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Trends and climate

Trends
How would you describe the current merger control climate, including any trends in particular industry sectors?

Unnotified mergers 
Unnotified mergers remain a key focus for the merger enforcement efforts of the Competition Commission of Singapore (CCS). The CCS has stepped up its market surveillance and actively investigates transactions that have not been notified. Such investigations may be triggered by the CCS on its own initiative or by third-party complaints.

As part of its investigations, the CCS has issued merger probe letters to parties that may need to self-assess whether they should notify the CCS of their mergers.

In 2012 the CCS published the revised CCS Guidelines on Merger Procedures 2012, which emphasised, among other things, that its market intelligence function in triggering investigations is an integral part of the merger notification regime. In order to elicit information about particular mergers, the CCS may publish a notice on its website indicating that it is considering whether an unnotified completed or anticipated merger raises concerns under the Competition Act (Chapter 50B). The CCS also reiterated the risks of divestment and financial penalties for unnotified transactions.

In 2014 the CCS established its new policy and markets division for internal advocacy and market monitoring, to complement its enforcement efforts. In addition to advising other government agencies on national competition matters and related issues, the new division conducts market studies and surveillance and deploys market investigation tools – alongside other sector-monitoring tools – to identify areas for attention. Market studies are also employed to identify potential problems requiring future action.

Remedies and commitments
The CCS continues to stress that commitments accepted by overseas competition authorities do not necessarily imply that the CCS will allow a merger to proceed in Singapore. The CCS has recently formed a commitments and remedies unit for independent assessment of the suitability of proposed local and overseas commitments. In 2014 the CCS issued its first conditional clearance subject to local commitments, which signals an increasing trend towards targeted Singapore remedies (see CCS 400/004/14 – SEEK/JobStreet).

Complex reviews and blocked mergers
The CCS is also increasing the frequency of Phase II reviews. From January 2012 to December 2014, one in four merger filings proceeded to a Phase II review.

In 2015 the CCS also issued its second-ever provisional decision to block a proposed transaction (see CCS 400/010/14 –Parkway/RadLink).

Reform
Are there are any proposals to reform or amend the existing merger control regime?

The Competition Commission of Singapore (CCS) has not publicly announced any further proposals to reform or amend the existing merger control regime since the revised CCS Guidelines on Merger Procedures 2012.

Legislation, triggers and thresholds

Legislation and authority
What legislation applies to the control of mergers?

Section 54 of the Competition Act prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore for goods and services.

What is the relevant authority?

The Competition Act is administered and enforced by the Competition Commission of Singapore, which was established on January 1 2005 as a statutory body under the Ministry of Trade and Industry.

Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?

Mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market affecting Singapore will be caught by the prohibition under Section 54 of the Competition Act.

Pursuant to Section 54(2) of the Competition Act, a merger is deemed to occur where:

  • two or more previously independent undertakings merge;
  • one or more persons or other undertakings acquire direct or indirect control of the whole or part of one or more other undertakings; or
  • an acquisition by one undertaking (the first undertaking) of the assets (including goodwill), or a substantial part of the assets, of another undertaking (the second undertaking) places the first undertaking in a position to replace or substantially replace the second undertaking in the business or the part of the business in which the second undertaking was engaged immediately before the acquisition.

The prohibition under Section 54 of the Competition Act can also apply to joint ventures.

The following are excluded from the prohibition under Section 54 of the Competition Act:

  • mergers that are:
    • approved by any minister or regulatory authority (other than the Competition Commission of Singapore) pursuant to any requirement imposed by written law;
    • approved by the Monetary Authority of Singapore pursuant to any requirement imposed under any written law; or
    • under the jurisdiction of another regulatory authority under any written law or code of practice relating to competition;
  • mergers involving any undertaking relating to any specified activity as defined in Paragraph 6(2) of the Third Schedule to the Competition Act; and
  • mergers resulting in net economic efficiencies (eg, lower costs, greater innovation, greater choice or higher quality).

Do thresholds apply to determine when a transaction is caught by the legislation?

There are no jurisdictional safe harbours where mergers which do not trigger specified quantitative thresholds are exempt or excluded from Section 54 of the Competition Act.

