Competition Law
| Date | 01 December 2019 |
| 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 LLP. |
| Published date | 01 December 2019 |
| Publication year | 2019 |
| Citation | (2019) 20 SAL Ann Rev 230 |
10.1 The year 2019 saw the conclusion of the Competition and Consumer Commission of Singapore's (“CCCS”) investigations in both areas of competition and consumer protection. This follows the CCCS taking on the role of consumer protection in 2018, pursuant to which it now has new powers to take action under the Consumer Protection (Fair Trading) Act1 (“CPFTA”) against errant retailers.
10.2 While the CCCS issued only one infringement decision relating to anti-competitive agreements in 2019, a substantially reduced number compared to previous years, it was nevertheless an important decision. The decision was against four hotels in Singapore for exchanging commercially sensitive information. Importantly, the CCCS clarified the doctrine of single economic entity (“SEE”) in the context of principal-agent relationships. No infringement decisions were issued on abuse of dominance. Nonetheless, the CCCS managed to conclude its investigations against two lift spare parts suppliers after accepting the commitments offered by the parties.
10.3 With regard to notifications, the CCCS received two notifications in relation to s 34 of the Competition Act,2 both in the context of airline alliances, and three merger notifications. For merger review, the CCCS issued three unconditional clearances following the Phase 1 review and one conditional clearance after commitments were offered during the Phase 2 review period. The CCCS also announced that it was unable to clear the proposed acquisition of Daewoo Shipbuilding & Marine Engineering Co Ltd by Korea Shipbuilding & Offshore Engineering Co Ltd after its Phase 1 review. It remains to be seen as to whether the parties will offer commitments or commence the Phase 2 review.
10.4 On the consumer protection front, the CCCS has been active in its new role and commenced legal proceedings in three of the consumer protection cases. In summary, it managed to successfully obtain an injunction from the State Courts against the SG Vehicles group of companies (“SG Vehicles”) and its director; commenced investigations against Charcoal Thai 1 and ultimately obtained an undertaking from the company to cease its unfair practices; and filed an injunction against an e-commerce retailer, Fashion Interactive (“FI”).
10.5 As part of its statutory duties and functions, the CCCS has also published various papers and its market study report on the online travel booking sector. These papers are important, as they provide insights into the CCCS's areas of focus and its enforcement approach. A set of draft guidelines on price transparency has also been put up by the CCCS for public consultation. It offers guidance to retailers on their display and advertisement of prices, thus ensuring that they comply with the CPFTA.
10.6 At the international level, the trend towards increasing cooperation between competition authorities continues. Regionally, the CCCS concluded a memorandum of understanding (“MOU”) with the Asian Law and Economics Association in relation to their collaboration on ASEAN competition policy and law. Beyond the region, the CCCS signed a MOU with the Competition Bureau Canada on the enforcement of competition and consumer protection laws. This marks the first MOU entered into by the CCCS that encompasses both competition and consumer protection.
10.7 Section 34 of the Competition Act prohibits agreements entered into by undertakings, decisions by associations of undertakings and concerted practices which have as their “object or effect the prevention, restriction or distortion of competition within Singapore”. In 2019, the CCCS issued one infringement decision. The CCCS also received two separate notifications for decisions, both of which relate to airline alliances.
10.8 On 30 January 2019, the CCCS issued an infringement decision against the former and current owners and operators of four hotels, Capri by Fraser Changi City Singapore (“Capri Hotel”), Village Hotel Changi, Village Hotel Katong (collectively “Village Hotels”) and Crowne Plaza Changi Airport Hotel (“Crowne Plaza”). The parties were found to have exchanged commercially sensitive information in the market of providing hotel room accommodation to corporate customers in Singapore.
10.9 The investigations conducted by the CCCS revealed that two separate bilateral exchanges of commercially sensitive information took place. The first was between Capri Hotel and Village Hotels, and the second was between Capri Hotel and Crowne Plaza. In both exchanges, parties swapped information in relation to their corporate customers, rates, bid prices and pricing strategies. The information exchanges were carried out by sales representatives pursuant to instructions received from the operators to request for customer information from competitors.
