Competition lawi Competition and Consumer Commission of Singapore
The Competition and Consumer Commission of Singapore (CCCS) is the agency tasked with administering and enforcing both the Competition Act and Consumer Protection (Fair Trading) Act (CPFTA).
The CCCS has conducted a number of market studies and has published its findings as well as other research and discussion papers as part of efforts to ensure guidelines and enforcement keep pace with technological and market developments. The market studies include studies on online travel booking sector and e-commerce platforms in Singapore, as well as a research paper on fair, reasonable and non-discriminatory commitments to resolve competition concerns and a discussion paper on data portability. M&A transactions in these sectors may be subject to enhanced scrutiny for any impact on competition in Singapore.
The CCCS' focus is on evaluating the impact of a merger in Singapore and how competition between the merger parties and their competitors may change as a result of the merger.ii The Competition Act
The merger provisions of the Competition Act will apply to mergers that have infringed, or anticipated mergers that if carried into effect will infringe, the Section 54 prohibition, unless they are excluded or exempt under the Competition Act. A merger infringes the Section 54 prohibition if it has resulted, or may be expected to result, in a substantial lessening of competition (SLC).
An M&A situation can lead to an SLC if it creates, maintains or enhances the following types of market power:
- 'non-coordinated effects' – which arise when there is a loss of competition between the merging parties and the merged entity finds it profitable to raise prices or reduce output or quality, or both; or
- 'coordinated effects' – which arise if the merger raises the possibility of firms in the market coordinating their behaviour to raise prices, reduce quality or output.
The CCCS has issued guidelines on the analytical framework for assessing the competitive effects of M&A. Merger parties may use the framework to conduct a self-assessment for potential SLC before implementing the M&A.iii Proposed changes to competition guidelines
Taking into account legislative changes and market findings, in September 2020 the CCCS proposed updates to its guidelines:
- CCCS Guidelines on the Treatment of Intellectual Property Rights – changes proposed to provide more clarity on the interface between intellectual property and competition law;
- CCCS Guidelines on Market Definition – changes proposed to provide greater clarity on issues related to market definition that may be relevant in the digital era;
- CCCS Guidelines on the Section 47 Prohibition – changes proposed to provide greater clarity on issues relating to the assessment of market power and types of potentially abusive conduct in the digital era;
- CCCS Guidelines on Enforcement – changes proposed to update and rename the guidelines to give effect to legislative amendments to the CA relating to commitments and remedies and reflect CCCS's current practices on substantive and procedural matters in assessing commitments and remedies;
- CCCS Guidelines on Substantive Assessment of Mergers – changes proposed to better guide businesses, consumers, and competition practitioners on issues relating to assessment of mergers; and
- CCCS Guidelines on Merger Procedures – changes proposed to enhance and clarify the process of merger filing notifications to CCCS, and reflect CCCS's current practices on merger filings.
Guidelines such as those on substantive assessments of mergers and merger procedures have a direct impact on M&A transactions, while others such as those on the treatment of intellectual property rights and market definition may have a bearing on market conduct.iv M&A
From January 2019 to September 2020, there are nine notifications on the public register and one application to vary directions issued by the CCCS.
Under the Competition Act, mergers that result in, or may be expected to result in, a substantial lessening of competition in Singapore are prohibited. Merger notification is voluntary under the Competition Act, but parties to a M&A transaction should conduct self-assessments against the guidelines published by the CCCS to determine if there may be a substantial lessening of competition and a merger notification is necessary.
The CCCS has set out the following indicative thresholds that when crossed will likely require further review to determine if there is a substantial lessening of competition: the post-merger market share of the top three undertakings is at least 70 per cent, and the market share of the merged undertaking is at least 20 per cent; or the merged undertaking has a market share of at least 40 per cent. The assessment of whether there is a substantial lessening of competition is qualitative and factual and may be undertaken even if the indicative thresholds are not met. The CCCS will consider various factors in this assessment, including barriers to entry, market transparency and countervailing buyer power.
Failure to adhere to merger control procedures may result in financial penalties of up to 10 per cent of the merger parties' turnover (for up to three years) in addition to other remedies such as the dissolution of the merger or subsequent divestments.
Corporations should be alert to competition law concerns that may arise in their commercial dealings or even in industry gatherings, bearing in mind that the CCCS is empowered to and does conduct investigations into un-notified mergers and that offenders will suffer both financial and reputational losses.