Competition Law
| Published date | 01 December 2014 |
| Citation | (2014) 15 SAL Ann Rev 185 |
| Author | Kala ANANDARAJAH LLB (Hons) (National University of Singapore), MBA (Banking and Finance) (Nanyang Technological University of Singapore); Advocate and Solicitor (Singapore); Partner, Head, Competition & Antitrust and Trade Practice, Rajah & Tann Singapore LLP. |
| Date | 01 December 2014 |
[The Writer Acknowledges The Assistance Of Joey Pang, Associate, Rajah & Tann Singapore LLP, In The Update Of This Article.]
10.1 2014 saw a number of important firsts for competition policy and law in Singapore as the Competition Commission of Singapore (CCS) grew in assertiveness and sophistication and utilised an increasing repertoire of tools to regulate Singapore's increasingly dynamic and complex marketplace. This update examines the cases and developments in the last year, adopting a similar approach to the previous updates and touches on, inter alia, extraterritorial enforcement, price-fixing agreements, single economic entity, net economic benefit, dominance, merger notifications, behavioural and structural commitments, the failing firm defence, the new whistle-blower rewards programme and other developments.
10.2 In 2014, there was a sharp increase in the number of decisions issued by the CCS due to the spike in the number of merger notification decisions.
10.3 In relation to decisions concerning s 34 of the Competition Act (Cap 50B, 2006 Rev Ed) (the Act) which deals with anti-competitive agreements, there was no significant increase in the number of decisions issued by the CCS in 2014 when compared to 2013. 2014 saw four notifications, all related to the airline industry, seeking and obtaining CCS's clearance of their proposed commercial arrangements. Significantly, the CCS investigated two international cartels, the first time it has done so and these investigations culminated in the issuing of two landmark infringement decisions in 2014, namely, Infringement of the Section 34 Prohibition in Relation to the Provision of Air Freight Forwarding Services for Shipments from Japan to Singapore CCS 700/003/11 (11 Decembe 2014) (Freight Forwarding) and Infringement of the Section 34Prohibition in Relation to the Supply of Ball and Roller Bearings CCS 700/002/11 (27 May 2014) (Ball Bearings) respectively.
10.4 Similar to the previous year, no new cases regarding the s 47 prohibition against the abuse of dominance were reported in 2014. Hitherto, the Abuse of Dominant Position by SISTIC.com Pte Ltd CCS 600/008/07 (4 June 2010) (SISTIC) remains the first and only infringement decision concerning the abuse of a dominant position. While the CCS also investigated Coca-Cola in 2012 for abuse of dominance, this investigation, being the only other reported case, was ceased with no infringement decision issued as the CCS was satisfied with Coca-Cola's behaviourial commitments to amend some of its business practices.
10.5 In terms of merger notifications in 2014, the CCS received and cleared a record number of mergers notifications. Ten mergers were notified to the CCS, with eight cleared unconditionally compared to three in 2013. Three mergers (including one notified in 2013) were also subjected to Phase 2 reviews in 2014 although only two eventually remained as the 2013 merger notification application was withdrawn. Of the two remaining merger notifications, one was conditionally approved on the back of behavioural and divestiture commitments, the first time that the CCS has done so, while the decision for the other was blocked in a provisional decision by the CCS and the proposed merger subsequently abandoned. Besides merger notifications, a number of confidential advice requests were also made to the CCS. However, owing to the confidential nature of such requests, it is unclear whether such proposed mergers ultimately continued without further notification or were aborted.
Extraterritorial enforcement
10.6 A significant development in 2014 was CCS's exercise of its extraterritorial enforcement powers. In this regard, even though the CCS as the enforcing authority of the Act has had the power to investigate anti-competitive activities outside of Singapore since its inception, it was not until 2014 that the CCS exercised these extraterritorial powers when it investigated and issued infringement decisions in Ball Bearings and Freight Forwarding (above, para 10.3).