Generally, the Competition Commission of Singapore (CCS) is likely to give further consideration to the merger if it meets the following quantitative thresholds:

  • The merged entity has a market share of 40% or more; or
  • The merged entity has a market share of between 20% and 40% and the post-merger market share of the three largest firms (ie, the concentration ratio of the three largest firms) is 70% or more.

The quantitative thresholds are based on the relevant markets defined in accordance with the rules set out in the gazetted CCS Guidelines on Market Definition, and can be broadly defined as local (ie, Singapore), regional or global.

The CCS also considers mergers that satisfy the following de minimis thresholds to be of more concern:

  • The turnover in Singapore (ie, turnover booked in Singapore as well as turnover from customers in Singapore) in the financial year preceding the transaction of at least one of the parties exceeded S$5 million; or
  • The combined worldwide turnover in the financial year preceding the transaction of all of the parties exceeded S$50 million.

The CCS has stressed that it may also investigate transactions that fall below the indicative quantitative thresholds and the de minimis thresholds. Parties must conduct a self-assessment to establish whether their merger could give rise to a substantial lessening of competition within any market affecting Singapore and should therefore be notified to the CCS.

Informed guidance
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?

Confidential advice
The Competition Commission of Singapore (CCS) provides for a confidential process for businesses to approach the CCS for advice, which is typically issued within 14 working days of the application. The confidential advice includes whether a merger is likely to raise competition concerns in Singapore and whether notification to the CCS is advisable, on the basis that such advice is provided without having taken into account third-party views.

This process is available only for transactions:

  • which raise a genuine issue relating to the competitive assessment in Singapore;
  • where there is a good-faith intention to proceed with the transaction; and
  • which are not in the public domain.

Confidential advice is not binding on the CCS and the CCS reserves the right to investigate the merger situation where the statutory test for doing so (ie, reasonable grounds to suspect that the prohibition under Section 54 of the Competition Act may be infringed) is met.

Pre-notification discussion 
Where the parties have decided to file, they are also encouraged to approach the CCS before filing for a pre-notification discussion to discuss the content and timing of their notifications. This is to identify further information that the CCS may require in assessing the filing. Where possible, the CCS will also indicate gaps in the information provided in the draft notification form. Such discussions can help the CCS to plan its work and facilitate an expeditious merger review process.

In the context of such discussions, the CCS does not give views on whether a merger situation would likely require Phase II assessment or would result in a substantial lessening of competition.

Foreign-to-foreign
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?

The prohibition under Section 54 of the Competition Act may apply even where the merger takes place outside Singapore or where any party is located outside Singapore, so long as the merger could have effect on any market affecting Singapore (whether as part of a global, regional or local market).

Joint ventures
What types of joint venture are caught by the legislation?

A joint venture may be subject to the prohibition under Section 54 of the Competition Act if it is considered a merger. In order to be considered a merger, a joint venture must fulfil the following criteria:

  • Joint control must exist, where two or more parties have the possibility of exercising decisive influence (including negative control) over that undertaking.
  • The joint venture must perform all the functions of an autonomous economic entity, where the joint venture operates on a market and performs the functions normally carried out by undertakings operating on that market, including having a management dedicated to its day-to-day operations and access to sufficient resources, including finance, staff and assets (tangible and intangible).
  • The joint venture must be intended to operate on a lasting basis.

A joint venture that merely takes over a specific function (eg, research and development or production) of its parent companies’ business activities without having access to the market is not considered a merger.

Whether a joint venture is prohibited under Section 54 of the Competition Act will depend on whether it results, or may be expected to result, in a substantial lessening of competition within any market affecting Singapore, and whether any exemptions or exclusions apply.

Notification

Process and timing
Is the notification process voluntary or mandatory?

Under the Singapore merger control regime, a merger notification to the Competition Commission of Singapore (CCS) is voluntary, but advisable if the merger may potentially result in a substantial lessening of competition in any relevant market or a market segment (defined in accordance with the rules set out in the gazetted CCS Guidelines on Market Definition).

