On 25 September 2015, the Competition Commission of Singapore (“CCS”) issued for public consultation various amendments to its guidelines. This is the first major overhaul of most, if not all, of the CCS‟ guidelines since the Competition Act (Cap. 50B) (“Act”) came into force on 1 January 2006. This public consultation is open from 25 September 2015 to 6 November 2015. As this is the first time that the CCS is undertaking a substantive and wide-ranging review of its guidelines, stakeholders would be well advised to review the public consultation papers and submit their responses to the CCS.
There are a number of points / issues arising from the proposed changes. This update only sets out these changes but does not comment on them. A private session will be held on 14 October 2015 to discuss the key issues arising from these changes. If you would like to join us, click here.
Substantive Assessment of Mergers
The merger regime in Singapore is a voluntary one, and businesses are generally advised to undertake a self-assessment on whether their proposed merger is likely to result in a substantial lessening of competition within any market in Singapore. In the 2012 Guidelines on Merger Procedures, the CCS had introduced various initiatives, including allowing for a confidential advice to be sought from the CCS and allowing for a „safe harbour‟ for small and medium enterprises whose turnover in Singapore in the financial year preceding the transaction is below S$5 million and whose combined worldwide turnover in the financial year preceding the transaction is below S$50 million.
To further assist businesses in Singapore in undertaking a self-assessment, in the Draft Guidelines On The Substantive Assessment Of Mergers (“Draft SAM Guidelines”), the CCS proposes the following –
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A New Fast Track Procedure
Drawing on the experience of other jurisdictions such as the European Commission and the UK Competition Markets Authority, the CCS proposes to introduce a fast track procedure for Section 34 and Section 47 investigations.
The purpose of this fast track procedure is to allow the CCS to more effectively and efficiently enforce the Act, and to allow parties being investigated the opportunity to admit liability for infringing the Competition Act and be eligible for a fixed percentage reduction (proposed to be set at 10%) in the amount of financial penalty they have to pay.
However, parties are not obligated to accept the fast track procedure, and even when the fast track procedure has started, both the CCS or any of the parties being investigated may decide to discontinue the fast track procedure at any time. When this happens, the process will revert to the normal investigation procedure, and any information or documents provided in the course of the fast track process will be deemed withdrawn and cannot be used as evidence by the CCS against the parties.
The fast track process has four stages - initiation, discussion, agreement and acceptance. Each of these stages will be discussed in greater detail below.
The CCS has the discretion in deciding, on a case by case basis, whether an investigation is suitable for the fast track procedure. In deciding whether such an investigation is suitable, the CCS may take into account factors such as: the number of parties in the investigation, the number of parties that have proactively indicated to the CCS their willingness to engage in the fast track discussion, whether the parties‟ relative positions will have foreseeable divergences, whether the parties‟ may have contradicting positions in relation to the attribution of liability, and in general to what extent are there facts which may be contested.
If the CCS decides that an investigation is suitable for the fast track procedure, it will initiate the procedure by sending a letter to each party in the investigation to invite the parties to indicate their interest, within a 2 week timeframe (unless an extension is granted), in engaging in discussions.
This decision to initiate can only take place before any infringement decision (“ID”) is made, but may be before or after a proposed infringement decision (“PID”). If the parties decide to enter into discussions, then CCS and each such party will enter into the next phase of the procedure, which is the discussion stage.
During this stage, the CCS and each party that has opted to continue with the fast track procedure will enter into discussions on (i) the scope and gravity of the conduct, including the infringements the CCS is contemplating making a PID/ID about; and (ii) the possible range and/or quantum of financial penalties.
The CCS may, if appropriate, inform the party about what evidence was used to determine the scope of the contemplated infringement; and non-confidential versions of key documents that may be necessary for the party to ascertain its own position in relation to the contemplated infringement.
Each party will be allowed to state its views on alleged facts, classification of the infringement, gravity and duration of the infringement, and its liability for its involvement in the infringing conduct. These views must be supported by evidence.
If the discussion stage leads to an understanding between the CCS and parties regarding the scope of the potential infringement and the range of potential penalties, then each party will be given a timeframe to express their intention and willingness to utilise the fast track procedure moving forward. This is done by
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way of a “Fast Track Procedure Submission” to the CCS which sets out the terms of the fast track procedure.