10.7 Under s 33(1) of the Act, ss 34, 47 and 54 prohibitions may be applied on agreements, parties and/or mergers made outside of Singapore so long as the elements of the respective prohibitions are made out. Specific to s 34, the CCS Guidelines on the Section 34 Prohibition at para 2.2 clearly states that notwithstanding the fact that an agreement [is] made outside Singapore, [or] an agreement where any party to the agreement is outside Singapore or any other matter, practice or action arising out of such an agreement [is] outside Singapore, such an agreement will be prohibited if the agreement has as its object or effect the prevention, restriction or distortion of competition within Singapore [emphasis in original omitted].
10.8 In Ball Bearings, the first time that the CCS exercised its extraterritorial enforcement powers, the CCS disclosed that it investigated four Japanese ball and ring bearings manufacturers and their Singapore subsidiaries for engaging in anti-competitive agreements and unlawful exchange of information in respect of the price and sale of ball and roller bearings sold to aftermarket customers in Singapore: CCS media release, CCS Imposes Penalties on Ball Bearings Manufacturers Involved in International Cartel (27 May 2014) at para 1. The CCS noted that the infringing activities took place both in and outside of Singapore and these infringing activities were carried out by both the parent companies in Japan and their respective subsidiaries in Singapore.
10.9 In Freight Forwarding where ten freight forwarding companies were investigated by the CCS for collectively fixing certain fees and surcharges, and exchanging price and customer information in relation to the provision of air freight forwarding services for shipments from Japan to Singapore (CCS media release, CCS Fines 10 Freight Forwarders for Price Fixing (11 December 2014) at para 1), the CCS stated in no uncertain terms that the fact that the infringing agreements took place only in Japan was no bar to the CCS investigating the companies for the s 34 prohibition.
10.10 In this regard, the CCS stated (at para 67) that the section 34 prohibition applies notwithstanding that an agreement has been entered into outside Singapore or that any party to such agreement is outside Singapore due to the operation of s 33(1) of the Act. Helpfully, the CCS also elaborated (at para 340) that:
Section 33(1) of the Act provides that notwithstanding that an agreement referred to in section 34 has been entered into outside Singapore; any party to such agreement is outside Singapore; or any other matter, practice or action arising out of such agreement is outside Singapore, the Act applies if such an agreement infringes or has infringed the section 34 prohibition.
Price-fixing agreement
10.11 In Freight Forwarding, the CCS was posed with an interesting submission by some of the parties in relation to whether an agreement to pass on to shippers the fuel surcharges which were imposed by and with rates determined by airlines was a price-fixing agreement. On this, the CCS found that there was price fixing. It noted (at para 515) that by agreeing to uniformly pass through the fuel surcharge to shippers and monitoring adherence to this [the agreement to pass through the fuel surcharge], [t]his in essence fixes the pricing of the JFS [that is, fuel surcharge imposed by the parties on shippers]. Specifically, the CCS elaborated in the same paragraph that the parties were:
informing one another of their success in imposing this agreed amount for the JFS [that is, the pass through surcharge] by reporting their respective collection ratio for the JFS [that is, the pass through surcharge] during JAFA meetings [that is, industry association meetings attended by the parties].
Hence, whilst the act of passing on fuel surcharges is not proscribed, the co-ordinated and agreed act of parties to pass on such surcharges is a form of price fixing caught by s 34 of the Act.
Object or effect of preventing, restricting or distorting competition
10.12 It is trite law that under s 34 of the Act, the CCS has the burden to prove that an infringing agreement or conduct in question has as [its] object or effect the prevention, restriction or distortion of competition within Singapore. Specifically in making this assessment, the CCS Guidelines on the Section 34 Prohibition at para 2.18 has provided that:
An agreement will fall within the scope of the section 34 prohibition [only] if it has as its object or effect the appreciable prevention, restriction or distortion of competition unless it is excluded or exempted. [emphasis in original]
Paragraph 2.20 has also provided that:
An agreement involving...
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