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ANNEX IV | Glossary of Competition Law Terminologies for ASEAN

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ANNEX IV | Glossary of Competition Law Terminologies for ASEAN ANNEX IV | Glossary of Competition Law Terminologies for ASEAN agreement Competition Holding Company Economies of Scale Antitrust Law Strategic Behaviour Subsidiary Exclusionary Practice Non-Competition (Clause) Intellectual Consumer Substitute Market Control Property Anti-Competitive Economies of Scope Exclusionary Practice Rights Competition Competition Leniency Parent Company EfficiencyAnti-Competitive Fair Competition Intellectual Vertical Integration Economies of Scale Property Subsidiary Rights Geograohical Competitive Law Market Subsidiary Anti-Competitive Agreement Economies of Scale Holding Company Consumer Intellectual trade Property Perfect Competition Rights Anti-Competitive Buyout Parent Company Buyout Deconcentration Consumer Consumer Competition Parent Company Protection Rights Policy ANNEX IV Glossary of Competition Law Terminologies for ASEAN 95 @ ASEAN, November 2017 ANNEX IV | Glossary of Competition Law Terminologies for ASEAN A Acquisition Refers to obtaining ownership and control by one firm, Abuse of Bargaining Position in whole or in part, of another firm or business entity. As distinct from a merger, an acquisition does not necessarily entail amalgamation or consolidation of Anti-competitive practices which a firm with an upper- the firms. An acquisition, even when there is complete hand (superior) position may use its position to change in control, may lead the firms involved to improperly exploit consumers (competitor or end- continue to operate as separate entities. Nevertheless, consumer) in order to maintain or increase its position joint control implies joint profit maximization and is a in the market. potential source of concern to antitrust authorities. See also Takeover. Abuse of Dominant Position Agreement (to lessen or restrict A dominant firm may use its substantial market power to stop efficient competitors from entering a market, to competition) drive existing efficient competitors out of the market Agreement refers to an explicit or implicit arrangement o or to charge a high price. Using substantial market between firms normally in competition with each other to power to stop new entry or to drive competitors out their mutual benefit. Agreements to restrict competition of business is called exclusionary conduct. Using may cover such matters as prices, production, markets substantial market power to prevent competition that and customers. These types of agreements are often allows the dominant firm to charge higher prices is equated with the formation of cartels or collusion called exploitative conduct. In Europe and in countries and in most jurisdictions are treated as violations that follow the European competition law exclusionary of competition legislation because of their effect of and exploitative conduct by a firm with substantial increasing prices, restricting output and other adverse market power is called abuse of a dominant position. economic consequences. Exclusionary conduct in the United States is called monopolisation. Agreements may be arrived at in an extensive formal manner, and their terms and conditions are explicitly In developed competition law jurisdictions, economics written down by the parties involved; or they may determines what is abusive conduct. For example, the be implicit, and their boundaries are nevertheless following kinds of exclusionary practices have been understood and observed by convention among found to be abusive conduct: price discrimination, the different members. An explicit agreement may predatory pricing, price squeezing by vertically not necessarily be an “overt” agreement, that is one integrated firms, refusals to deal or sell, tied selling. which can be openly observed by those not party See Anti-competitive practices. to the agreement. Indeed, most agreements which give rise to anticompetitive practices tend to be Absolute Teritorrial Protection covert arrangements that are not easily detected by competition authorities. Practice by manufacturers or suppliers relating to the Not all agreements between firms are necessarily resale of their products and leading to a separation harmful of competition or proscribed by competition of markets or territories. Under absolute territorial laws. In several countries, competition legislation protection, a single distributor obtains the rights from a provides exemptions for certain cooperative manufacturer to market a product in a certain territory arrangements between firms which may facilitate and other distributors are prohibited to sell actively or efficiency and dynamic change in the marketplace. For passively into this territory. (Definition by European example, agreements between firms may be permitted Commission). 97 ANNEX IV | Glossary of Competition Law Terminologies for ASEAN to develop uniform product standards in order to between firms to develop uniform product standards promote economies of scale, increased use of the that benefit consumers or agreements that allow faster product and diffusion of technology. Similarly, firms diffusion of new technology may be permitted by may be allowed to engage in cooperative research competition authorities because the benefits are greater and development (R&D), exchange statistics or form than the anti-competitive impact. Similarly, competing joint ventures to share risks and pool capital in large firms may be allowed to engage in cooperative research industrial projects. These exemptions, however, are and development (R&D), to exchange statistics on past generally granted with the proviso that the agreement sales or to form joint ventures to share risks and pool or arrangement does not form the basis for price fixing capital in large industrial projects. These exemptions, or other practices restrictive of competition. however, are generally granted on the condition that the agreements are the least restrictive way of achieving those benefits. Anti-Competitive Agreement Anti-competitive agreement refers to an explicit or Anti-Competitive Practices implicit arrangement between firms, normally in competition with each other, which prevents entry by This refers to a wide range of business practices in new firms, raises price or restricts output. Agreements which either a single firm or a group of firms act in ways to restrict competition may cover such matters as which restrict competition. Restricting competition collectively setting prices, introducing production leads to higher prices and less production or output in quotas which has the effect of increasing prices or the market. dividing markets geographically or by customers. Anti-competitive agreements violate competition law In a competitive market firm try to beat competitors because they increase prices to business and final by offering lower prices (due to being more efficient consumers directly, or indirectly by restricting output. in production) or by offering better quality products. Anti-competitive practices artificially limit competition Agreements may be formal, with their terms and resulting in higher prices and lower quality products. conditions explicitly written down in a contract between the parties involved or informal through a Many competition law jurisdictions make a distinction verbal agreement. Agreements may also be implicit between anti-competitive practices which are per where there is no formal communication between se illegal those which are examined under a rule of them at all. For example, anti-competitive practices reason. Under a per se rule the conduct is presumed by customs where competitors understand the terms to be illegal without examining the actual effects in a of the agreement through convention and practices particular case. Under a rule of reason the effect of in the market. Alternatively, competitors in a market the conduct on competition (e.g. whether the conduct learn how other competitors react to changes in price leads to higher prices or lower output) is examined. which results in higher prices even though there is no For example, resale price maintenance is usually per se communication between them. Agreements, whether illegal in most countries but exclusive dealing is usually formal, informal or implicit are usually secret and so subject to a rule of reason. not easily detected by competition authorities. Anti-competitive practices can be are broadly divided Not all anti-competitive agreements are prohibited by into horizontal and vertical restraints on competition. competition laws. Some countries allow for exemptions Anti-competitive horizontal restraints are between firms for anti-competitive agreements which provide benefits that operate at the same level in the production chain greater than the anti-competitive effect. Benefits (e.g. between manufacturers or between wholesalers can include improving firm efficiency or promoting or between retailers). They include price-fixing between technological change which benefits consumers either competitors (in a cartel) and a merger between in the short or long-term. For example, agreements competitors. Vertical restraints are between sellers and buyers (i.e. at different levels of the production chain). 98 ANNEX IV | Glossary of Competition Law Terminologies for ASEAN This can include a seller signing an exclusive dealing law. The widest definition is given by Bain who contract with a buyer or only allowing the buyer to resell argues that barriers to entry include the following: within a particular geographic area, market restrictions, product differentiation, absolute cost advantages resale
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