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Business Law Review
May 2006
Competition
New Developments in
Competition Law in Singapore
Catherine Tay Swee Kian*
Summary
With a small and open economy, Singapore has recently
joined the international community with a broad standard
of similar anti-competitive prohibitions in competition
law. This article gives an overview of the new developments in competition law and policy in Singapore. Currently, the new Competition Act is being implemented in
a phased approach to facilitate the transition to the new
competition rules for businesses in Singapore.
Introduction
Singapore’s new competition legislation is wide-ranging with punitive powers such as fines and sanctions
to combat abuse of power by big businesses. In the
second reading of the Competition Bill, the Senior
Minister of State for Trade and Industry explained
the objective of the Competition law:
‘‘... competition is a key tenet of Singapore’s
economic strategy. Market competition spurs firms
to be more efficient, innovative, and responsive to
consumer needs. Consumers would enjoy more
choices, lower prices and better products and
services. The opened up sectors of the economy to
market competition ... whilst we have rules against
anti-competitive behaviours in specific sectors like
energy and telecommunications, there is no generic
competition law that covers all sectors ... thus
recommended that a generic competition law be
enacted to create a level playing field for businesses,
big and small, to compete on an equal footing... The
government accepted ... competition law will help to
reinforce our pro-enterprise and pro-competition
policies, enhance the efficiency of our markets and
strengthen our economic competitiveness.’’
The Competition Act 2004 (the ‘Act’) which was
passed by Parliament on 19 October 2004 has been
implemented in three phrases. On 1 January 2005,
only the provisions on the establishment and incorporation of the Competition Commission of Singapore
(the ‘CCS’) became operative. With effect from 1 January 2006, the prohibitions against anti-competitive
agreements and abuse of dominance as well as on
enforcement and appeal processes under the new Act
became operative. The prohibition provisions for mergers and acquisitions will only come into force after 1
January 2007, as these are more complex and technical. The rationale for this phased approach was to prepare businesses regarding the new competition
requirements and for the CCS to prepare its operations.
The Act has incorporated the international best
practices from other competition regimes worldwide
(including the United Kingdom, the United States,
Australia, Ireland, Canada and India) that are relevant
to Singapore economic circumstances although the Act
is largely modelled on the United Kingdom and European Community legislations but with a number of
significant differences, which are discussed in this
paper. In particular, the role of the Competition Commission of Singapore (CCS) is consistent with the
objective of its legislation. The legislative driven
policy initiative is reflected into the Act itself. This
can be seen in the Third Schedule of the Act which
allows for exemptions from public policy considerations. The CCS and the law courts have a huge discretion to manage competition rules which are subject to
an ever changing social economic environment. The
freedom to trade is important as Singapore attracts
foreign investments into its small and open economy.
In its pursuit of excellence, Singapore’s economic
growth is fuelled by competition policies as can be
seen in the sectors of the biomedical research, pharmaceuticals and the life sciences, to obtain international
competitiveness and the efficient allocation of
resources. Another point to note is the institutional
relationship which is a new dynamic within Singapore
between the CCS and the Competition Appeal Board
intertwined with political objectives. The aim of the
Act is to create a level playing field for businesses, eg
through steps that prevent firms from using their
dominant position in markets to thwart competition.
But there are certain controversial factors which
remain outside its ambit.
Previously, Singapore did not have a general competition law regime although she has competition
codes administered by regulators for newly liberalised
sectors such as energy, telecommunications and the
media sectors. Because of the changing technologies
and the Free Trade Agreements with the United
States and Australia, the competition regulation was
introduced.
* LL B (Hon) (London), LL M (London), Barrister (England), Advocate and Solicitor (Singapore).
The author is a member of the Institutional Review
Board / Ethics Committee of the National Healthcare
Group Domain Specific Review Board which is tasked to
review scientific and ethical aspects of research protocols.
She is a member if the Institutional Review Board of
SingHealth Polyclinics. She lectures on biomedical ethics
and medical law in the Faculty of Dentistry at the
National University of Singapore. She has supervised on
bioethics and medical law in a special study module in the
Faculty of Medicine at the National University of Singapore. Her research interests include business laws, clinical and research ethics, medical and biotechnology laws.
