The Basics
Rolling out standardised distribution agreements across Asia Pacific is challenging because
of the huge variety in the treatment of vertical arrangements under each jurisdiction’s
competition laws. This tool provides a handy summary by jurisdiction, together with a
risk assessment for the main types of restraints found in distribution agreements. In this
table, we use the term ‘competition effects test’ to refer to a requirement that the
conduct have the required degree of adverse effect on competition in a market. The
terminology used to describe the required degree of impact differs: e.g. Australia uses
“substantial” while India uses “appreciable adverse effect”.
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JURISDICTION
Australia1
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a)Yes
a) Yes, except to the extent that the
vertical arrangement constitutes
exclusive dealing under section 47 (or
would, but for section 47(10)).
b) (i) E xclusive dealing, which includes
defined types of vertical restraints
that have the purpose, or likely
effect, of substantially lessening
competition in a market
(competition effects test), as well
as ‘third line forcing’ (a per se
contravention, section 47); and
(ii) Resale price maintenance (a per
se contravention, sections 48
and 96).
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
Penalties
Yes. Minimum resale price maintenance is
a per se prohibition (sections 48 and 96).
Yes.
Liability is civil only:
Maximum resale price maintenance is not
prohibited.
b) Vertical arrangements also need to be
considered under the general
prohibition against contracts,
arrangements or understandings that
have the purpose or likely effect of
substantially lessening competition in a
market (section 45).
Vertical arrangements also need to
be considered under the general
prohibition against contracts,
arrangements or understandings
that have the purpose or likely
effect of substantially lessening
competition in a market, to the
extent that not regulated by
section 47.
1. Most types of vertical arrangements
are only prohibited if the purpose or
effect (or likely effect) of conduct is to
substantially lessen competition. In
effect, a “market power” screen exists
for most types of vertical
arrangements (see sections 45 and
47). A competition effects test is also
applied, except in relation to “below
cost pricing” (see section 46(IAA)).
• Fines;
• Injunctions;
• Declarations;
• Damages; and
• Disqualification orders against
directors.
2. Section 46 prohibits a corporation
with a substantial degree of market
power taking advantage of that power
for the purpose of:
(i) eliminating or substantially
damaging a competitor;
(ii) preventing entry into that market
or any other market; or
(iii)deterring or preventing a person
from engaging in competitive
conduct in that market or any
other market.
3. Section 46(1AA) prohibits below-cost
pricing for a sustained period by
corporations with a substantial share
of the market. Not only does section
46(1AA) require a corporation have
only a substantial share of a market,
there is no ‘take advantage’ element.
Minimum resale price maintenance
and third line forcing are per se
prohibitions, irrespective of
dominance (see section 48 and 96).
1The Competition and Consumer Act 2010 (Cth) (CCA) deals with unilateral conduct of firms with a degree of power in a market, which is a lesser threshold than dominance.
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JURISDICTION
China
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a)Yes
a) No.
b) (1) U
nder the Anti-Monopoly Law
(AML), in the absence of
dominance, the vertical
arrangements that raise
competition concerns are set out
in Article 14 of AML and Article 8
of the Provisions on Anti-Price
Monopoly. Examples include fixing
prices and restrictions on
minimum prices.
(2)Under the Anti-Unfair
Competition Law, irrespective of
dominance, business operators are
prohibited from selling below cost
(Article 11) and tying (Article 12).
(3)Pursuant to Article 14 of the
Pricing Law, business operators
(irrespective of dominance) are
prohibited from:
•d
umping at the lower than cost
price;
• price discrimination; and
• forcing up or forcing down
prices.
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The provisions that apply to horizontal
arrangements provided for in Article
13 of the AML while the provisions
that apply to vertical arrangements
are provided for in Article 14. It is not
applicable for abuse of dominant
position either.
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
Penalties
Yes. Article 14 of AML expressly prohibits:
(1) Pursuant to Article 17 of the AML,
undertakings with a dominant position
are prohibited from :
(1) Violation of AML
• resale price maintenance (the fixing
of resale prices of products to third
parties); and
• fixing of minimum resale prices (the
fixing of minimum resale prices of
products sold to third parties).