10.10 In holding both the owners and operators equally liable for the anti-competitive conduct, the CCCS relied on the doctrine of SEE and found that the owners and operators were in principal-agent relationships. This was because the operators were the sole and exclusive managers of their respective hotels, and were wholly entrusted with the daily operations of the hotels. There was no evidence indicating that the owners expressly prohibited the exchange of commercially sensitive information; the owners were in fact being kept apprised of the operators' marketing strategies. Significantly, the CCCS pronounced that ignorance was no defence under competition law, even if the anti-competitive activities carried out by the operators fell outside the scope of activities entrusted to them.
10.11 The CCCS ultimately imposed a total fine of $1.5m on the parties. As the owners and/or operators of Village Hotels and Crowne Plaza successfully submitted leniency applications, the CCCS reduced their penalties to $286,610 and $225,293 respectively. For Capri, its owner and operator received a penalty of $793,925.
10.12 The first airline alliance notification related to an application by Emirates to remove the capacity commitments which it undertook in 2013 pursuant to its alliance with Qantas Airways Ltd (“Qantas”).4 Emirates' application was approved by the CCCS on 14 November 2019.
10.13 By way of background, the parties sought a decision from the CCCS as to whether their proposed alliance would infringe s 34 of the Competition Act (“the Alliance”) in 2013. The Alliance involved a global co-ordination of certain aspects of the flight services offered by the parties. This included planning, operating and capacity, sales, pricing, connectivity and integration of certain routes, and code sharing arrangements. As the Alliance allowed for the parties to co-ordinate on prices, scheduling, planning, operating and capacity, the CCCS viewed the Alliance as being effectively both pricing and production control agreements. The CCCS further rejected the parties' net economic benefit claims on the grounds that the purported economic benefits (for example, promotion of Singapore as an Aviation Hub, increase in Qantas' dedicated capacity to Singapore, increase in tourism and employment) did not result from the Alliance. In any event, the Alliance was not indispensable to achieving these benefits. To address the CCCS's competition concerns, the parties provided a voluntary undertaking to maintain minimum dedicated capacities on the Singapore-Melbourne and Singapore-Brisbane routes. The undertaking was to be in force for the duration of the Alliance.
10.14 On 16 April 2019, Emirates sought to vary the undertaking by removing the capacity commitment for the Singapore-Brisbane route. This was because Emirates had intentions to cease operating on that route due to capacity under-utilisation, declining revenue levels and rising costs. After carrying out its assessment and one round of public consultation, the CCCS concluded that even without Emirates' seat capacity commitment, sufficient competitive constraint was exerted on the parties, thus approving the removal of Emirates' capacity commitment.
10.15 The second airline alliance notification received by the CCCS was from Singapore Airlines Limited (“SIA”) and Malaysia Airlines Berhad (“MAB”) regarding their proposed commercial co-operation. The proposed commercial co-operation was to also apply to SIA's wholly owned subsidiaries (SilkAir (Singapore) Private Limited and Scoot Tigerair Pte Ltd) and MAB's sister company (FlyFirefly Sdn Bhd).
10.16 According to the parties' submissions, the proposed commercial co-operation related to the provision of international air passenger transport services between Singapore and Malaysia. The parties overlapped on seven routes, including those where the parties offered the services both directly and indirectly. However, the parties submitted that the relevant market should only consist of routes where only direct services were provided. This would only amount to two routes.
10.17 As for the scope of the proposed commercial co-operation, it included scheduling, pricing, sales and marketing co-operation, as well as other commercial areas (for example, expanded code sharing and special prorate arrangements). Further, the parties were of the view that the proposed commercial co-operation would give rise to various net economic benefits. For instance, they would be able to offer an enhanced air travel product for Singapore to Malaysia routes, and that there would be an expanded virtual network of airlines and competitive pricing.
10.18 At the time of writing, the CCCS had yet to issue its decision...
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