-border anticompetitive
practices and global supply
chains:
Challenges for developing countries
Cross-border M&A:
WD’s acquisition of Hitachi’s hard disk drive business
HP’s global sourcing map
Post-merger market share
Toshiba
21.2
0
31.6
Seagate
2.5 inch
3.5 inch
46.8
47.2
53.2
WD/HGST
0
20
40
60
Merger review by jurisdictions
Hard-disk drivers
Thailand, China
Power supplies
China
Memory chips
Korea, US
Microprocessor
US
Liquid-crystal display
Korea,Japan,China
Approval conditional on the
divesture of production assets for
3.5 inch HDD (Nov 2011)
Main issues in dealing with cross-border M&A
• A cross-border M&A normally engages many
jurisdictions.
• When it involves a key component in global supply
chains, the effect can easily cover the entire globe.
• Therefore, one of the key issues is how to coordinate
merger reviews conducted by different jurisdictions.
• From the perspective of developing countries, a big
challenge is how to address their competitive concerns
with limited resources and capabilities.
Challenges faced by developing countries
Notification
• Risk of non-notification by merging
parties – risk being much higher in
jurisdictions with voluntary notification
system.
• Notification preference for “priority”
jurisdictions.
• Timely filing of the transaction and
respect for local legislation in mergers
between foreign companies.
Challenges faced by developing countries
Notification
• Challenges for small economies like
Singapore in mergers between large
foreign firms:
• Submission of notifications based on
data filed to other jurisdictions.
• Difficulty in distinguishing the specific
effects of the merger in the country
concerned when merging parties are
involved in a wide range of activities
globally.
Challenges faced by developing countries
Access to
information
Remedies
• Difficulties in collecting information,
questionnaire distribution and gathering
• Language of communication and data
• Difficulty in enforcing and monitoring
remedies.
• Differences in approaches of
competition authorities to remedies –
these do not block the merger.
A way forward
• Young competition agencies must first strengthen their capacities by
dealing with domestic mergers, from which they could gain
experience.
• Given their limited resources, young competition authorities need to
give priority to those international mergers which significantly affect
their market.
• Promote formal cooperation (Bilateral/regional cooperation
agreements).
• Informal cooperation is important and seems to work well.
International cartel cases
Suppliers of the Specified CRTs
Customers of the Specified CRTs
Japanese manufacturers
of CRT televisions
５ parent companies etc. out of the 11 companies
（located in Japan, Korea, Chinese Taipei etc.）
② Negotiating and determining prices
etc. of the Specified CRTs in
accordance with ①（Note １）
③ Giving instructions to
sell the Specified CRTs
in accordance with the
determined prices in the
negotiation of ②
① At “CRT Meetings”,
jointly setting the minimum target prices
etc. of the Specified CRTs
Giving instructions to
purchase the Specified
CRTs in accordance with
the determined prices in
the negotiation of ②
⑤ Selling almost all
the CRT televisions
６ subsidiaries etc. out of the 11 companies
（ substantial production bases of CRTs
in the Southeast Asian Region )
Indonesia
④ Selling the Specified CRTs
in accordance with ③ （Note ２）
Singapore
Overseas Manufacturing Subsidiaries etc.
（ substantial production bases of CRT
televisions in the Southeast Asian Region）
Thailand Philippines Viet Nam Malaysia
Main issues in dealing with international cartels
• The last two decades have seen a great success in
prosecution of international cartels by the US and the EU.
• However, there has been little enforcement activity on
the part of developing countries,
- even though international cartels also affect developing
countries.
• International cartelists are usually MNCs located in
developed countries, which creates huge problems in
obtaining evidence.
Challenges faced by developing countries
No leniency
Application
• International cartelists make strategic
choices of leniency applications.
• Even in follow-on investigations, no
leniency applications were filed (Korea).
Initiation of
Investigation
• Cartels come to their attention only after
other’s enforcement
• Informal information by the US helped it
to decide whether to launch an
investigation (Brazil)
Challenges faced by developing countries
No physical
presence
• In many cases, there is no branch or
subsidiary in developing countries.
• In response to investigations, one of
cartelists closed its office (Turkey)
Material
evidence
from others
• Official decisions open to the public do
not contain material information due to
confidential concerns.
• KFTC benefited from US court
decisions in its early case (Korea)
Challenges faced by developing countries
Service of
document
• Where it has a certain legal effect, it
could be a serious issue.
• An option is to have a formal help from
foreign authorities (Chile).
Period of
exclusion
• When the period has passed, no legal
action can be taken.
• So the case could collapse or end
without fines (Japan)
A way forward
• A jurisdiction cannot entirely rely on others’ enforcement.
• Given its scarce resource, a young authority needs to focus on
international cartels which create specific harm to its market.
• The first priority is to establish an effective leniency program.
• A young authority must step up its enforcement efforts against
domestic cartels, from which they could build up reputations and
capabilities.
• Informal cooperation should not be underestimated. An idea is to set
up an intelligence network based on what is already available.
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