She is an author of 28 law books.
The author would like to thank Dr Albert Myint Soe,
Ph D, (Camb), Barrister (UK), for his valuable comments on a draft of this article.
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Competition
Scope of Anti-Competition Law
The Act applies to every conduct by all undertakings
including individuals, corporations and unincorporated
bodies and government-linked corporations.1 It will
apply to commercial and economic activities carried on
by private sector entities, whether owned by the government or not, statutory bodies, local or foreign entities. But there are a number of exclusions from its
scope because these undertakings are either currently
regulated by the competition codes in the media,
energy and telecommunication sectors; or activities
subject to pre-existing legal requirements or international obligations; and cases where public policy dictates including the vertical agreements. The exclusions
are not permanent as there will be reviews to meet the
need for sectoral exclusions taking account of market
development. The exclusions made are based on
public interest considerations, which are similar to
other competition regimes globally.
Competition Regulation
The Act prohibits three main anti-competitive activities that unduly prevent, restrict or distort competition. These are:
1. anti-competitive agreements, practices and decisions (the section 34 prohibition);
2. abuse of dominant position (the section 47 prohibition); and
3. mergers and acquisitions that substantially lessens
competition (the section 54 prohibition).
Numerous guidelines covering market definition,
intellectual property, transitional arrangements, filing
notifications for guidance and decision, enforcement,
leniency and the appropriate amount of penalties have
been issued by the CCS to guide businesses on how
the CCS will interpret the provisions of the Act.
These guidelines which appear to have been influenced
by the approach taken in the United Kingdom, will
ensure greater transparency and clarity to businesses
on the competition law regime. To ensure their continued relevance, such guidelines will be reviewed,
taking into consideration market changes and the
decisions of the Competition Appeal Board and the
courts.
Anti-Competitive Agreements
Since 1 January 2006, section 34 of the Act has prohibited anti-competitive agreements made between
undertakings which affect the appreciable prevention,
restriction or distortion of competition unless they are
exempted in the Third Schedule of the Act such as
the vertical agreements or the net economic benefit
exclusion or have met the requirements specified in a
block exemption order. The CCS has announced its
policy on maritime block exemptions.
In assessing whether an action is anti-competitive,
due consideration will be given to whether it promotes
innovation, productivity or longer-term economic efficiency, so as not to inadvertently constrain innovative
and enterprising endeavours.
The new wide ranging competition law targets prohibited agreements between competing firms on pricefixing, bid-rigging, market-sharing and the restriction
of production. The term ‘agreement’ has a wide meaning and includes both legally enforceable and nonenforceable agreements such as gentlemen agreements,
whether oral or written.2 Unlike the USA and UK,
such blacklisted agreements are not criminal offences
but in Singapore, only a financial penalty may be
imposed.
The section 34 guidelines explain that there are different ways in which prices can be fixed. For instance,
it may be fixing the components of a price such as a
discount or by fixing the percentage by which prices
are to be increased or fixing a range outside which
prices are not to move. It is also price-fixing if there is
an agreement to adhere to published price lists or not
to charge less than any other price in the market.
Further, recommendations of a trade association or a
professional body in relation to price may be regarded
as price-fixing. In certain circumstances, the exchange
of information on prices between competitors may lead
to price co-ordination and thus diminish competition.
Generally, where historical information is exchanged,
it is less likely that the exchange could have an appreciable adverse effect on competition.3
Anti-competitive provisions in contracts and agreements are prohibited and void. Both the prohibition
and voidness are a matter of competition law and
not the law of contract. ‘Voidness’ here is transient,
as it only applies when section 34 of the Act applies.
On the other hand, the effect of voidness on the
other contractual provisions is a matter of contract
law.4
There is a leniency programme which is particularly
aimed at cartel-busting, with up to 100% immunity
from financial penalties subject to providing evidence
and on-going cooperation during the investigation.
Leniency applies to ‘whistle-blowers’ especially for
cartel activities because cartels are secret and usually
difficult to detect. Experience has shown in a number
of Western competition law regimes that the leniency
programmes are usually successful where there is a
complete amnesty given to the first conspirator who
comes forward to reveal the cartel activities to the
Competition authorities.
