Antitrust & Competition
Behavioural and Divestiture Commitments - A
New Era for CCS?
A Review of the Conditional Approval by CCS on the Proposed Acquisition of
JobStreet Singapore by SEEK Asia Investments Pte. Ltd.
The Competition Commission of Singapore ("CCS") received a merger
notification for decision on 20 February 2014 in respect of the proposed
acquisition by SEEK Ltd. and SEEK Asia Investments Pte. Ltd. (collectively,
"SEEK") of 100 per cent of the issued share capital in certain recruitment
business assets of JobStreet Corporation Berhad, including JobStreet.com
Pte. Ltd. ("JobStreet") (collectively, the "Parties").
The Parties compete in the online recruitment service industry, which
operates by matching recruiters and employers together with jobseekers.
Recruiters and employers advertise employment opportunities online on
various platforms/portals, and jobseekers search for potential job opportunities
on these platforms/portals. The industry consists of a combination of general
and specialist job portals, as well as "aggregators", which are portals that
collect and display job advertisements from various online sources into one
The proposed acquisition would bring together the two main online
recruitment advertising service providers in Singapore, i.e. SEEK’s platform,
JobsDB.com.sg and JobStreet’s platform, JobsStreet.com.sg.
As CCS was unable to conclude during its Phase 1 review of the notification
that the merged entity would be sufficiently constrained in the near term, the
review therefore proceeded to Phase 2. On 31 October 2014, CCS granted
conditional approval of the merger based on various behavioural and
divestiture commitments offered by SEEK.
In the Phase 1 review, CCS found that, despite the (a) relatively low barriers
to entry and expansion in the industry; (b) the willingness of jobseekers and
employers to use multiple platforms for job search and recruiting; and (c) the
high degree of innovation and competition in the industry, it was unable to
conclude that the merged entity's behaviour would be sufficiently constrained
in the near term. Accordingly, the review moved on to the more in-depth
Phase 2 review.
During the Phase 2 review, CCS further consulted third-party industry players
as well as the Ministry of Manpower, which had just launched the Singapore
government's JobsBank. The JobsBank is a new public portal for recruiters,
employers and jobseekers, and is part of the implementation of the Fair
Consideration Framework employment initiative in Singapore.
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2 Client Alert December 2014
After the consultations, CCS found that it was unclear if the new JobsBank could competitively constrain the merged entity. Additionally, it also surfaced during market consultations that SEEK owned and operated another aggregator site in Singapore (jobs.com.sg), which had not been initially disclosed by the Parties to CCS. This led to a second market consultation on the proposed divestiture commitment offered by SEEK, to address the potential competition concerns arising from SEEK's ownership of the jobs.com.sg aggregator site.
After the Phase 2 review, where CCS considered the Parties' submissions, gathered industry feedback and carried out market consultations, CCS was of the view that the Parties are each other’s closest competitors. CCS also took the view that the merger may give rise to non-coordinated effects, which could lead to a substantial lessening of competition in the industry.
To address competition concerns, SEEK offered a number of commitments to CCS. CCS accepted them as it considers that these commitments would mitigate the likely anti-competitive effects of the merger.
(i) Behavioural Commitments:
a) SEEK committed not to enter into exclusive agreements with employer and recruiter customers. Without exclusivity and lock-ins, employers, recruiters and jobseekers will likely continue with a multi-homing practice, i.e. use more than one online recruitment advertising platform. This commitment is also aimed at keeping barriers to entry and expansion low, thus preserving competition in the market for online recruitment advertising services.
b) SEEK committed to maintain the current prices of its services capped at present day rate cards or current day negotiated prices, subject to Consumer Price Index variations. These price caps will address concerns that the Parties, being each other's closest competitor, would be in a position to increase post-merger prices.
SEEK will implement these behavioural commitments for a period of three years from the date of completion of the merger.
(ii) Divestiture Commitments:
As discovered by CCS during its first round of market consultations, SEEK owns and operates jobs.com.sg in Singapore, an aggregator site which collects and displays recruitment advertisements listed on other online job portals. This business had been acquired in the course of the purchase of an Australian-based online recruitment aggregator. To alleviate potential competition concerns that may arise from SEEK’s ownership of jobs.com.sg, SEEK offered to divest, as a going concern, the complete assets of jobs.com.sg, including the domain name http://www.jobs.com.sg ("Divestment Business"). As part of its commitment, SEEK will find a purchaser for the Divestment Business and enter into a sale and purchase agreement in respect thereof within six calendar months from the date of the completion of the merger, or the date of CCS's decision on the merger, whichever is later.
3 Legal Update October 2013
©2014 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
It is imperative that potential merger parties carry out a thorough self-analysis/assessment when preparing their notification submissions to CCS. This is to ensure that the merger parties are fully aware of the potential outcomes (including the provision of any commitments) of the merger assessment. In particular, it is important to avoid being perceived as not having provided all relevant information to CCS. As can be seen from the present case, market consultations conducted by CCS as part of its merger review may potentially reveal such information. The failure to provide relevant information may result in unexpected findings by CCS that could impact the proposed merger.
In addition, it is also clear that CCS is willing to grant conditional approvals of mergers subject to the undertaking of commitments by the relevant merger parties, including behavioural and divestiture commitments. Whilst CCS has previously indicated that behavioural commitments may not be the preferred approach, where it is of the view that such commitments may be appropriate in light of the potential adverse effects resulting from the proposed merger, potential merger parties should be aware that CCS will not hesitate to require such commitments.
Potential merger parties should therefore always consider each proposed acquisition carefully as well as think about whether CCS may require them to undertake certain behavioural and/or divestiture commitments for purposes of mitigating any substantial lessening of competition in the relevant market, in particular where the merged entity may be dominant in the relevant market.
Should there be a need to provide such commitments, where the potential merger parties have considered such issues, this would likely assist in discussions with the CCS, with a view to obtaining CCS's approval on the merger. Potential merger parties should also be aware that any commitments would ultimately have an impact on the value of the business being acquired and should be factored in at the preliminary stage of the transaction.