Mandatory self-assessment
While merger notifications to the CCS are voluntary, the CCS requires all parties to mergers to conduct a self-assessment on whether a merger filing is necessary, in accordance with the methodologies in the guidelines published by the CCS, read with its decided cases. In cases where the CCS investigates a merger which was not notified, the CCS would expect the parties to explain why the merger was not brought to their attention and why a merger filing was not made.

Where the quantitative thresholds established by the CCS are exceeded, the CCS generally expects that a merger filing be made. Even where the quantitative thresholds are not crossed, a merger filing may nonetheless be necessary if there are qualitative factors which suggest that the transaction may give rise to a substantial lessening of competition.

In the event that the CCS finds that the transaction gives rise to an infringement of the prohibition under Section 54 of the Competition Act, the CCS will consider whether the infringement was entered into intentionally or negligently in determining whether financial penalties should be levied on the parties, apart from other directions and remedies.

In the context of cross-border transactions, the prohibition under Section 54 of the Competition Act may apply even where the merger takes place outside of Singapore, or where any party is located outside Singapore, so long as the merger has effect on any market affecting Singapore (whether as part of a global, regional or local market). In its assessment of the potential impact of global mergers, the CCS will also consider Singapore-specific factors. It is accordingly necessary to include an assessment of any Singapore-specific effects in the self-assessment as to whether the merger may give rise to a substantial lessening of competition within any market affecting Singapore.

Risks ensuing from failure to file
In the absence of a filing, parties bear the antitrust risk, as there is no limitation period after which the CCS may cease to have the power to investigate a transaction. There is accordingly an evergreen risk of an investigation and subsequent divestment or other remedies to the transaction, even where the transaction has been implemented for some time. The CCS has stated that it will generally not consider the divestment costs which the parties would incur, as it would have been open to them to notify the merger to the CCS for a decision. The only way to remove the antitrust risk is to undertake a merger notification and obtain clearance from the CCS.

Investigative risk
As part of its statutory remit in the context of merger control, the CCS keeps markets under review to ascertain which mergers and acquisitions are taking place.

Where the CCS identifies transactions that it considers may potentially raise concerns under the prohibition under Section 54 of the Competition Act, it will approach the parties, as well as third parties, to gather further information about the transaction and its effect on competition. The CCS has further stepped up its market surveillance recently and issued merger probe letters to parties that it judged needed to self-assess whether they should notify the CCS of their mergers.

A formal investigation may be triggered under Section 62 of the Competition Act if there are reasonable grounds to suspect that a merger has infringed or will infringe the prohibition under Section 54 of the Competition Act. Where the CCS investigates a transaction, it may publish a notification on its website.

The circumstances in which the CCS may be prompted to investigate are as follows:

  • following consistent complaints, or one or two substantiated complaints, from third parties;
  • where there are preliminary indications that the quantitative thresholds are likely to be crossed;
  • where customers in Singapore appear, post-merger, to have limited choice; or
  • for vertical mergers, where there is a possibility of competitors being foreclosed.

The CCS has previously raised serious doubts as to the compatibility of transactions with Section 54 of the Competition Act even where:

  • mergers by the same parties, or involving the same industry, had received clearance in other jurisdictions;
  • no significant issues were identified within the wider defined relevant markets, but the CCS had reviewed whether there may be competition issues within narrower market segments on a global or Singapore-specific basis; or
  • the quantitative thresholds were not crossed.

Closing risk
A CCS investigation may be triggered at any point before or after closing. There is no administrative timetable for the investigation and it can take several months. This may adversely affect the timeline for closing of the transaction or for implementation of the transaction post-closing.

Burden of proof risk
When the parties make a filing, the burden of proof is on the CCS to demonstrate why the arguments advanced in the filing are incorrect. The CCS will not generally look beyond the arguments raised unless an apparent area of concern has entirely not been addressed.

However, when the CCS investigates, it will already have formed its theories of harm and the burden of proof will be on the parties to demonstrate why the CCS is wrong. Anecdotally, this burden of proof is significantly harder to discharge.

The tenor of the merger review process is also materially harsher in case of investigations. The extent and volume of documents requested tend to be much greater. The CCS is likely, in an investigation, to require documents which the parties would not have included in a merger filing.

