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What are the potential outcomes of a merger control investigation in Singapore?
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.
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.
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.
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