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Competition Law, Part 13

Since there are many small and medium firms in ASEAN countries, and these firms fear that an ASEAN regional market open to powerful TNCs might significantly affect local smaller firms, to protect the competitive position of such local companies and to ensure fair competition will increase their confidence in doing business in the single ASEAN open market(25). A regional competition law and policy could fulfil this task.

Competition law could also allow each country to protect its indigenous enterprises or national/cultural industries to preserve country specific values or to maintain the country’s specific renown for its own competitiveness globally(26). In the Czech Beer Case, the American firm, Anheuser-Busch, brewer of the American Budweiser lager beer, wanted to acquire a stake in Czech Budvar, famous for Budweiser Budvar lager beer, so far unsuccessfully. Both companies produce the same brand name of "Budweiser" beer and they have had disagreement over the brand name, but neither of them have exclusive right to use the brand name internationally, so they settled the dispute by allocating the use of the name in different markets(27). However, a conflict occurred when they both entered the European markets, where the agreement did not clearly define the territory of the use of the name by each party. The American firm thus wanted to merge the two companies so that it could produce and sell the product world-wide without any constraint. However, Czech Budvar has been regarded as the distinct producer of the real Czech Budweiser lager beer, and the consumers, both within the Czech Republic and in other countries, favour this typical and unique beer, and prefer the Budweiser beer to be originally produced by Czech Budvar. They wanted to preserve Czech Budvar as the national indigenous industry and had active movements and campaigns to stop the acquisition by the American firm.

Muchlinski argued, in relation to this case, that since the Czech Republic, the only one among the transitional economies, has abolished specialised foreign investment laws and has actively liberalised investment, only privatisation and competition law could act as vehicles for the close screening of foreign investment. The EU law as a source of principles for the regulation of foreign investment would also be justified, because the Czech Republic and the EU have had an agreement (28) to bring the Czech’s commercial and economic laws into line with EU law as a prelude to possible future membership of the EU. Therefore, EU competition law, which concerns the anti-competitive and concerted practices, abuse of a dominant position and preferential state aids that distort competition, must be taken into account regarding any business practices in the Czech Republic. Competition law could provide an alternative screening procedure for foreign investment to examine any threat of damage to national industry by means of merger or acquisition. In this perspective, the protection of indigenous industries could be based on the ground of the concern for consumers and the availability of a range of choice of products, which can include cultural diversity.

ASEAN countries follow an "Open Door" policy and thus liberalise investment so regional competition law, which is consistent to liberalisation, would play an important role in protecting domestic firms from damage such as in the Czech Beer case. ASEAN can thereby reconcile a positive approach to foreign investors, justified by the lack of regulatory control, while at the same time exercising control over undesirable market and social effects of FDI through laws that apply to foreign and domestic firms alike, notably competition law, merger & acquisition control regulation, and anti-monopoly control(29). In this way control over foreign investors and the preservation of the equal treatment of foreign investors and domestic investors in the same area of industry can be reconciled.

Therefore, ASEAN indigenous industries could be protected under the ASEAN regional competition law and policy, and by a regional merger control regulation. Moreover, consumer and local interest group opinion concerning some particular business or industries can be taken into account by the authority concerned(30).

In conclusion, the function of regional competition law and policy and the regional merger control regulation would be to ensure the review of mergers in ASEAN countries lacking effective domestic controls and lacking experiences in dealing with mergers and acquisitions so that member countries would be able to engage the support of the Regional Merger Task Force where concentration occurs that has significant actual or potential anti-competitive effects within any member countries. An ASEAN regional competition law and policy could ensure that regional economic strength would be enhanced and strengthened and that the regional open market that welcomes non-ASEAN trade and investment would not allow foreign firms to entirely dominate the regional economy. This complies with the main concept of open regionalism to enhance both intra- and extra- ASEAN trade and investment, so regional competition law and policy can be the suitable instruments facilitating the achievement of this goal.


(25)  In fact, ASEAN countries have been aware of this sensitive issue and have already promoted the small and medium firms in the region preparing them to be ready in competing with extra-ASEAN firms. See Joint Statement on East Asia Co-operation, 28 November 1999, Manila, The Philippines. Also each individual ASEAN country has set up Small and Medium Firm Networks to promote and strengthen S&M enterprises, for example, Malaysia set up the Small and Medium Industry Development Office, The Philippines set up the Bureau of Small and Medium Business Development to help promote S&M enterprises.

(26)  See Muchlinski, P. T. "A Case of Czech Beer: Competition and Competitiveness in the Transitional Economies" (1996) The Modern Law Review. Vol. 59: 5 (September), pp. 658-675.

(27)  The dispute was settled by the agreement of 4 September 1911, whereby the US brewer was granted exclusive use of "Budweiser" name in North America, while the Czech brewer was granted the name for the rest of the world. But it did not confer any right or imposed any restrictions on any part with the regard to the use of the name in Europe, nor did it prevent any party from establishing an exclusive right to use the Busweiser trade name as part of its trading style in any European country.

(28)  The Czech Republic has become a party to an EU Europe Agreement (EA), which entered into forced on 1 February 1995 to ensure greater convergence between EU economic laws and the national law of the non-EU contracting states, as a precondition for any future application for membership.

(29)  Muchlinski argued that "Maximum foreign shareholding limits in national laws have tended to be relaxed. The most promising avenue for regulation in competition law, in that a level of foreign ownership that may create an anti-competitive concentration can be legitimately challenged without upsetting the logic of free market policies. See Muchlinski (1996: 59).

(30)  For instance, the issue can be brought to the Regional Merger Task Force, within the spirit of the Regional Merger Regulation, consumer groups can request that the Task Force review a concentration