In almost all Asia-Pacific countries, the role and importance of small- and medium-sized enterprises (SMEs), not least in terms of contribution to GDP and job creation, can never be overestimated. Consequently, many governments have made substantial efforts to promote SMEs. In the past few decades, competition laws have been enacted in many countries with the aim of encouraging a healthy competitive environment for big and small businesses alike. Ideally, competition law would benefit SMEs by providing a safeguard against anti-competitive conducts by firms with significant market power. In practice, however, there is still a vast disconnect between SMEs and competition law. In some Asia-Pacific jurisdictions, competition law and enforcement do not fully recognize SMEs. In other countries, SMEs may be unaware of the existence of competition law. Such a disconnect would hinder SME development and lead to a slowdown in economic growth. It is quite surprising that little work in this area has been done in the past. Competition Law, Regulation and SMEs in the Asia-Pacific: Understanding the Small Business Perspective takes the first important step to address this sizeable knowledge gap.
What are effective ways to engage SMEs and raise their awareness of and compliance with competition law? How should a competition authority approach SME trade associations? Should SMEs merit differential treatment to reconcile the conflict between SME policies and competition law? These are a few examples of open questions the book has shed light on. Since there is no one-size-fits-all solution, the approach of the book is to take readers through a number of interesting real-life case studies on competition law enforcement and how regulatory agencies in various Asia-Pacific countries overcome the existing challenges. Such wide perspectives from seasoned contributors ranging from researchers to practitioners certainly help connect the dots.
As public policymaking is generally a complicated matter, different policies imposed by different government bodies sometimes serve overlapping or even conflicting goals. At first glance, the goals of competition law and SME policy may align well. But when examining the situation in detail, SME policy may accidentally encourage behaviors prohibited by competition law. As a result, policymakers need to make an integrated effort to minimize such policy conflicts. On the flip side, SMEs’ behaviors that infringe competition law are typically unprofitable and the impacts on markets are likely to be marginal. Given this presumption, an intention of competition law to create a level playing field may entail giving handicaps to SMEs and focus investigative efforts on large enterprises which have stronger unilateral incentives and more opportunities to create harmful effects on competition. Some jurisdictions lay out a special provision for SMEs instead of using per se rules. For example, Singapore and Australia still prosecute hardcore anti-competitive behaviors regardless of company size, but SMEs receive exemptions in other types of anti-competitive conduct.
The book goes on to discuss the implications of several categories of SME networks prevalent in Asia-Pacific countries: franchises, Chinese family firms and trade associations. They typically have complex vertical and horizontal relationships that may complicate investigations of non-compliant coordination. Although an individual SME's anti-competitive behavior may have little effect on the market, SMEs’ collective actions under dense relationship structures may lead to violations of competition law and cause non-trivial damage to competition. Coordination among SMEs in and across networks can pose serious challenges to competition authorities. When looking from a different angle, SME networks can be influential supporters of competition law. For instance, they can become a centralized engagement channel for members, provide appropriate training and even pursue legal actions against other firms on members’ behalf. Thus, competition authorities can lay the groundwork by using SME networks as a leverage to increase compliance.
One interesting empirical finding in this book is drawn from SME experiences in the United Kingdom where competition law has been in effect for decades. Despite the long history of competition law, many SMEs still reportedly fall victim to anti-competitive practices. It is even more worrying that only a small fraction of those affected SMEs has managed to file complaints with competition authorities. This raises some serious concerns: (1) many SMEs are not aware of the existence of competition laws, let alone fully understand them; (2) they may not realize that competition law is of use to them; and (3) they may perceive that pursuing legal actions may be too costly. This UK experience yields a valuable lesson for the Asia-Pacific countries.
Moreover, it is always a challenge for a regulator to convey to SMEs their legal rights and obligations. The book puts forth simple and sensible recommendations that a regulator should engage SMEs in a proactive, cooperative, and discretionary manner. The book also suggests highly feasible approaches to disseminate information and education materials through online channels. Key success factors include creating simple and SME-specific contents, obtaining third-party endorsement, awarding certification and so on.
The large section of the book that provides country case studies is particularly interesting as it discusses competition law enforcement experiences in various settings. For example, linguistically diverse societies such as Malaysia and China have been facing communication problems with their multilingual communities. Some economies such as the Pacific Island countries and China where regulators are small relative to the size of the jurisdiction have faced a problem of insufficient resources. Countries with long histories of SME promotion policies such as Japan and South Korea may peculiarly face many conflicts between their SME policies and competition laws. Interestingly, during its initial years, the Hong Kong competition authority focused its efforts on creating awareness and understanding for SMEs on competition law before taking on larger corporations.
Apparently, all countries have long recognized SMEs’ significant contribution to economic development, and viewed competition law as a means to shape a free and fair market environment for SMEs to grow. As competition law is fairly new to many Asia-Pacific countries, the competition authorities, given their limited resources, need to strike the right balance between educating all stakeholders and enforcing competition law. One key take-away is that competition regulators should take the driving seat while providing special care for SMEs. Not only do competition regulators need to actively engage SMEs about the benefits and the requirements of complying with competition law, but they have to ensure that SMEs and their associated networks understand the consequences of competition law breaches as well. In addition, regulators must recognize that SMEs, especially those in the Asia-Pacific markets, are characteristically diverse and, accordingly, that the regulators need a variety of engagement approaches. Lastly, under the rapidly evolving digital age, digital technology can empower SMEs and allow them to play a bigger part in global value chain where the scope of competition law and jurisdiction border become less clear. This changing competition landscape calls for rethinking of the relationship between competition law and SMEs. Competition authorities must be dynamic and be ready to adapt themselves to increasingly complex market conditions.
Competition Law, Regulation and SMEs in the Asia-Pacific: Understanding the Small Business Perspective is simple and yet insightful. The book's narrative simulates an experience of attending a seminar where many discussants share their perspectives on a wide range of topics related to competition law and SMEs. Although, probably intentionally, there is no conclusion that wraps up the findings and prescribes policy recommendation, the book provides many case studies for readers to understand implications and encourage further discussions. I believe the book is suitable for a broad group of readers. Policymakers and practitioners can learn from a range of experiences of how to make competition laws more workable. Researchers will find that the book, both implicitly and explicitly, provides useful guidance for directions of further research on this underexplored area.
