Competition Law

• Date: 01 December 2017
• Publication year: 2017
• Citation: (2017) 18 SAL Ann Rev 266
• Published date: 01 December 2017
• 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.

Overview of Competition Commission of Singapore's (“CCS”) decisions and work in 2017

10.1 The year 2017 has been a busy year for CCS, as seen from the culmination of several investigations conducted by CCS over the recent years. Within this year, CCS has one infringement decision and two proposed infringement decisions. Most notably, CCS imposed its largest fine to date on five capacitors manufacturers involved in the to-date largest price-fixing case in Singapore. Further, the Competition Appeal Board (“CAB”) has also issued its decision in relation to the appeal against CCS's 2016 decision to impose financial penalties ten financial advisers for pressurising a competitor to withdraw its offer from the life insurance market, the only appeal decision handed down in 2017.

10.2 CCS was equally busy with its review of mergers and acquisitions, where in 2017 alone, it received nine merger notifications, two of which have now proceeded into Phase 2 review and one of which was conditionally cleared subject to commitments.

10.3 In relation to sector-specific inquiries, CCS concluded three of CCS's market inquiries into studies the formula milk, automotive parts and retail petrol industries.

10.4 Of particular interest are the imminent changes to the Singapore competition landscape. The proposed amendments to the Competition Act, which CCS published for public consultation in December 2017, would certainly be the most significant. Another important shift would be the way in which competition law will react to technological developments, in particular the rise of big data and e-commerce. In this regard, CCS has indicated its approach in responding to such developments appropriately, as seen from its two e-commerce-focused seminars, a “Symposium: E-Commerce, ASEAN Economic Integration, and Competition Policy and Law [in Singapore]” – that was held jointly with the Institute of Southeast Asian Studies and Yusof Ishak Institute, and the “Competition Law Conference 2017 – New Approaches for a New Economy” (“CCS–SAL Competition Law Conference”), jointly organised by CCS and the Singapore Academy of Law (“SAL”). It therefore remains to be seen how these developments will culminate and impact competition law in the coming year.

Focus on big data and rapid advancement of technology

10.5 At the CCS–SAL Competition Law Conference on 16 August 2017, Lim Hng Kiang, Minister for Trade and Industry, highlighted in his keynote address that a big challenge currently facing competition authorities is finding ways to ensure that the regulatory frameworks and models remain effective and relevant, given the rapid advancement of technology and the emergence of big data. Given that businesses may adopt new market strategies to foreclose competition (for example, by monopolising data to drive out competitors), it becomes important for competition authorities to give greater weight to special market characteristics such as network effects, access to data and substitutability of data. CCS Chairman, Aubeck Kam, also observed that it may be a matter of time before CCS started relying on datasets of a merged entity instead of market shares, when assessing mergers.

10.6 CCS shared key findings from its research paper on the Singapore data landscape, which explored the implications of the proliferation of data analytics and sharing on competition law and policy. While it was concluded that the existing framework was sufficiently flexible to adapt to the changing competition landscape, CCS will monitor new developments and respond appropriately. As such, the Personal Data Protection Commission (“PDPC”) and CCS will be jointly exploring competition issues relating to data portability alongside a PDPC study of the benefits and risks in the increased use of algorithms in profiling and automated decision-making in Singapore.

10.7 The speeches indicate the approach that CCS will adopt in response to technological developments. This is important as there is a need to foster a business environment that balances promoting innovation by companies and ensuring that there is a level playing field for all.

Anti-competitive agreements, decisions of associations of undertakings, and concerted practices (section 34 of Competition Act)

10.8 Section 34 of the Competition Act prohibits all agreements between 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 particular, agreements which involve price-fixing, market-sharing, output control, and bid-rigging agreements are considered as “object” restrictions.

10.9 On 29 June 2017, CAB dismissed an appeal by IPP Financial Advisers (“IPP”) seeking a substantial reduction in the fine it received from CCS.1 By way of brief background, IPP (together with nine other financial advisers) was found to have infringed the Competition Act in 2016 by engaging in an anti-competitive agreement to pressurise a competitor (“iFAST”) to withdraw an offer of a 50% commission rebate on competing life insurance products (“Fundsupermart Offer”). IPP was fined $239,851 for its part in the infringement.

