Competition law enforcement in the region concerning distribution practices adopted by parties without market power has commonly focused on resale price restrictions; and the imposition of heavy fines for resale price maintenance practices can be observed in several jurisdictions, including China, Indonesia, Japan, Korea and Taiwan.
However, a number of recent developments suggest a broadening of interest towards other types of vertical restraints – in particular, territorial, channel and product exclusivities. In China, the draft guidelines for the automotive industry published earlier this year, coupled with the express reference to the existence of cross-supply restrictions in this month’s decision against Haier indicate that concerns may already be verging on vertical restraints beyond the sphere of resale price restrictions.
Non-price related vertical constraints have also emerged on the agenda of other authorities in the region, including Indonesia’s Commission for the Supervision of Business Competition, which this month sanctioned exclusive distribution practices by a dominant supplier, and Japan’s Fair Trade Commission, which has begun raising questions about the legality of most-favoured nation clauses (known as price parity clauses) in the online sector – on account of their potential effect of dampening price competition amongst distributors. Meanwhile, the Japanese authority has also reportedly commenced probes into territorial restrictions (known as, destination clauses) in the gas sector.
While resale price maintenance remains a clear enforcement priority in the region, parties to distribution agreements should bear in mind constraints that may apply to other types of vertical restraints when designing their supply and distribution networks in East Asia.