• charging excessively high or low
prices;
• predatory pricing;
• refusing to deal;
• restricting dealing;
• tying or imposing unreasonable
trading conditions; and
• discrimination on price and other
terms.
b) N/A.
Additionally, Article 14 of the
Provisions on Anti-Price Monopoly
provides that restricting dealing
through loyalty rebates is prohibited.
(2) In accordance with Article 6 of
Anti-Unfair Competition Law,
business operators that have a legal
monopoly status are prohibited from
restricting others from purchasing
from designated suppliers in order to
distort fair competition.
• Confiscating unlawful gains;
• Imposition of a fine 1% -10% of the
previous year’s sales; and
• Bearing civil liabilities if it has caused
losses.
(2)Violation of Anti-Unfair Competition
Law
• Compensation of damages; and
• Fines between RMB50000-200,000
(for breaching restrictions on
business operators that have a legal
monopoly status).
(3)Violation of Pricing Law
• Confiscation of illegal gains;
• Imposition of fine not more than five
times illegal gains;
• Disciplinary warning; and
• Suspending business for
rectification, revoking the business
license.
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JURISDICTION
India
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a)Yes.
a)No.
b) Section 3(4) of the Competition Act
2002 (as amended) (Competition
Act) prohibits:
Horizontal agreements are regulated
by section 3(3) of the Competition
Act whereas vertical agreements are
regulated by covered under section
3(4) of the Competition Act.
Sections 3(1) and 3(2) of the
Competition Act, which deal with
anti-competitive agreements in
general, also cover vertical
arrangements.
• Tying;
• Exclusive distribution agreements:
• Exclusive supply agreements;
• Refusal to deal; and
• Resale price maintenance,
Indonesia 2
where such conduct causes an
appreciable adverse effect on
competition (i.e. a competition
effects test).
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
Yes. The Competition Act prohibits resale
price maintenance (i.e. stipulating a
minimum or fixed price unless it is clearly
stated that prices lower than those prices
may be charged), to the extent the
conduct breaches a competition effects
test.
Yes.
Yes. Minimum resale price maintenance is
prohibited to the extent the conduct
breaches a competition effects test.
Yes.
In the case of dominance, there can be a
breach of section 3(4) read with section 4
of the Competition Act (which deals with
the abuse of dominance). For example,
concluding contracts subject to the
acceptance of supplementary obligations.
Penalties
• Fines of up to 10% of the average
turnover for the last three preceding
financial years;
• Modification of agreements or
directions to discontinue such
agreements/practices;
• Damages for aggrieved parties (class
actions possible);
• Interim relief; and
• Imprisonment for a term extending
up to three years, in case of a failure
to pay fine.
b) N/A.
a) Yes.
a) Yes.
b) Exclusive distribution, tying or
bundling, exclusive dealing, minimum
resale price maintenance and vertical
integration.
b) Trusts (Article 12), agreements with
foreign parties (Article 16), bid rigging
(Article 22) and misappropriation of
confidential information (Article 23)
are subject to the competition effects
test.
The following is prohibited:
• determining the conditions of
trading with the intention of
preventing and/or barring
consumers from obtaining
competitive goods and/or services,
both in terms of price and quality;
• limiting market and technology
development; and
• restricting other potential business
actors from entering the relevant
market.
Administrative sanctions
• Fines;
• Damages;
• Annulment of agreements; and
• Injunctions.
Criminal sanctions
• Fines.
• Imprisonment (as a replacement of
the fines);
• Revocation of business permit; and
• Injunctions.
Criminal sanctions are imposed as a result
of criminal investigation. Criminal
investigation is initiated if the alleged
companies do not cooperate during the
KPPU’s investigation or if it fails to comply
with the KPPU’s decision.
2 Law No. 5 of 1999 on the Prohibition of Monopoly and Unfair Business Competition Practices.
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JURISDICTION
Japan3
Malaysia4
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a)Yes.
a) No.
b) Unfair trade practices (including price
discrimination, below-cost pricing,
resale price maintenance, abuse of
superior bargaining position, refusal to
deal, discriminatory treatment, tying,
exclusive dealing, territorial or
customer restriction and exclusive
distributorship agreement).
b) N/A.
a) Yes.
a) Yes.
b) Vertical agreements will be assessed
on a case-by-case basis, but
problematic arrangements might
include, inter alia:
b) Any agreements which have the
purpose or likely effect of significantly
restricting, preventing, or distorting
competition (see section 4 of the
Competition Act 2010)
• resale price maintenance –
particularly the imposition of
minimum price restrictions;
• tying arrangements;
• exclusive supply agreements;
• exclusive distribution agreements
(territorial);
• exclusive customer allocation
agreements; and
• up-front access payments.