What timing requirements apply when filing a notification?

The Competition Act specifies no deadline for notification. If the parties wish to notify their merger to the Competition Commission of Singapore (CCS) for a decision, they may do so at any time before, during or after the merger.

To apply to the CCS for a decision on a merger or anticipated merger, Form M1 (the first notification form) must be completed and submitted to the CCS together with the prescribed fee. Once the CCS receives the complete Form M1 and the requisite filing fees, it will commence its Phase I review of the merger.

For anticipated mergers, an application can be made only once the parties have a good-faith intention to proceed with the transaction and the merger has been made public (or if the parties have no objection to the CCS publicising the merger).

In the case of completed mergers, an application may be made at any time – although parties are encouraged to notify as soon as possible after completion. If, at the end of the Phase I review, the CCS is of the opinion that it is necessary to proceed to a Phase II review, the CCS will notify the applicant of its decision to carry out a more detailed assessment. Phase II review will commence once the CCS receives a complete Form M2 (the second notification form) and a response to the CCS’s Phase II information request which the CCS considers satisfactory.

What form should the notification take? What content is required?

The broad areas of information required for Form M1, the first notification form, include:

  • the details of the transaction;
  • information on the parties to the transaction, including their ownership structures and the relevant overlapping products and services;
  • estimates of market shares;
  • information on the nature of competition in the relevant markets affected by the transaction, including on the elements of competition, competitors (including their competitive strengths), factors affecting market entry and bargaining power of customers and suppliers;
  • efficiencies expected to arise from the transaction; and
  • supporting documents, including:
    • the relevant transactional documents;
    • the most recent annual reports and accounts of the parties;
    • documents prepared to assess, analyse or give a view on the merger; and
    • the business plans of the parties (and, if available, for the merged entity).

The broad areas of further information required for the second, more detailed notification form, Form M2, include:

  • information on supply structures in the relevant markets, including on suppliers to the parties, distribution channels and service networks, capacity estimates and pipeline products;
  • information on demand structures in the relevant markets, including on market phases, customer preferences, product differentiation, customer concentration, types of customer and distribution or long-term contracts;
  • the importance of research and development in the relevant markets;
  • the prevalence of cooperative agreements in the relevant markets;
  • efficiencies expected to arise from the transaction, including detailed explanations of how the efficiency is expected to be achieved and quantifications of the efficiency;
  • any applicable failing firm defence; and
  • supporting documents on the failing firm defence (if applicable), and other supporting documents to submissions.

The Competition Commission of Singapore may, by giving notice to the applicant, dispense with the obligation to submit any particular information or document forming part of the Form M2 if it considers that such information or document is unnecessary.

Is there a pre-notification process before formal notification, and if so, what does this involve?

Pre-notification discussion 
Where the parties have decided to file, they are also encouraged to approach the Competition Commission of Singapore (CCS) before filing for a pre-notification discussion to discuss the content and timing of their notifications. This is to identify further information that the CCS may require in assessing the filing. Where possible, the CCS will also indicate gaps in the information provided in the draft notification form. Such discussions can help the CCS to plan its work and facilitate an expeditious merger review process.

In the context of such discussions, the CCS does not give views on whether a merger would likely require Phase II assessment or would result in a substantial lessening of competition.

Pre-clearance implimentation
Can a merger be implemented before clearance is obtained?

There is no requirement to suspend implementation of a merger or anticipated merger before clearance by the Competition Commission of Singapore (CCS). However, parties that give effect to or proceed with mergers before CCS clearance should note that they do so at their own commercial risk, as the CCS has the power to unwind a merger that has already been effected and – in the case of intentional or negligent infringements – to impose financial penalties if it decides that the merger infringes the prohibition under Section 54 of the Competition Act.

Guidance from authorities
What guidance is available from the authorities?

Confidential advice
The Competition Commission of Singapore (CCS) provides for a confidential process for businesses to approach it for advice, typically issued within 14 working days of the application. The confidential advice includes an indication of whether a merger is likely to raise competition concerns in Singapore and whether a notification to the CCS is advisable, on the basis that such advice is provided without having taken into account third-party views.

