Resale Price Maintenance in Emerging Competition Regimes in Asia (ex-China)

Clara Ingen-Housz, Oct 28, 2013

Resale price maintenance is the practice whereby suppliers of goods or services specify a fixed, minimum, or maximum resale price to their resellers. If the distributors do not comply, supply can be suspended or there may be some other form of commercial retaliation. This mechanism has received considerable attention from competition authorities and the business community worldwide-including Asia-ever since the United States Supreme Court ruled in the 2007 Leegin case that RPM was no longer per se illegal but, rather, should be assessed under a “rule of reason” approach.

In Mainland China, in particular, the treatment of RPM under the Anti-Monopoly Law has been a particularly hot topic this year. There were indeed major uncertainties as to whether RPM would be considered per se illegal and whether the chosen approach would be applied in a consistent way. The answer started to shape up earlier this year through a combination of vigorous administrative enforcement and high profile private litigation. First, the National Development and Reform Commission imposed its highest fines to date in relation to RPM cases in the alcohol and the baby formula sectors after conducting large-scale, highly publicized investigations. Second, in the high-profile case against Johnson & Johnson, the Shanghai High People’s Court awarded damages to the Chinese distributor. At this juncture, it would appear that commentators conclude that RPM in China tends to follow a “rule of reason” approach.

While 2013 has offered at least some clarification about the Mainland Chinese position on RPM, the situation across Asia remains confused. It is, however, critical to understand the position of antitrust authorities towards RPM in Asia, for two main reasons. First, the region represents a formidable economic opportunity with fast-growing markets and the rise of consumption-driven economies. The ASEAN countries alone represent close to 9 percent of the global population (about 600 million people) and a GDP of over U.S.$2 trillion, ranking it the eighth economy in the world. This region is one no multinational company can afford to ignore.

Second, this region has experienced in recent years a significant proliferation of competition laws: but for a few exceptions, all countries have more or less recently enacted a cross-sector competition regime (Hong Kong being the most recent). However in the absence of institutional or, at least, intense economic integration, competition regulators across the region have not pursued a uniform approach to RPM and businesses now have to deal with different legal systems being at varying stages of development and reflecting unique socio-economic circumstances.

The purpose of this article is to analyze enforcement trends on RPM in East and South-East Asian nations having a relatively young competition regime. I have excluded mature Asian jurisdictions (Japan, Korea, or Australia) where policies are more established and transparent; nor have I included India, due to the suggested length of this article. I will first (Part II) present the features of the different regimes using representative examples drawn from a spectrum ranging from pure exemption to strict prohibition. I will then attempt to anticipate the way forward (Part III) before making concrete proposals on how to navigate effectively the complexities of the current situation (Part IV). Part V concludes.

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