Competition law developments in East Asia - April 2017

This month’s editors: Pearl Yeung, Sophie Chen, Jeremiah Chew and Lydia Fung.

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 are to be found in this month’s edition of our report available on a free subscription basis (see further below).

This month, competition authorities in Indonesia and Korea published three decisions sanctioning participants in bid-rigging activities. Continuing a long-lasting enforcement trend across most of the region, all of these cases concern the construction industry and follow decisions in similar cases adopted earlier in the year.

Bid-rigging conduct is among the most common type of competition law infringement sanctioned in the region, particularly in the construction and heavy equipment industries. It is a particular focus of enforcement in Japan, Korea and Indonesia;  competition authorities in Singapore and Taiwan have also dealt with several bid-rigging cases in recent years.  This type of case is usually attractive to a newly established competition authority, as it is often relatively straightforward to establish horizontal collusion where competing bidders co-ordinate their respective submissions (the first case brought to court by the recently established Hong Kong Competition Commission involves alleged bid-rigging).

Competition law rules also allow authorities to tackle instances of both private and public corruption, often more easily than under the criminal rules applicable to bid-rigging offences. Particularly in Indonesia and Korea, investigations are often led in parallel by the respective authorities responsible for competition and anticorruption enforcement.

The above enforcement trend has however yet to extend to China, where competition authorities have sanctioned very few instances of bid-rigging conduct since the Antimonopoly Law came into effect in 2008, preferring to focus their enforcement on other types of cartel-like conduct, vertical restraints and abuse of market power.

On 7 April, the Korea Fair Trade Commission (KFTC) conditionally approved the proposed merger between Dow Chemical and DuPont. The KFTC was notified of the proposed merger in May 2016.  Both parties are global chemical companies headquartered in the United States.

Whilst the KFTC considered several overlap markets (including in the seed and pesticide sector), the KFTC only identified significant competition concerns in the market for the supply of ethylene acrylic acid copolymers and ionomers. On that market, Dupont and Dow are respectively the largest and the third largest competitors with market shares of respectively 32.5 per cent and 15.3 per cent.  Their combined market share is twice as high as ExxonMobil, the second largest competitor.  Post-transaction, the combined market share of the top three competitors would reach 77 per cent and the number of major competitors would be reduced from four to three, which would significantly increase market concentration.  The KFTC therefore considered that the transaction would lead to restrictive effects on this market.

To address this concern, the KFTC imposed a structural remedy requiring the merging parties to divest either DuPont or Dow Chemical’s assets relating to the research and development, manufacture and sale of ethylene acrylic acid copolymers and ionomers within six months from completion of the transaction. The parties are also required to hold separate their respective assets until completion of the divestiture and to submit a compliance report to the KFTC within 30 days after the divestiture.

The same transaction is subject to merger control review also in other jurisdictions including the United States, China, India and Brazil. The European Commission conditionally approved the transaction on 27 March.  To secure an EU clearance, the merging parties had to commit to divest amongst others a significant part of DuPont’s existing pesticide businesses together with its global research and development organisation and related assets.

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