Recently, there was a move by three cinema operators in Singapore to increase ticket prices. Would such
conduct be considered ‘price fixing’ under the new
1
See SNUPAT v High Authority [1961] ECR 53; Hofner and
Elser v Macrotron GmbH [1991] ECR I-1979; Hydrotherm
Geratebau v Compact [1984] ECR 2999; and Viho v Commission
[1996] ECR I-5457.
2
See section 34 guidelines of CCS.
3
See US Sherman Act and American Column and Lumber Co v
US 257 US 377 (1921) and Maple Flooring Manufacturers’
Association v US 268 US 563 (1925).
4
See the English law position in Passmore v Moreland [1999] 1
CMLR 1129; and Delimitis v Henniger Brau [1991] ECR I-935.
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Competition
law? The impact of the new competition law on existing contracts means that businesses and firms now
need to look again at their existing contractual agreements to comply with the new Act. However, the businesses were given a one-year window since the law was
passed in 1 January 2005 but which took effect on 1
January 2006.
Abuse of Dominant Market Position
Section 47 of the Act prohibits the abuse of a dominant position but does not prohibit undertakings from
having a dominant position.5 The prohibited behavior
would include limiting production, tying agreements,
price discrimination and predatory pricing towards
competitors such as sustained pricing at below average
variable cost. But there may be an objective justification defence such as a price promotion or a refusal to
supply which may be justified by the poor creditworthiness of the buyer.6
Provided the abuse has an effect within Singapore,
the dominant position need not be in Singapore. An
indicative market share of 60% or above would be in a
dominant position including a position of economic
strength or an ability to act independently of the
market. However, each case would have to be looked
at on its own merit. In practice, it may be difficult to
determine whether a particular conduct by a dominant
firm is bad or good. Ideally, the economic welfare
effect (ie a cost-benefit analysis) and not just the effect
on competition should be taken into account.
Third Schedule Exclusions to AntiCompetitive Agreements and Abuse of
Dominance
The following are the exclusions for the sections 34
and 47 prohibitions:
1. services of general economic interest or having
the character of a revenue-producing monopoly;
2. activities to avoid conflict with international obligations;
3. activities needed to comply with legal requirements;
4. activities arising from exceptional and compelling
reasons of public policy eg national security;
5. goods or services regulated by other sector-specific competition law eg Telecommunications Act
1999 and th0e Info-Communications Development Authority of Singapore Act 1999;
6. specified activities already regulated under various laws:
. supply of ordinary letter and postcard services
under the Postal Services Act,
. supply of piped potable water,
. supply of waste water management services,
. supply of scheduled bus services under the
Public Transport Council Act,
. supply of rail services under the rapid Transport Systems Act,
. cargo terminal operations under the Maritime
and Port Authority of Singapore Act;
7. the clearing and exchanging of articles undertaken by the Automated Clearing House established under the Banking (Clearing House)
Regulations;
8. any activity of the Singapore Clearing Houses
Association in relation to its activities regarding
the Automated Clearing House.
Vertical agreements are excluded from section 34 prohibition.7
Agreements with ‘net economic benefit’ which contributes to improving production or distribution or
promoting technical or economic progress are
exempted also from section 34 prohibition unless specified in a Ministerial order. Such block exemptions
may be qualified and conditional.
Mergers and Acquisitions
At a future date in 2007, section 54 of the Act will
prohibit mergers and acquisitions which result in a
substantial lessening of competition within any market
in Singapore for goods or services unless approved by
written law. The section 54 prohibition will not apply
to any merger relating to the specified activities stated
above under points 6 to 8.
The CCS has the power to prohibit mergers. It will
provide guidance on the turnover and market shares
that will trigger an investigation and will review proposed mergers within a time-frame. The merger test
standard is that of a ‘substantial lessening of competition within any market in Singapore’, which is similar
to the US and Australian merger test standard.