This process is available only for transactions:

  • which raise a genuine issue relating to the competitive assessment in Singapore;
  • where there is a good-faith intention to proceed with the transaction; and
  • which are not in the public domain.

Confidential advice is not binding on the CCS and the CCS reserves the right to investigate the merger situation where the statutory test for doing so (ie, reasonable grounds to suspect that the prohibition under Section 54 of the Competition Act may be infringed) is met.

Pre-notification discussion 
Where parties have decided to file, they are also encouraged to approach the CCS before filing for a pre-notification discussion to discuss the content and timing of their notifications. This is to identify further information that the CCS may require in assessing the filing. Where possible, the CCS will also indicate gaps in the information provided in the draft notification form. Such discussions can help the CCS to plan its work and facilitate an expeditious merger review process.

In the context of such discussions, the CCS does not give views on whether a merger would likely require Phase II assessment or would result in a substantial lessening of competition.

Fees
What fees are payable to the authority for filing a notification?

The table below illustrates the prescribed fees payable to the Competition Commission of Singapore for a notification for decision on mergers or anticipated mergers. 

Description Amount of fees
Where all the merger parties are small or medium-sized enterprises (ie, with an annual sales turnover of not more than S$100 million (approximately US$76 million) or not more than 200 employees) S$5,000 (approximately US$3,800)
In the case of mergers by acquisition of control or assets (including a joint venture), where the acquirer is a small or medium-sized enterprise and direct or indirect control of the acquirer is not or will not be acquired  S$5,000 (approximately US$3,800)
Where the turnover of the target or turnover attributed to the acquired asset is equal to or less than S$200 million (approximately US$151 million) S$15,000 (approximately US$11,300)
Where the turnover of the target or turnover attributed to the acquired asset is between S$200 million and S$600 million (approximately between US$151 million and US$454 million) S$50,000 (approximately US$37,800)
Where the turnover of the target or turnover attributed to the acquired asset is above S$600 million (approximately US$454 million) S$100,000 (approximately US$75,600)

Publicity and confidentiality
What provisions apply regarding publicity and confidentiality?

Publicity
Upon acceptance of a complete Form M1 (the first notification form) – together with the necessary supporting documents and prescribed fees – the Competition Commission of Singapore (CCS) will publish a summary of the merger on the public register on its website. The summary is provided by the applicant as part of the Form M1. The recent practice of the CCS has been to issue a media release together with acceptance of the notification published on the public register.

Third parties are invited to provide comments to the CCS on the merger, and any commitments contemplated, via an invitation to comment on the CCS website.

The CCS will update the status of its review on the public register – for example, when it is considering commitments, when it is proceeding to a Phase II review and when it makes a decision on the notified merger.

Confidentiality
In submitting the Form M1, Form M2 (the second notification form) and any other submissions to the CCS, applicants are required to provide both confidential and non-confidential versions, as well as confidential and non-confidential versions of the supporting documents. The CCS is obliged under Section 89 of the Competition Act to preserve the secrecy of confidential information which it receives.

The confidentiality claims of the applicants are subject to acceptance by the CCS. In considering such claims, the CCS will have regard to the grounds for confidentiality set out in Section 89(6)(b) of the Competition Act and Regulation 2 of the Competition (Notification) Regulations 2007, which include information that could reasonably be considered to be commercially sensitive or relating to the personal affairs of an individual.

The CCS will also exercise its discretion in considering whether the information claimed is confidential. It will generally not accept confidentiality claims over information which, in the CCS’s view, is:

  • publicly available;
  • not confidential because disclosure would not harm the business;
  • not confidential because it merely reflects the applicant’s views of how the relevant market could be analysed. Such information can be produced by reasonably well-informed market participants, trade analysts and legal or economic advisers; and
  • not confidential because it can reasonably be expected to be general knowledge within the industry or is likely to be readily ascertainable by any reasonably diligent market participant or trade analyst.

Pursuant to Section 89(6)(c) of the Competition Act, the CCS must also consider the extent to which disclosure is necessary for the purposes for which it proposes to make the disclosure.

