- In the first abuse of dominance case under Singapore’s Competition Act, the Competition Appeal Board (Appeal Board) upheld an abuse of dominance decision by the Competition Commission of Singapore (CCS) against SISTIC, Singapore’s largest ticketing services provider.
- The Appeal Board held that 19 exclusive agreements that SISTIC had entered into with venue operators and event promoters foreclosed existing or potential competition. The Appeal Board’s decision largely vindicates the CCS’s approach to the facts and application of the law.
- The case is a stark example of how competition law can directly impact upon a business model, even where it has been in operation over many years and might be considered to be an acceptable or typical business practice. A crucial point was that there was no evidence SISTIC could point to that showed that the exclusivity had a legitimate purpose – foreclosing competition stood out.
- The decision also serves as a reminder to businesses in other industries to reflect on their position in their market and the rationale for business practices. It is critical to ensure that business activity is pursued with a rationale that is sensitive to competition law principles, particularly where market power or ‘dominance’ exists.
- The case is also an interesting example of how a particular feature of Singapore’s Competition Act that excludes vertical agreements from the prohibition on anticompetitive agreements does not mean those agreements will not come under scrutiny.1 The establishment of a dominant position (and an abuse of that position) allowed the CCS to mount its attack.
- Finally, we can compare and contrast this ticketing case with those in other countries, including a recent decision in Australia where a major ticketing service provider was penalised A$2.5 million for misuse of market power. The Australian case also related to exclusive arrangements but focussed on reliance by the service provider on its exclusive rights rather than attacking the exclusive agreements themselves, which was the approach in the SISTIC case.
SISTIC and the conduct that concerned the CCS
SISTIC is the largest ticketing services provider in Singapore and provides ticketing services for arts, entertainment and sports events. SISTIC handles more than 90% of all events staged in Singapore. Competitors for the provision of ticketing services in Singapore include Gatecrash Ticketing, Tickets.com and Global Ticket Network.
Between the periods of 2006 to 2009, SISTIC was party to agreements with 17 event promoters and 2 venue operators which contained explicit and total restrictions that required the promoters to exclusively use SISTIC to sell tickets for events they promoted, and the venue operators to exclusively use SISTIC to sell tickets for all events held at their venues.
The exclusive agreements with the venue operators were particularly significant, being:
- an agreement with the Esplanade, the premier performing arts venue in Singapore, which has four performance venues available for hire, and
- an agreement with the Singapore Sports Council (SSC) about the provision of ticketing services for events held at the Singapore Indoor Stadium.
Click here to view table.
On 4 June 2010, the CCS issued an infringement decision against SISTIC, determining that the exclusive agreements constituted an abuse of a dominant position in a market for the provision of ticketing services, in contravention of section 47 of the Competition Act.
Section 47 of the Competition Act prohibits any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in any market in Singapore. The CCS held that by entering into the exclusive agreements SISTIC had abused its dominant position in that those agreements restricted promoters’ choice of ticketing service providers, helped SISTIC maintain its dominant position, and allowed SISTIC to charge ticket buyers higher fees.
The CCS directed SISTIC to remove or modify the relevant exclusive provisions and imposed a penalty of S$989,000.
The Appeal Board’s decision
Did SISTIC hold a dominant position in a market?
The CCS submitted, and the Appeal Board accepted, that the relevant market in which SISTIC operated was the market for the provision of a range of ticketing services, and further, that SISTIC held a dominant position in that market.
The Appeal Board identified the following facts as relevant in considering the issue of dominance.
- SISTIC’s large market share (~90%) over time, although the Appeal Board recognised that market share alone was not a determinative factor.
- SISTIC’s ability to profitably sustain prices above competitive levels. The Appeal Board relied on evidence that SISTIC had priced profitably above competitive levels for a sustained period. In particular, the Appeal Board referred to evidence that CCS had increased its booking fee by 50% in 2008, and the fact that its fees were higher than its competitors. The Appeal Board rejected SISTIC’s case that the CCS had not established that SISTIC’s pricing was above a competitive level.
- The absence of countervailing buying power or lack of an incentive to use countervailing buyer power. The Appeal Board recognised that both the Esplanade and the SSC had countervailing power, however it considered that they had weak incentives to use that power against SISTIC. This lack of incentive resulted from the industry structure, in that although the venue operators were required to dictate that SISTIC be the ticketing service provider for events held at their venues, event promoters who held their events at those venues were the parties who would ultimately acquire SISTIC’s ticketing services.