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
Penalties
Yes. Resale price maintenance is
prohibited unless there are justifiable
grounds.
Yes, private monopolization (including
below-cost pricing, exclusive dealing,
tying, refusal to deal and discriminatory
treatment).
• Fines (private monopolization only);
• Imprisonment (private
monopolization only);
• Injunctions (unfair trade practices
only);
• Damages;
• Cease and desist order; and
• Surcharges (specific types of private
monopolization and unfair trade
practices only).
No. However, the Malaysian Competition
Commission (MyCC) has indicated that it
will take a strong stance on minimum
resale price maintenance. It will generally
assess both minimum and maximum
resale price maintenance using a
competition effects test.
Yes.
• Cease and desist order;
• Specify appropriate steps to be
taken by the infringing party to end
the infringement;
• Financial penalty not exceeding 10%
of the worldwide turnover of an
enterprise over the period during
which an infringement occurred; and
• Interim relief.
The MyCC has indicated that it may
scrutinise conduct that is both conduct
that is exclusionary (i.e. breaches a
competition effects test) and conduct that
is exploitative (i.e. not subject to a
competition effects test).
In particular, the following conduct may be
problematic:
• exclusive dealing;
• loyalty rebates;
• tying and bundling;
• refusal to supply/share essential
facilities; and
• price discrimination.
(See sections 35 / 40 of the
Competition Act 2010)
3 Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No. 54 of April 14, 1947).
4 Competition Act 2010.
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JURISDICTION
New Zealand5
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a) Yes.
a) Yes.
b) Resale price maintenance only.
b) Any agreements which have the
purpose or likely effect of substantially
lessening competition (i.e. a
competition effects test).
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
Yes. Per se prohibition on minimum
resale price maintenance.
Yes.
1. Most types of vertical arrangements
are only prohibited if the purpose or
effect (or likely effect) of conduct is to
substantially lessen competition. In
effect, a “market power” screen exists
for most types of vertical arrangements.
Penalties
• Fines;
• Injunctions;
• Damages (including exemplary
damages); and
• Injunctions.
2. Section 36 prohibits a person with a
substantial degree of market power
taking advantage of that power for the
purpose of:
(i) restricting the entry of a person
into that market or any other
market; or
(ii) deterring or preventing a person
from engaging in competitive
conduct in that market or any
other market.
(iii)eliminating a person from that or
any other market.
3. Minimum resale price maintenance is a
per se prohibition, irrespective of
dominance.
Singapore6
a) No.
a) No.
b) N/A.
b) N/A.
No.
Yes. This will be assessed on a case-bycase basis applying a competition effects
test and may include, inter alia:
• loyalty rebates;
• exclusive agreements;
• tying or bundling;
• discrimination on price or other
terms; and
• limiting production or supply.
Inter alia:
• Fines;
• Cessation/modification orders; and
• Damages (private actions).
5 Commerce Act 1986.
6 Competition Act (Chapter 50B).
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JURISDICTION
South Korea7
Taiwan8
Thailand9
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a) Yes.
a) No.
b) Refusal to deal, discriminatory
treatment, predatory pricing, tying,
exclusive dealing which are unfair and/
or anti-competitive and resale price
maintenance.
b) N/A.
a) Yes.
a) Yes.
b) Resale price mantenance.
b) Discriminatory treatments, tie-ins,
exclusive dealing, restrictions on
territory, customers, use, or other
terms, subject to rule of reason test.
a) Unclear.
a) Unclear.
b) N/A.
b) N/A.
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
Yes. There is a per se prohibition on
minimum resale price maintenance.
Maximum resale price maintenance is
prohibited without just cause.