If the confidentiality claims are accepted, the CCS will not generally disclose any confidential information received to any other parties. Instead, the CCS may use the non-confidential version of the submissions and supporting documents both to facilitate its discussion with third parties and to enable the CCS to publish a non-confidential version of its decision without delay.

In the event that any confidentiality claims are not accepted by the CCS, the CCS will generally liaise with the applicant before any disclosure to consider how any detriment to the applicant could be minimised.

The CCS will also generally provide applicants with the opportunity to review its decision to ensure that confidentiality claims and the accuracy of factual statements have been maintained before publishing a merger decision.

Penalties
Are there any penalties for failing to notify a merger?

In the event of a Competition Commission of Singapore (CCS) finding that the transaction gives rise to an infringement of the prohibition under Section 54 of the Competition Act, it will consider whether the infringement was intentionally or negligently committed in determining whether financial penalties should be levied on the parties, apart from other directions and remedies. The CCS may impose financial penalties of up to 10% of the turnover of the undertaking in Singapore for each year of infringement – up to a maximum of three years – and remedies on parties to the transaction, such as a direction for the merger to be unwound or for divestments to be carried out. 

Procedure and test

Procedure and timetable
What procedures are followed by the authority? What is the timetable for the merger investigation?

There are two phases for a Competition Commission of Singapore (CCS) review of a notified merger.

The CCS is subject to no statutory deadlines for its review process. When the CCS receives an application for notification, it first determines whether Form M1 (the first notification form) is complete and the application otherwise meets all of the requirements. If so, the CCS Merger Procedure Guidelines 2012 prescribe an indicative timeframe of 30 working days within which the CCS should complete its Phase I review. The clock starts to run from the date on which a complete Form M1 is submitted and the requisite filing fee is paid. By the end of this period, the CCS will decide whether to issue a favourable decision to allow the merger to proceed or move on to a Phase II review.

If the CCS decides to proceed to a Phase II review, it will notify the applicant of its decision to carry out a more detailed assessment. The indicative timeframe for a Phase II review is 120 working days, commencing from the date on which the CCS receives a complete Form M2 (the second notification form) and a satisfactory response to its Phase II information request.

In both Phase I and Phase II review, the CCS may require the applicant to provide additional information. If the applicant is unable to provide the requested information by the deadline stipulated by the CCS, an extension may be requested. If the CCS extends the deadline, it may stop the clock until the requested information is provided, thereby extending the 30-working day (Phase I) or 120-working day (Phase II) indicative review period.

At any time during the Phase I or Phase II review process, the parties (which may not be limited to the applicant if a sole filing is made) may offer commitments to the CCS to remedy the adverse effects of the transaction. In order to accommodate the commitments procedure in a Phase I review – including for public consultation on the proposed commitments – the CCS is likely to extend the indicative timeline by 20 working days or more, at its discretion. An extension may also be required in a Phase II review.

Where the CCS proposes to make an infringement decision at the end of the Phase II review, it will issue a notice to the applicant setting out its provisional statement of decision. The applicant’s written response to the provisional statement of decision will be its last opportunity to propose commitments or give their views on the remedies proposed by the CCS. However, even where the parties propose commitments, the CCS may consider and impose alternative remedies.

In contrast to a merger notification, there is no administrative timetable for the CCS to conclude a merger investigation commenced on its own initiative. The risk of such investigation is evergreen and an investigation may be triggered at any time before or after closing.

What obligations are imposed on the parties during the process?

Implementation of merger
There is no requirement to suspend implementation of a merger or anticipated merger before clearance by the Competition Commission of Singapore (CCS). However, parties that give effect to or proceed with mergers before CCS clearance should note that they do so at their own commercial risk, as the CCS has the power to unwind a merger that has already been effected and – in the case of intentional or negligent infringements – to impose financial penalties if it decides that the merger infringes the prohibition under Section 54 of the Competition Act.

Accuracy obligation 
Each applicant must sign a declaration stating that the information submitted in Form M1 or Form M2 (the first and second notification forms) is correct to the best of its knowledge and belief.

The applicant also has a continuing obligation to inform the CCS of any material changes in the information contained in the notification, after the notification has been made.

