Abuse of dominance in Singapore

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

The issue of abuse is assessed by the CCCS on a case-by-case basis, and the analysis will be an effects-based analysis, rather than a form-based analysis. That being said, it seems clear from the CCCS Guidelines, and from the SISTIC case, that the focus of the CCCS will be on exclusionary behaviour, which may include ‘excessively low prices, certain discount schemes, refusals to supply, or vertical restraints, which foreclose (or are likely to foreclose) market or weaken competition’. The CCCS Guidelines state that this conduct may be abusive to the extent that it harms competition, for example, by removing an efficient competitor, limiting competition from existing competitors or excluding new competitors from entering the market.

In relation to the SISTIC case, in lodging an appeal to the CAB, one of SISTIC’s grounds of appeal was that its conduct was not abusive and, accordingly, the definition of abuse (and the test for such) was considered by the CAB. In issuing its decision, the CAB determined that an abuse will be established where a competition authority demonstrates that a practice has, or is likely to have, an adverse effect on the process of competition, in particular: it is sufficient for the competition authority to show a likely effect and it is not necessary to demonstrate an actual effect on the process of competition; and if an effect, or likely effect, on restricting competition by the dominant firm is established, the dominant undertaking can advance an objective justification. An objective justification entails adducing evidence to demonstrate that its behaviour produces countervailing benefits such that it has a net positive impact on welfare. However, the burden is on the undertaking to demonstrate an objective justification.

Does the concept of abuse cover both exploitative and exclusionary practices?

Despite the Competition Act being modelled on the UK Competition Act (and the European competition laws), purely exploitative conduct would arguably not constitute an abuse of dominance in Singapore. Critically, while UK and European laws contain a specific reference to the direct or indirect imposition of ‘unfair purchase or selling prices or other unfair trading conditions’, this was removed from the Competition Act before it was enacted in Singapore. Moreover, the CCCS Guidelines contain no reference (or any examples) with regard to exploitative conduct constituting an abuse of dominance. However, the CCCS is yet to make a definitive and binding statement in relation to whether exploitative conduct could constitute an abuse and the position is yet to be legally tested.

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

No causal link between dominance and abuse must be shown as a matter of law, and the CCCS will assess the issues of dominance and abuse separately.

That being said, there may be instances where the dominance of an undertaking might cast light on the issue of whether its conduct is abusive and vice-versa. In the SISTIC case, the conduct in question involved exclusive contracts between SISTIC and its venue operator and event promoter partners. In considering the question of barriers to entry (in the context of considering whether SISTIC held a dominant position), the CCCS observed that SISTIC’s strategic conduct (ie, its exclusive agreements with key industry players) made large-scale entry even harder. In particular, the CCCS stated in the SISTIC case that ‘the barrier to entry in relation to network effect is artificially erected and sustained by SISTIC’s strategic conduct’. In this regard, and in appropriate circumstances, it is possible that the CCCS will not make determinations of dominance and abuse completely in isolation from one another.

In addition to the above, it is also noted that the CCCS Guidelines specifically state that it is not necessary for the dominant position, the abuse and the effects of the abuse to be in the same market.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

In assessing whether conduct is abusive, the CCCS Guidelines state that the CCCS may consider whether the dominant undertaking is able to objectively justify its conduct. However, to rely on this defence, it will be necessary for the dominant undertaking to show that it has behaved in a proportionate manner in defending its legitimate commercial interest and that it had not taken any measures that are more restrictive than necessary in doing so. While the CCCS Guidelines indicate that objective justifications will be taken into consideration when assessing whether conduct is abusive, the test arising from the CAB’s decision in the SISTIC case instead suggests that objective justifications can be a defence after the conduct has already been classified as abusive, and that the burden is on the dominant undertaking in question to establish those objective justifications. This is described in further detail in question 10.