Role of the Competition Commission
The functions and duties of the CCS are to maintain
and enhance efficient market conduct and promote
overall productivity, innovation and competitiveness of
markets in Singapore; to eliminate or control practices
having adverse effect on competition in Singapore; to
act internationally as the national body representative
of Singapore and advise the government or other
public authority on national needs and policies in relation to competition matters.8 But one cannot ignore
the economic reasoning which can help to explain why
businesses behave in a certain manner. The CCS will
5
See Hoffman La Roche [1979] ECR 215 on the meaning of
‘abuse’? Also see the Report of Economic Advisory Group for
Competition policy), July 2005.
6
See the recent attempts to rely on efficiency justifications for
exclusionary conduct which have been unsuccessful British
Airways [2003] ECR II-5917 and Michellin II [2003] ECR II4071.
7
See s 8 of Third Schedule of the Act on the meaning of
vertical agreement ‘‘... any agreement made between 2 or more
undertakings each of which operates at a different level of
production or distribution chain ...’’.
8
See s 6(1)of the Act.
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have regard to the differences in the nature of various
markets in Singapore, the economic, industrial and
commercial needs of Singapore and maintain the efficient functioning of the markets in Singapore.9
In administering the various prohibitions, the CCS
will issue guidelines,10 recommend the making, variation or revocation of a block exemption order, give
decisions or guidance, investigate infringements and
adjudicate on infringements. The CCS has issued
guidelines, after public consultation, on the sections 34
and 47 prohibitions, ‘market definition’, powers of
investigation, enforcement, filing notifications for guidance or decision, lenient treatment for undertakings
coming forward with information on cartel activity
cases, transitional arrangements and appropriate
amount of penalty and treatment of intellectual property rights.
Undertakings may apply to the CCS for guidance or
a decision to indicate whether an agreement is likely to
infringe the sections 34 and 47 prohibitions or whether
it is likely to be exempted in a block exemption.11
Once the CCS has given guidance or a decision that
an agreement has not infringed the sections 34 or 47
prohibitions, the CCS will take no further action
unless it has reasonable grounds to believe that there
has been a material change of circumstance since
giving its decision or guidance or it has reasonable
grounds to suspect that the information was incomplete, false or misleading.12
Investigation Powers of Competition
Commission
If there are reasonable grounds for suspecting infringements, the CCS has certain powers of investigation
such as informal enquiries, information notices, witness statements, ‘dawn raids’ or the power to enter
premises with or without a warrant.13 The CCS is
likely to investigate behaviour where there would be
‘an appreciable adverse effect’.
Investigations could be the result of a complaint
from a competitor, a public member, the CCS’s own
monitoring and surveillance or from overseas competition authorities investigating associated companies
overseas.
The CCS has wide powers under the Act to request
documents or information. Such power to require production of specified documents or information may be
given to complainants, suppliers, competitors or customers, besides the infringers and their officers. The
term ‘document’ means ‘information recorded in any
form’ such as facsimiles, e-mails, letters, customer
contacts, board minutes, mobile phones, marketing
and strategic plans. But the CCS may require ‘information’ not in a recorded form such as estimates of
market shares. The CCS has the powers to conduct
searches of business premises. It is a criminal offence
if an undertaking fails to comply or co-operate with
such powers of investigation. But communications
between a legal adviser and his client are considered
privileged documents, because the privilege against
self-incrimination is recognised. Legally privileged
documents must be clearly marked in big bold red ink.
There should be sound processes in place to ensure
legally privileged documents are clearly labelled.
During the investigative process, co-operation is
essential as delaying the process is often unwise. It
would be wise to give the CCS as much information
as possible to justify the business decisions. Early and
on-going co-operation to tell ‘your side of the story’
may mean that the competition regulator is more likely
to negotiate a settlement should there be an infringement.
The CCS cannot disclose confidential information
unless there is a gateway such as permission given by
the relevant parties or if it is necessary for CCS functions. The CCS has to protect the identity of leniency
applicants and complainants. It will participate in
international fora but will not be sharing or receiving
confidential information.