Yes. The following conduct is prohibited:
Yes. There is a per se prohibition on both
minimum and maximum resale prices
Yes. The law prohibits vertical
arrangements that:
• unfairly setting the price;
• controlling sales volume unfairly;
• unfairly denying competitor’s access
to essential facility; and
• unfairly and substantially impairing
consumer’s interest.
• improperly set, maintain or change
the price for goods or the
remuneration for services;
• force a counterparty to provide it
with favourable treatment without
due cause; and
• other abuse of dominant position
conduct.
It is not clear whether the provisions in
Article 27 will be applied to vertical
conduct. If so, resale price maintenance
may also be prohibited under Article 27
where it reduces or restricts
competition.10
Yes. The following is prohibited:
• resale price maintenance;
• unreasonably imposing conditions
on customers;
• limiting quantities; and
• intervening in third party’s
operations without justifiable
reasons
Penalties
• Surcharges;
• Injunctions;
• Public announcement of the fact that
penalty was imposed;
• Fines;
• Imprisonment; and
• Damages.
• Fines;
• Damages; and
• Penalties/imprisonment for repeat
offenders.
• Fines to the maximum of
USD195,000 (THB 6 million);
• Imprisonment for a term not
exceeding 3 years; and
• Penalties may double for repeat
offenders.
7 Monopoly Regulation and Fair Trade Act
8 Fair Trade Act of 2010.
9 Competition Act BE 2542 (1999).
10The application of Thailand’s Trade Competition Act (TCA) to vertical conduct is not clear in various respects. The prohibitions expressly applicable to dominant businesses (RPM, imposing certain restrictions on customers, reducing supplies, interfering with other businesses) are qualified with respect to unfairness or
reasonableness and it is not certain how these prohibitions or qualifications will be applied in individual cases. A further complication is that, despite a prior decision by the regulator that broad prohibitions pertaining to agreements among businesses only apply to horizontal conduct between competitors, this limitation
is not expressly provided for in the legislation and the precedential affect of this decision is uncertain. Finally, the TCA contains a broad prohibition against unfair trading - which has already been applied in at least one vertical restraint investigation – which creates greater uncertainty with respect to any general
consideration of these issues.
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JURISDICTION
Vietnam11
a) Are there specific provisions (in the
absence of dominance) regulating
vertical arrangements?
a) Do the provisions which govern
horizontal arrangements also cover
vertical arrangements?
b) If yes, what types of conduct should
you be wary of?
b) If yes, what types of conduct should
you be wary of?
a) Unclear.
a) Unclear.
b) N/A.
b) Resale price maintenance, tying or
bundling, limiting production or supply
and imposing unrelated conditions
when the parties to the agreement
have a combined market share of 30%
or more of the relevant market.
Is resale price maintenance expressly
prohibited in the law?
If you are dominant, are there specific
types of vertical arrangements which are
prohibited?
It is not clear whether Article 8 will be
applied to vertical conduct. If so, resale
price maintenance may be prohibited
where the parties’ market share exceeds
30%.12
Yes.
The following is prohibited:
• providing goods or services below
cost;
• fixing unreasonable or minimum
prices;
• limiting production, supply or
technological development;
• discrimination on commercial terms;
• imposing unrelated conditions; and
• preventing new competitors from
participating in a market.
Penalties
• Fines;
• Damages;
• Fines up to 10% of previous year’s
total turnover;
• Revocation of business registration;
• Restructure of enterprise;
• Removal of illegal terms;
• Confiscation of exhibits and facilities
used to commit the breach; and
• Other measures as necessary.
Additional prohibitions apply to
monopolies.
11 Law on Competition (2004).
12Vietnam’s Law on Competition contains express prohibitions against certain forms of abusive conduct by dominant enterprises (selling below cost, certain forms of RPM, limitations on market supply or development, applying different conditions to similar transactions, imposing certain types of conditions on third
parties, impeding new competitors) or monopolies (the prohibitions applying to dominant enterprises, imposing disadvantageous conditions, altering contracts unilaterally), a number of these prohibitions are qualified with respect to intent or effect. Greater uncertainty results from the potential application of various
prohibitions related to agreements in restraint of competition as there is no express limitation of these prohibitions to horizontal agreements. Further, market share thresholds and an exemption process apply with respect to certain of the prohibitions on agreements making it more difficult to determine their
application generally to vertical conduct.
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