10.10 In its appeal, IPP made four main submissions. First, that the relevant turnover used to calculate the base financial penalty should only include new policies and not existing policies entered into before financial year 2014. This ensures that the financial penalty imposed has a direct relationship with the benefit that IPP had received for its anti-competitive behaviour. Second, the starting percentage of the financial penalty imposed ought to be smaller given the short-lived nature of the infringing conduct. Third, the duration of the infringement should have been decreased to a month. Lastly, CCS had failed to consider other mitigating factors.

10.11 These arguments were, however, rejected by CAB. With regards to the relevant turnover, CAB held that relevant turnover refers to an undertaking's entire turnover and should not be limited to revenue directly impacted by the infringement. According to CAB, this is consistent with the approach taken in jurisdictions such as the European Union (“EU”). Moreover, even if IPP's arguments were accepted, CAB found that IPP's infringing conduct would have affected both IPP's new and existing policies, as both IPP's new and existing policies would have benefitted from the reduction in competition as a result of the withdrawal of the Fundsupermart Offer. There are also strong public policy arguments – deterrence and punishment – in favour of imposing a higher financial penalty using the entire turnover of the last available financial year.

10.12 CAB did not agree that the starting percentage was excessive as it considered IPP's infringement to be an “object” restriction even if it did not constitute a hardcore infringement. Further, CAB regarded the starting percentage as being relatively low as CCS has already taken into

account the fact that the infringing conduct was less severe than hardcore infringements. Third, while CAB accepted that the short duration of the infringement may lead to a reduction in penalties, it will only do so if it incentivises the infringing undertakings to cease their anticompetitive conduct quickly. This was the approach adopted by the UK Competition Appeal Tribunal in Umbro Holdings Ltd v Office of Fair Trading.2 In this case, however, IPP's infringement was for a relatively short duration as the objective of the agreement had come to fruition relatively quickly. iFAST had complied with their request immediately so it was not necessary for parties to continue with their infringing conduct. Here, there was no conscious attempt to cease the infringing conduct.

10.13 CAB also rejected IPP's contentions that CCS had failed to properly consider that the undertaking operated in a high turnover, low profit margin industry. This was as IPP had failed to demonstrate that “monies passed through” to third parties was a significant proportion of its gross revenue. Further, IPP had failed to prove that the financial advisory industry as a whole consistently experienced high turnovers and low margins, given that the financial data submitted by IPP indicated volatility in its net profit margins. Similarly, CAB rejected IPP's assertions that there was genuine uncertainty over the legality of its conduct as it was a clear attempt to foreclose competition in the market for individual life insurance products.

10.14 Separately, in 2017, CCS issued two other infringement decisions, one proposed infringement decisions, and is currently consulting on proposed joint venture. The infringement decision was issued against Chemicrete Enterprises Pte Ltd, Cyclect Electrical Engineering Pte Ltd and Cyclect Holdings Pte Ltd (collectively, “Cyclect Group”), HPH Engineering Pte Ltd (“HPH”) and Peak Top Engineering Pte Ltd (“Peak Top”) for bid-rigging in the tenders for the provision of electrical services for the Formula 1 Singapore Grand Prix for 2015–2017.3 The allegation was that the Cyclect Group had prepared price schedules and final bid prices for HPH's and Peak Top's submissions for the F1 Tender, such that Cyclect Electrical would win the tender as agreed between the undertakings. The Cyclect Group and HPH were also found to have rigged the bids for another 2015 tender for the provision of asset tagging services for GEMS World Academy. As such, CCS imposed a collective fine of $626,118 on the parties. This case

reflects the extremely strict stance that CCS takes as it analyses facts reflective of a cartel, and the penalty imposed.

10.15 The first of the two proposed infringement decisions issued by CCS was against five capacitor manufacturers, Panasonic Industrial Devices Singapore and Panasonic Industrial Devices Malaysia Sdn Bhd, ELNA Electronics (S) Pte Ltd, Nichicon (Singapore) Pte Ltd, Rubycon Singapore Pte Ltd...