Recklessly or intentionally providing false or misleading information to the CCS is an offence under the Competition Act.

Requests for additional information
In both the Phase I and Phase II review, the CCS may require the applicant to provide additional information. If the applicant is unable to provide the requested information by the deadline stipulated by the CCS, an extension may be requested. If the CCS extends the deadline, it may stop the clock until the requested information is provided.

If the requested information is not provided within the deadline (and any extensions which may have been granted), the CCS may determine the application by withholding a decision and may then commence its own investigation into the merger using its statutory powers.

What role can third parties play in the process?

The Competition Commission of Singapore (CCS) has stated in its Guidelines on Merger Procedures 2012 that information provided by third parties plays an important role in its assessment of mergers. The CCS obtains relevant information from third parties via:

  • public consultation – information on mergers notified to CCS is published on the CCS website. All interested third parties are invited to submit their views on the merger to the CCS; and
  • contacting third parties directly – third parties, such as the parties’ main customers, suppliers and competitors, may be approached by the CCS for their views on the transaction. Contact details of the parties’ top customers and competitors must be provided as part of Form M1 (the first notification form). The CCS may also contact other government bodies for their views. Where any of the parties is regulated by another government authority, the CCS will generally seek input from that authority.

Substantive test
What is the substantive test applied by the authority?

There are no jurisdictional safe harbours under which mergers that do not trigger specified quantitative thresholds are exempt or excluded from Section 54 of the Competition Act.

The substantive test applied is whether the merger has resulted, or may be expected to result, in a substantial lessening of competition within any market affecting Singapore. Apart from market shares, the Competition Commission of Singapore (CCS) will also assess how the dynamics of competition are affected by the merger and examine qualitative factors such as market entry and expansion, countervailing buyer power, market volatility, supply-side substitution, market transparency and cost stability in the market.

The CCS will also consider whether the substantial lessening of competition may be outweighed by other factors, such as:

  • efficiency gains (ie, whether such efficiencies may increase competition in the market or enhance competition among the remaining players in the market); and
  • the failing firm/division defence. In the case of a failing firm, where one of the parties to the merger is genuinely failing and likely to exit the market in the absence of the merger, the counterfactual scenario may need to be adjusted to reflect the likely loss of competition which will result from the exit of the failing firm.

Carve-outs
Does the legislation allow carve-out agreements in order to avoid delaying the global closing?

There is no requirement to suspend implementation of a merger or anticipated merger before clearance by the Competition Commission of Singapore (CCS). However, parties that give effect to or proceed with mergers before CCS clearance do so at their own commercial risk, as the CCS has the power to unwind a merger that has already been effected and – in the case of intentional or negligent infringements – to impose financial penalties if it decides that the merger infringes the prohibition under Section 54 of the Competition Act.

There is no express prohibition against carve-out agreements as a means of managing the risk of financial penalties, directions or remedies imposed by the CCS.

Test for joint ventures
Is a special substantive test applied for joint ventures?

No special substantive test is applied for joint ventures which are considered a merger under the Competition Act. The substantive test applied is whether the merger has resulted, or may be expected to result, in a substantial lessening of competition within any market affecting Singapore.

Remedies

Potential outcomes
What are the potential outcomes of the merger investigation? Please include reference to potential remedies, conditions and undertakings.

The Competition Commission of Singapore (CCS) may issue:

  • a favourable decision – that is, that a merger has not infringed or will not infringe the prohibition under Section 54 of the Competition Act. A favourable decision may be issued at the end of a Phase I or Phase II review;
  • a favourable decision subject to commitments – that is, that subject to the implementation of commitments, the merger will not infringe the prohibition under Section 54 of the Competition Act. The CCS may accept commitments proposed by the parties to remedy the adverse effects of the transaction at any time until it issues its final decision on the merger; or
  • an unfavourable decision – that is, that a merger has infringed or will infringe the prohibition under Section 54 of the Competition Act. An unfavourable decision is issued only at the end of a Phase II review. Apart from financial penalties, the CCS may impose directions to remedy, mitigate or prevent the substantial lessening of competition or any adverse effects resulting therefrom.