The CCS has said that it will typically only proceed with the fast track procedure when all parties in a potential infringement decision agree to the procedure. However, depending on the facts of each case, the CCS may still proceed with the fast track procedure even if not all parties proceed with the discussion stage, or further.
At the end of the discussion stage, each party who has come to an understanding with the CCS will make their fast track procedure submissions to the CCS and then sign an agreement with the CCS containing the following:
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Any other terms, besides the above, that have been agreed between CCS and the party during the discussion stage will also be stated in the agreement.
A party will only be deemed to have accepted the fast track procedure when it has entered into the fast track agreement with the CCS.
Acceptance and CCS’ decision
After the agreement is signed, the CCS will issue its PID or ID, depending on the stage at which the fast track procedure was initiated. If a PID is issued, the party may make concise representations within a limited time period to identify any material factual inaccuracies in the PID.
The PID/ID will provide for a 10% reduction in the financial penalty, in addition to any leniency reduction. For example, if a party is granted a 40% reduction due to leniency, and a further 10% due to the fast track procedure, the party will receive a total of 50% reduction in penalty.
Note that at any point, the CCS retains the right to issue a PID/ID that departs from the position agreed between the party and the CCS during the fast track procedure. If it does so, the party will be notified, and the investigation will revert to the normal procedure.
Review of the Leniency Regime
The leniency programme in Singapore allows undertakings which are participating in cartel activities to disclose the existence of such cartels to the CCS, and in so doing, obtain immunity from / a reduction in the financial penalties they would otherwise face for such cartel activity. In its review of the leniency programme guidelines, the CCS has proposed both procedural and substantive changes in the CCS Guidelines on Lenient Treatment for Undertakings Coming Forward with Information on Cartel Activity (the “Draft Leniency Guidelines”).
The key changes in the Draft Leniency Guidelines are outlined below:
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applicant or its legal representatives to provide secretarial and/or administrative support in this regard.
(e) The Draft Leniency Guidelines also set out what happens to information submitted to the CCS in the course of a leniency application. In particular, if a leniency application is withdrawn or rejected, the leniency applicant may choose to either withdraw the information submitted, or still provide the information to the CCS as a mitigating factor in reducing the financial penalties to be imposed. If information is withdrawn by the applicant, CCS is not prevented from using its formal powers of investigation to obtain the information.
Other Proposed Changes
In addition to the changes set out above, the CCS also proposes to update the definition of a Small and Medium Enterprise (“SME”) to reflect the new definition of SME by SPRING Singapore. SPRING Singapore‟s new definition is that an SME refers to an undertaking of annual sales turnover of less than S$100 million or not having more than 200 employees.
Apart from the above, in the Draft Guidelines on the Section 34 Prohibition (“Draft Section 34 Guidelines”), the CCS makes clear that the unilateral disclosure of information by one undertaking to another may constitute an infringement of the Act, where such unilateral disclosure is the result of a request by the recipient or where the recipient of the information accepts the disclosure. The CCS also clarifies that apart from the hard core agreements involving price-fixing, bid-rigging, market sharing or output limitations, once an agreement is found to have as its object the restriction of competition, it will also be regarded as restrictive of competition to an appreciable extent and consequently, there is no need for the CCS to prove appreciable adverse effects on competition. Further, the CCS clarifies that any information exchange with the objective of restricting competition will be considered as a restriction of competition by object.
Finally, the CCS in the Draft CCS Guidelines on the Appropriate Amount of Penalty (“Draft Penalty Guidelines”) sets out a 6 step process which the CCS uses when calculating the financial penalty that it will impose on an undertaking for an infringement of the Act. On this, the CCS provides a clear definition of „relevant turnover‟, i.e. the turnover of the business of the undertaking in Singapore for the product and geographic market affected by the said infringement.
This consultation paper marks the first time that the CCS is undertaking a substantive overview of its guidelines since the Act came into force more than 10 years ago. It presents a valuable opportunity for businesses to provide feedback to the CCS on the proposed changes and areas for further change or clarification. Businesses who wish to submit their responses to the consultation are encouraged to start preparing early in order to meet the deadline of 6 November 2015. Businesses are also advised to review the consultation paper carefully and understand the implications of the proposed changes so that they are better prepared to respond to these changes if they are passed.
Should you have any queries or wish to speak to us on the above, including assisting your business in preparing submissions to the CCS consultation, please do not hesitate to contact us at firstname.lastname@example.org or email@example.com.