In assessing the existence of countervailing power, the Appeal Board considered the Irish case of Re Ticketmaster Ireland where TicketMaster Ireland entered into contracts with two event promoters. In that case, TicketMaster Ireland had a 100% market share, however the Irish Competition Authority found that the promoters exerted downward pressure on booking fees. The Appeal Board held that this conclusion stemmed from the fact that Ticketmaster Ireland could not impose more than the ‘cap’ specified in its contracts with the promoters and therefore it was not unfettered in the amount it could charge end consumers. In contrast, SISTIC did not have a cap in its contracts with the venue operators. Further, the Appeal Board considered it relevant that in Ireland, there were two large event promoters, whereas in Singapore, there are a number of small event promoters which participate in the market.
- The exclusive agreements acted as barriers to entry which prevented new entry to the market, and prevented major partners such as the Esplanade and the SSC from switching providers. While both of the exclusive agreements with venue operators were terminable on a period of notice, the Appeal Board noted that the venue operators between them held 100% of the shares in SISTIC, and held that this meant that there was a further disincentive on the operators to switch to another ticketing service provider. The issue of the venue operators’ shareholdings in SISTIC was particularly interesting as the Appeal Board (agreeing with the CCS) had held that SISTIC and the venue operators were not a single economic entity and operated at arms-length and on the basis of merit. Despite this finding, the Appeal Board agreed with the CCS that it was relevant to take into account how the relationship between the entities would affect their willingness to switch away from SISTIC.
Did SISTIC abuse its dominant position?
The Appeal Board was asked to determine the correct legal test for abuse of dominance cases under section 47 of the Act.
The Appeal Board noted that section 47 is modelled on section 18 of the UK Competition Act 1998, and therefore considered UK case law on the correct approach. It concluded that the legal test of abuse of dominance as established under UK law is that an abuse will be established where a practice has, or is likely to have, an adverse effect on the process of competition. However, if a dominant undertaking can establish that its conduct produces countervailing benefits so that it has a net positive impact on welfare, it will not constitute an abuse of a dominant position.
Central to its decision, the Appeal Board found that there was no legitimate justification for the exclusive agreements, and that they were intended to effectively restrict or foreclose competition or were capable of doing so. The Appeal Board held that:
- as a result of the exclusive agreements, SISTIC increased its share in the market and sustained persistently high market shares,
- by the exclusive agreements with the Esplanade and the SSC, SISTIC had secured a large share of the market for a long duration and had foreclosed any competition for this share of the market. No equally efficient firm would be able to overcome the competitive restraint imposed by SISTIC through the exclusive agreements,
- as a result of the exclusive agreements, SISTIC’s competitors had been disincentivised from making adequate investments in the market, and
- the exclusivity restrictions made no economic sense other than to foreclose competition.
Ultimately, the Appeal Board held that the exclusive agreements are exclusionary in nature and have led to substantial foreclosure effects on competition in the market, by stifling market entry, market access and growth opportunities for existing or potential competition.
In determining a penalty, the Appeal Board considered that some mitigating factors existed. The Board took into account that SISTIC had cooperated with the CCS’s investigation and SISTIC’s uncertainty as to whether the exclusive agreements contravened the Competition Act.
Accordingly, the Appeal Board reduced the financial penalty initially imposed by the CCS. The Board determined that the appropriate penalty was S$769,000.
Contrasting a recent approach in Australia
The SISTIC case can be contrasted with a recent case in Australia, where the Federal Court of Australia penalised ticketing services provider Ticketek, $A2.5 million for misuse of market power under section 46 of the Competition and Consumer Act 2010 (CCA). The relevant conduct was facilitated by a number of exclusive agreements Ticketek had with venue operators and promoters.
As part of a settlement with the ACCC, Ticketek admitted that it had taken advantage of its market power in the ticketing services market for the purpose of deterring or preventing a competitor from engaging in competitive conduct.
It is interesting that both in Singapore, and Australia, the regulators brought action against the ticketing companies under their respective prohibitions against misuse of market power/abuse of dominance. But both the approach and the result were different.
Comparing SISTIC decision with Ticketek case
Click here to view the table.
In Australia, section 47 of the CCA also prohibits exclusive arrangements which have the purpose, effect or likely effect of substantially lessening competition. However, the ACCC chose to attack the conduct under the prohibition against misuse of market power rather than the prohibition against anticompetitive exclusive dealing. In Singapore, the CCS had no choice but to challenge SISTIC’s conduct under the prohibition against abuse of dominance. In Singapore, vertical agreements are excluded by the Competition Act from the prohibition on anti-competitive agreements. In Singapore, vertical agreements are excluded by the Competition Act from the prohibition on anti-competitive agreements.
In Singapore the end result is that the CCS, although unable to directly challenge SISTIC’s exclusive dealing, has attacked the conduct securing the exclusive dealing and the Appeal Board has made directions that the relevant agreements be modified to remove the exclusive rights. In Australia , the ACCC attacked the conduct pursuant to the exclusive agreements, but there was no attack against the exclusive dealing arrangements themselves and no directions made in respect of the arrangements – ie the exclusive rights continue.
Our separate article on the Ticketek decision is available here.