An extract from The Dominance and Monopolies Review - Edition 9

Market definition and market power

The concept of dominance in Singapore is considered equivalent to an undertaking having substantial market power. Substantial market power, in turn, arises where an undertaking does not face sufficiently strong competitive pressure and can be thought of as the ability to profitably sustain prices above competitive levels, or to restrict output or quality below competitive levels.13

The first step in the assessment of whether an undertaking holds a dominant position is for the CCCS to consider the relevant market. In doing this, the CCCS adopts the use of a hypothetical monopolist test to define markets conceptually. The test aims to identify products that buyers consider substitutable and then identify undertakings that can supply the focal product and its substitutes. In practical terms, the CCCS considers a number of demand-side considerations (including switching costs, patterns in price changes, own or cross-price elasticities and product characteristics, among other factors) and supply-side considerations (including the ease of supply-side substitution, evidence of existing capacity and buyer preferences, among other factors). The CCCS will also consider its own earlier decided cases (if any are relevant to the case at hand) and market definition assessments in overseas jurisdictions (where these may be relevant in light of the unique market circumstances in, and appropriate market definition for, Singapore).

Turning to the assessment of market power within the relevant market, once defined, the Section 47 Guidelines state that there are no market-share thresholds for determining dominance under the Section 47 Prohibition. Notwithstanding this, the Section 47 Guidelines also note that, as a starting point, the CCCS will generally consider a market share in excess of 60 per cent as a likely indication that an undertaking is dominant in the relevant market. However, the Section 47 Guidelines include a caveat that dominance can be established at lower market shares, depending on an assessment of all relevant factors. Moving from this starting point, the CCCS will conduct a detailed assessment of:

  1. existing competitors: the CCCS assesses the competitors to whom buyers might switch if the alleged dominant undertaking sustained prices above competitive levels. Due consideration is also given to the positions of other undertakings operating in the same market and how market shares have changed over time. The CCCS also includes in its assessment factors such as barriers to expansion, the degree of innovation, product differentiation, the responsiveness of buyers to price increases and the price responsiveness of competitors;
  2. potential competitors: the CCCS notes that entry barriers are important in assessing the degree of competitive constraint posed by potential competition, which will in turn inform the assessment of whether an undertaking would have the ability to profitably sustain prices above competitive levels. In the Section 47 Guidelines, the CCCS indicates that such assessments require consideration of sunk costs, access to key inputs and distribution outlets, regulation, economies of scale, network effects and potential exclusionary behaviour by incumbents; and
  3. other factors, such as powerful buyers and economic regulation: the CCCS considers that a buyer's bargaining strength is affected by the buyer's knowledge of alternative supply sources, opportunities to self-sponsor or establish a procurement auction or competitive tenders, as well as whether the buyer is important to the seller. These factors again may influence whether an undertaking is effectively in a position to exercise market power.

Ultimately, the CCCS's consideration of whether a dominant position is held will require an objective assessment of all of the above criteria (and any other relevant facts and circumstances).

The Section 47 Prohibition also extends to abuses of collective dominant positions, which may be held when two or more legally independent undertakings present themselves or act together in a particular market as a collective entity. The CCCS considers that undertakings holding a collective dominant position are able to act largely independently of their competitors, customers and consumers. The CCCS will consider whether there are factors linking the undertakings together in its assessment. Once the CCCS establishes that the collective entity holds a dominant position, it will assess whether there has been an abuse of the collective dominant position.