Adjudication by Competition Commission
The Act provides several procedural safeguards
because the CCS is both the investigator and adjudicator.14 This institutional structure under the Act is
similar to the UK competition model. Before deciding
that the sections 34 or 47 prohibition is infringed, the
CCS shall give written notice to the person so that he
has an opportunity to make his representations. A
person can appeal a decision of the CCS to the Competition Appeal Board and higher courts.15
If there is an infringement under sections 34 or 47,
the CCS may give directions to the infringing parties
to end such infringement. Where such infringement is
done intentionally or negligently, the CCS can impose
a financial penalty of up to 10% of the undertaking’s
turnover in Singapore for each year of infringement
up to a maximum of 3 years.16 The intention or negligence relates to the facts.17 Intention may be inferred
if the consequences of an agreement are reasonably
foreseeable.18 But an infringement will be committed
negligently where an undertaking ought to have known
9
See s 6(1)of the Act.
See s 61 of the Act. These guidelines give conceptual,
analytical and procedural approach that the CCS will interpret
and give effect to in its enforcement activities; and their
application will depend on the facts of each case.
10
11
See s 43 of the Act.
See ss 45, 46 and 53 of the Act.
13
See s 62 of the Act.
14
See s 71. Also see Bettercare v DGFT [2002] CAT 6. and
Claymore v DGFT [2003] CAT 3.
15
See JJB Sports PLC v Office of Fair Trading [2004] CAT 17
on the civil standard of review that an infringement is duly
proved.
16
See s 69(3) of the Act.
17
See paras 4.3 to 4.11 of the CCS’s Guidelines on Enforcement,
November 2005.
18
See Napp Pharmaceutical Holdings Ltd v DGFT [2003] Comp
AR 13 at para 456 where the CAT gave its guidance on the
meaning of ‘intentionally’.
12
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Competition
that its agreement would distort competition. Further,
even where an undertaking acts under duress, it may
still be acting intentionally or negligently.
The objectives of the CCS for imposing any financial penalty are to reflect the seriousness of the infringement and to deter undertakings from engaging in
anti-competitive practices.19 The CCS adopts the
leniency programme for undertakings involved in
cartel activity, which is modelled upon the UK competition regime.20
A decision of the Commission as to ‘‘whether the
section 34 prohibition, the section 47 prohibition ...
has been infringed... is an ‘appealable decision’.’’21
Whether there is an appealable decision is a question
of fact depending on the particular circumstances of
each case, which is a question to be determined objectively.
There is a right of private third party action for
damages only after the CCS has made a decision of
infringement and after all the appeal processes.22
There is a two year time limit for the taking of such
private actions from the time that the CCS made the
decision or from the determination of the appeal,
whichever is the later.23 The court will be bound in
such proceedings by the relevant infringement decisions.24 This is in contrast to the EC and UK
approach where a party may bring a claim for damages
where there has been no preceding infringement decision.
As to who can claim third party actions for damages,
it is interesting to note that co-conspirators are
excluded. Parties to agreements that infringe the section 34 prohibition have no right of action for relief.25
This is in contrast to the UK and EC competition
law.26 ‘Third parties’ in the case of a price-fixing
cartel would include direct and indirect purchasers,27
potential purchasers, competitors, non conspirators,
purchasers from non conspirators and suppliers.
For the issues of causation and quantum, it is likely
that the Singapore courts will use the ordinary rules
applicable to claims of breach of statutory duty.28 So
the loss which can be recovered in an action for
damages would be the difference between the losses
made and the smaller losses which would have been
made in the absence of the infringing conduct.
An interesting point to note is whether the Singapore courts would allow the award of punitive or
exemplary damages remains to be seen, as section
86(8) of the Act provides that the court may grant the
following relief:
. relief by way of injunction or declaration,
. damages, and
. such other relief as the court thinks fit.
Compliance Programme
Contracts that are affected will be taken care of by the
transitional provisions of the Act. Although the law
comes into effect on 1 January 2006, businesses get a
six-month grace period to ensure their existing contracts comply with the new competition legislation.
However, to facilitate the long term agreements, parties who have entered into contracts at least five years
before 1 January 2005 may apply to the CCS for a
longer transition period and an exemption from the
prohibition provisions of the competition law during
this period.