In relation to remedies, the CCS’s starting point is to choose the remedial action that will restore the competition that has been, or is expected to be, substantially lessened as a result of the merger. There are broadly two types of remedy which the CCS may consider – structural and behavioural.

The CCS prefers structural remedies to behavioural remedies, as they tend to address the competition concerns more directly and require less monitoring.

The CCS has recently formed a commitments and remedies unit to independently assess the suitability of proposed commitments and remedies.

Structural remedies
Typically, structural remedies require the sale of one of the overlapping businesses that have led to the competition concern. The sale should be completed within a specified period and the CCS must approve the proposed buyer before the sale of any business in order to ensure that it has the necessary expertise, resources and incentives to operate the divested business as an effective competitor in the marketplace.

Where appropriate, the CCS may also consider other structural or quasi-structural remedies – for example, divestment of the buyer’s existing business (or part of it) or an amendment to IP licences.

Behavioural remedies
The CCS will consider behavioural remedies in situations where divestments are considered to be impractical or disproportionate to the nature of the concerns identified. Where appropriate, the CCS may also implement behavioural remedies to support structural divestment.

In a recent decision (CCS Case CCS 400/004/14 – SEEK/JobStreet), the CCS took the view that the significant market power possessed by the merged entity could give rise to non-coordinated effects post-merger, such as the ability and incentive to:

  • provide loyalty rebates, exclusive contracts or bundling and tying of its products across its two brands which would prevent – or would be likely to prevent – customers from switching away; and
  • impose price increases.

The CCS accepted behavioural commitments, in addition to structural commitments, by the merged entity:

  • not to enter into exclusive agreements with employer and recruiter customers for a period of three years; and
  • to maintain the current pricing of services capped at present-day rate cards or current-day negotiated prices, subject to Consumer Price Index changes for a period of three years.

Appeals

Right of appeal
Is there a right of appeal?

Where the Competition Commission of Singapore (CCS) proposes to make an infringement decision, it will issue a notice setting out its provisional statement of decision. The applicant may then apply to the minister for trade and industry for the merger to be exempted on the grounds of any public interest consideration (ie, national or public security, defence and such other considerations as the minister for trade and industry may gazette). Should the application to the minister for trade and industry be unsuccessful, the CCS will make a final decision on the merger, after having taken into account any oral and written representations made by the applicant.

There is a right of appeal to the Competition Appeal Board (CAB) against any decision of the CCS in respect of a merger situation or any direction (including interim measures) imposed by the CCS. Any party may appeal the CCS’s decision in respect of a merger situation, while an appeal of a direction may be made by the party to which the CCS issued the direction.

There is no right to appeal the CCS’s refusal to accept any commitments offered, but the parties may appeal against its refusal to vary, substitute or release existing commitments.

The parties to the CAB proceedings may further appeal the decision of the CAB to the High Court and thereafter to the Court of Appeal, but only on points of law and the quantum of the financial penalty.

As of April 30 2015, the CAB had received 12 appeals and issued eight decisions. The CAB had not received an appeal in respect of a merger situation as of April 30 2015; the 12 appeals received by the CAB related to either Section 34 (against anti-competitive agreements) or Section 47 (against abuse of dominance) of the Competition Act. In six of the eight CAB decisions issued, the CAB upheld the findings and decisions of the CCS, but reduced the financial penalty that was initially imposed by the CCS.

Do third parties have a right of appeal?

Third parties have no right to appeal to the Competition Commission of Singapore (CCS) or Competition Appeal Board against any decision by the CCS in respect of a merger situation or any direction imposed by the CCS.

Time limit
What is the time limit for any appeal?

Where the appeal is against a decision of the Competition Commission of Singapore (CCS) in respect of a merger situation or any direction (including interim measures) imposed by the CCS, the notice of appeal must be lodged within four weeks of either the date on which the appellant was notified of the contested decision or the date of publication of the decision (whichever is earlier). On the application of the appellant, the Competition Appeal Board may, in its discretion, extend the timeframe for lodging the notice of appeal.

Law stated date

Correct as of
Please state the date as of which the law stated here is accurate.

The law stated here is accurate as of April 30 2015.