Antitrust in Asia
Digital sector in focus
A key target of increased global antitrust scrutiny in recent years has been the digital sector, particularly in an age where the influence and pervasiveness of ‘big tech’ has been driven to the forefront of public discourse.
The EU has made significant headway in digital regulation with the introduction of the Digital Markets and Digital Services Acts, and a number of regulators in Asia have introduced or are in the process of introducing legislation and/or are stepping up enforcement in the sector.
Recent developments fall within the following broad trends:
- New or upcoming regulations or guidelines imposing additional antitrust and/or consumer protection-focussed obligations on operators in the digital sector;
- Increased antitrust enforcement against digital companies with a focus on large online platforms; and
- Transactions in the digital sector facing increased merger control scrutiny.
New or upcoming regulations or guidelines
A number of jurisdictions in Asia have introduced or proposed regulations or guidelines that address perceived antitrust or consumer protection issues in the digital economy.
- In February 2021, China officially issued the Anti-monopoly Guidelines for the Platform Economy (the Guidelines), which addressed various issues such as algorithmic collusion, hub-and-spoke agreements, most-favoured-nation clauses, “choosing one from two” practices, and notification of transactions involving variable interest entities (i.e. the so-called VIE structure). In March 2023, the State Administration for Market Regulation (SAMR) published a set of updated implementing regulations (the Regulations) which will come into effect on 15 April, covering merger reviews, anti-competitive agreements and abuses of market dominance. These Regulations formalise and refine the issues discussed in the Guidelines, including market definition, anti-competitive conduct, factors determining the market power of digital platforms, and remedies unique to the platform economy.
- In Japan, the Act on Improving Transparency and Fairness of Digital Platforms came into effect in February 2021. The Act designates “specified digital platform providers” and makes such providers subject to specific regulations. Since then, certain operators have been designated with reference to their online shopping malls, application stores or digital advertising businesses, including Amazon, Yahoo, Google, Apple and Meta. The Japan Fair Trade Commission (JFTC) recommended further ex-ante rules in its Market Study Report on Mobile Operating System and Mobile App Distribution published in February 2023 .
- In South Korea, the revised Telecommunications Business Act which came into effect in September 2021 prohibits app store operators from forcing developers to use their own in-app payment systems, making it the first country that imposed curbs to the app stores’ payment policies in its national legislation.
- In India, the Competition Commission of India (CCI) has been examining the introduction of a Digital Competition Act following the recommendation by the Parliamentary Standing Committee on Finance. An inter-ministerial panel has been established in February 2023 to begin drafting the legislation.
- Following the introduction of the News Media and Digital Platforms Mandatory Bargaining Code in Australia, there have been calls from the news media in Taiwan, New Zealand and Vietnam to follow the trend. Although no legislation has been formally enacted so far, New Zealand Commerce Commission in November 2022 authorised the local news publishers’ association to engage in collective bargaining with Meta and Google, while the Taiwan Fair Trade Commission (TFTC) suggested in its December 2022 White Paper on Competition Policy in the Digital Economy that if the news media enterprises and associations attempt collective bargaining, authorisation by the TFTC is required.
Other jurisdictions are also considering how best to handle potential issues arising in the digital sector without necessarily resorting to ex-ante mechanisms.
- The Competition and Consumer Commission of Singapore (CCCS)’s revised Guidelines on the Competition Act 2004 came into effect from February 2022, which include various clarifications and revisions related to issues in the digital sector such as market definition, assessment of market power and types of potential abusive conduct.
- The TFTC’s White Paper on Competition Policy in the Digital Economy proposed certain light-touch regulatory amendments without recommending ex-ante regulation.
Increased antitrust enforcement
In light of the above developments, it will come as no surprise that antitrust enforcement in the digital sector is growing in Asia, in particular with respect to large digital platforms.
- There has been a recent regulatory focus on digital payment gateways across a number of Asian jurisdictions. In August 2022, the Korea Communication Commission launched an investigation into Google, Apple and One Store’s in-app payment policies over alleged breach of the in-app payment law. In October 2022, the CCI issued a provisional penalty of approximately USD 113 million against Google for abusing its dominant position with respect to its application store policies, including forcing the applications to use its payment systems and charging commission fees. In December 2021, the CCI launched an investigation into Apple for its alleged restrictive practices, including the mandatory use of its payment system for in-app purchases and the collection of commission fees. More recently, the Indonesia Competition Commission also announced an investigation into Google’s in-app payment policies.
- More broadly, Google and Apple face probes in the mobile device ecosystem for other practices as well. In September 2021, the Korea Fair Trade Commission (KFTC) provisionally fined Google approximately USD 177 million for allegedly prohibiting local smartphone manufacturers from installing operating systems developed by its rivals, which was subsequently upheld by the High Court. In October 2022, the CCI provisionally fined Google approximately USD 1.6 million for its agreements with mobile device makers, including pre-installation of Google’s proprietary applications on Android devices and prohibiting the device makers from offering devices based on Android’s rival operating systems. In Japan, Apple reached a settlement with the JFTC in 2021 and started to allow developers of “reader” applications to direct users to their own websites for account creation and management in early 2022.
- Digital platforms have been in China’s antitrust spotlight. In April 2021 and October 2021, SAMR imposed two penalties of approximately USD 3 billion and USD 534 million over the “choose one from two” practices of a giant e-commerce platform and a food delivery platform in China respectively. In December 2022, SAMR imposed a penalty of approximately USD 12.6 million on a Chinese academic literature online database platform for its abuse of dominance by selling database services at unfairly high prices and entering into exclusivity agreement with content publishers.
More scrutiny over transactions
Following in the footsteps of regulators elsewhere, such as in Austria and Germany, several Asian jurisdictions have adopted (or are considering adoption of) amendments to their antitrust rules to capture mergers falling short of existing jurisdictional thresholds. These amendments aim to address a perceived enforcement gap against so-called ‘killer acquisitions’ in innovative areas of the economy, including the digital and pharmaceutical sectors.
- In December 2019, Japan amended its merger assessment guidelines to recommend voluntary filings for consolidations in the digital sector that fail to meet the mandatory thresholds.
- In December 2021, Korea adopted new transaction value thresholds via the amended Monopoly Regulation and Fair Trade Act.
- In June 2022, SAMR published its draft implementing regulation on merger control proposing to introduce a new threshold for transactions involving mega-corporations, following the adoption of the new Anti-monopoly Law.
- In Australia, the ACCC suggested economy-wide reforms to the merger control regime with a stricter threshold to deal with acquisitions by designated large digital platforms.
- In India, a new “deal value threshold” is part of the planned amendments to the antitrust law for transactions where the target has substantial business operations in India, according to the proposal by the Central Government in February 2023.
In addition to the alternative notification thresholds, there has also been an uptick in merger enforcement in the digital sector.
- SAMR has been stepping up gun-jumping enforcement in the digital economy with a large number of fines being issued to Chinese digital players. Also in July 2021, SAMR prohibited the Douyu/Huya merger, which is SAMR’s first prohibition decision that only involved domestic players.
- In Australia, ACCC rejected Google/Fitbit’s remedy package in 2021 and did not take a decision by the time when the transaction was completed. The review has since turned into an enforcement investigation of the completed merger.
In reviewing transactions in the digital sectors, regulators across the region have started to take into account factors specific to the sector, such as the relevance of data and structure of the multi-sided platforms. Some regulators, such as SAMR, CCCS and KFTC, have adopted or proposed updated merger control guidelines to clarify such factors in the review of transactions in the digital sector.