Businesses would be wise to establish a compliance
programme:
. to comply with the new competition rules (thereby
avoiding litigation costs and rendering future agreements invalid);
. to induce a culture of compliance for the whole
company / undertaking;
. to increase awareness of prohibited behaviour;
. to establish effective training programmes for dealing with competition issues;
. to have a compliance manual with procedures in
place for clearance of certain actions by defining
lines of authority;
. to formulate policies for internal document retention
as a paper trail is important;
. to draw up a list of all contracts to be reviewed at
multi-department level and review current agreements;
. to devise procedures for dealing with any inspections and investigations by the competition regulators;
. to have internal policy for whistle-blowers;
. to be updated with the latest CCS’s policy and news
releases.
It is also crucial to monitor overseas developments.
Conclusion
As a small and open economy, the new competition
law can stimulate competitive behavior by opening up
a competitive business environment in Singapore
thereby ensuring fair competition with a greater innovation, efficiency and enterprise. After all, competition
law is meant to enable allocatable economic efficiencies
and enhance consumer welfare in the domestic market
and not for the case of export cartel. Consumers can
19
See s 69 of the Act. Also see Napp Pharmaceuticals v Office of
Fair Trading [2003] Comp AR 13.
20
See Guidelines on Lenient Treatment for Undertakings
Coming Forward with Information on Cartel Cases (CCS,
November 2005).
21
See s 71(3) of the Act.
22
See s 86 of the Act.
23
See s 86(6) of the Act.
24
See s 86(7) of the Act.
25
See s 86(9) of the Act.
26
See Crehan v Courage [2001] ECR I-6297 where the ECJ
held that damages are available even to those parties to an
unlawful agreements unless they were ‘significantly responsible’
for the infringement.
27
See Illinois Brick Co v Illinos 431 US 720 (1977) where in the
US Federal anti-trust law, the Supreme court stated that claims
brought by indirect purchasers (ie those who did not buy
directly from the infringer) should generally be refused. This
issue has not yet been addressed by the UK or EC courts.
28
See Society of Lloyd’s v John Stewart Clementson (No 2)
[1996] QBD at para 12 and Arkin v Borchard Lines (No 4)
[2003] EWHC 687.
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benefit from lower prices as manufacturers will now
have strong incentives to compete with each other for
creativity and efficiency. Otherwise, there would be a
guaranteed level of prices regardless of quality and the
level of innovation.
As any regulatory intervention in the market may
impose costs, Singapore needs to balance regulatory
and business compliance costs against the benefits
from effective competition. So instead of catching all
forms of anti-competitive activities, Singapore will
focus principally on those that have an appreciable
adverse effect on competition in Singapore or that do
not have any net economic benefit.29 Cartel activities
such as price fixing, market arrangements and bid-rigging activities which have an appreciable adverse effect
on competition in Singapore are more likely to occupy
centre stage in the CCS list of enforcement priorities.
The new Act provides the flexibility to apply competition law and policy to suit Singapore’s interest in
maintaining an efficient and open economy. However,
much will depend on the CCS’s response to the challenges it faces in the future, given that it has the primary control over all competition law liability issues.
Perhaps, applying a general effects based standard of
reasonableness is a wise step to ensure a more flexible
approach in the application of the new competition
regime to enhance the competitiveness of Singapore’s
economy. For now, it is a new model but a dynamic
one. Within a few years, there will be an established
Singapore competition law with case laws and further
guidelines. If it so requires, Singapore has available to
an abundance of case law decided in the United Kingdom,30 the European Union and the United States of
America.31 Singapore has joined the international community with a broad standard of similar prohibitions
as she has incorporated the best practices from competition regimes globally that are best suited to her particular economic situation.
29
See the Second Reading of the Competition Bill of
Parliamentary Debates, Singapore, 19 October 2004.
30
See the recent judgment of the Competition Appeal Tribunal
in The Racecourse Association v Office of Fair Trading [2005]
CAT 29 in which an important issue of the circumstances in
which joint selling might be considered as anti-competitive.
31
See the United States case of National Collegiate Athletic
Association v University of Oklahoma 468 US 85 (1984).