This paper – which you can find here – looks at the different approaches to vertical agreements across ASEAN. The paper draws on practice and experience in the US and EU to consider whether, and if so how, the approach to vertical agreements under the competition law systems of ASEAN countries should be changed in order to ensure a more coherent policy across the region.

  • Following an introduction, Section 2 examines how divergent national policies towards vertical agreements in ASEAN might be damaging competition, efficiency and market integration, and why greater convergence around a harmonised framework might be desirable. It begins by reviewing the outlines of the ASEAN single market and by assessing the role of competition law for its development. It devotes particular attention to the treatment of vertical agreements, which are subject to a spectrum of radically different approaches across the region – from only vertical agreements by dominant companies being subject to competition law in Singapore and Brunei, to the very strict treatment of certain vertical agreements in Indonesia and Malaysia.

 

  • Section 3 then goes on to analyse the rules and standards that have evolved to evaluate vertical restraints in the USA and EU. First, the paper identifies a broad spectrum of regulatory options, going from bright line rules to generic standards. Secondly, it explains how the US moved away from a per se rule and  adopted instead a broad rule-of-reason standard for vertical agreements. At this point, the paper goes into some detail describing the US struggle to “create a litigation structure which makes ‘rule of reason analysis’ transparent to business and workable so that anticompetitive restraints can be identified and eliminated under it.”  Thirdly, section 3 explains how EU law’s concern with ensuring that private businesses do not jeopardise the internal market project by re-erecting barriers to the free movement of goods and services that have been, or are being, dismantled at the State level, has strongly influenced competition policy towards vertical (and intellectual property (IP) licensing) agreements. This concern – which is usually criticised, particularly in the US, as not being focused on consumer welfare, and hence not fit for purpose under competition law – partly explains why certain vertical restraints, particularly territorial ones, are treated with such hostility under EU competition law.

 

  • Section 4 then considers what ASEAN might learn from the US and the EU. It begins by holding that, since both the EU and US agree that vertical agreements have the potential to produce anticompetitive effects even when entered into by firms which are not dominant, all ASEAN countries should subject vertical agreements to competition scrutiny. Secondly, if vertical agreements are to be appraised under competition laws in ASEAN, a framework needs to be developed which ensures greater consistency and uniformity of analysis across the region. In this, the EU and the US provide different templates – and, between the US rule of reason and the EU’s restriction by object, she advises a middle course  that requires serious consideration “of whether application of (rebuttable) presumptions of illegality might be appropriate and/or whether safe harbours should be provided”, and of “how any applicable presumption can be rebutted.

 

  • Section 5 concludes that greater harmonisation of policies towards vertical agreements might be desirable in ASEAN. However, it will be a challenge for such harmonisation to be achieved without some legislative changes and significant cooperation between the ASEAN competition authorities. Unlike in the EU, in ASEAN there is no supra-national law or enforcement agency. Given the different perspectives on vertical agreements across the region, a debate will be required to  build consensus around a more uniform approach that can be adopted in all member countries. An ASEAN Competition Network and/or the ASEAN Experts Group for Competition could provide a forum in which to develop policy consensus, and try to ensure uniformity and coherence when dealing with cross-border matters.

One should not expect new deep insights into how to treat vertical agreements from this piece. However, it is a very good piece if one takes into account the purposes for which it was written. Furthermore, it contains an enlightening discussion of the different treatments of vertical restrictions in the EU and the US, and of the rationale for such differences (with the added benefit of also providing an overview of the treatment of vertical restrictions in ASEAN); and it also provides a useful template on how to design a system of rules / standards for vertical agreement.

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