Keeping with the times: CCCS updates competition guidelines and issues guidance note for businesses

1. Introduction

The Competition and Consumer Commission of Singapore (CCCS) recently issued a guidance note for businesses to provide a clearer conceptual framework as to how the CCCS will analyse and evaluate cases, and revised several of its guidelines. These changes take into consideration the rapidly evolving business landscape in Singapore, in particular the proliferation of online business activities. In revising its various guidelines, the CCCS also considered findings from its 2020 E-commerce Platforms Market Study, as well as feedback from the public and stakeholders.

In this legal update, we provide an insight into the CCCS’s guidance note for businesses, and summarise some of the key changes made to the guidelines.

2. Business Collaboration Guidance Note

In December 2021, the CCCS published its Business Collaboration Guidance Note (the “Guidance Note”). The Guidance Note seeks to provide businesses with guidance on how the CCCS will assess whether a business collaboration complies with Section 34 of the Competition Act (the “Act”), which prohibits agreements that prevent, restrict or distort competition within Singapore. In particular, the Guidance Note provides guidance on 7 common types of business collaborations which may raise competition concerns.

1. Information sharing

The Guidance Note recognises that while information sharing between businesses can be pro-competitive, the sharing of certain types of information may be anti-competitive, where the information shared allows businesses to reduce uncertainty from competition.

In particular, the Guidance Note indicates that (i) the sharing of individualised price information; (ii) the sharing of non-price information which reveals important factors that impact how businesses compete; and (iii) price recommendations by trade associations are likely to raise competition concerns.

2. Joint production agreements

Joint production agreements may raise competition concerns if they involve the setting of prices to be charged between the producers, or contain an agreement to on total production output. Whether such agreements breach the Act will depend on factors such as whether the agreement increases the business’ market power, and whether the agreement may foreclose competition or may facilitate anti-competitive market sharing.

3. Joint commercialisation

Joint commercialisation refers to agreements between businesses to jointly sell, distribute or promote their products, or jointly bid in a tender. Joint commercialisation may be anti-competitive to the extent that it aligns the commercial interests of competitors and/or reduces their ability to make decisions independently. When assessing the legitimacy of a joint commercialisation agreement, it is relevant to consider the purpose of the agreement, how restrictive its terms are, and the nature and structure of the market.

4. Joint purchasing agreements

Joint purchasing agreements will be assessed by the potential effects they have on the purchasing market and the downstream selling market. For example, if buyers with a high degree market power agree to jointly purchase from suppliers, they may be able to depress prices to the extent that suppliers are unable to supply without compromising on safety and quality. Such agreements may also lead to price-fixing concerns if the parties share commercially sensitive information such as purchase volume or margins as part of the agreement.

5. Research and development activities

The CCCS has helpfully indicated that R&D collaborations between businesses that are not actual or potential competitors are unlikely to be anti-competitive. As for R&D collaborations between competitors, their legitimacy will depend on factors such as: (i) the parties’ market power in the existing product or technology market; (ii) whether the collaboration adversely affects innovation efforts in new product or technology markets; and (iii) whether the collaboration removes a potential maverick (e.g. a disruptive or innovative business) from the market.

6. Standards development

Standards refer to specifications or procedures that define technical or quality requirements that products, processes, services or methods may comply with. A potential concern with standardisation is that it could foreclose innovation if competing technologies are excluded during the standard-setting process. Standardisation may also harm competition if quality-control requirements are changed on the pretext of meeting standards, or if established standards prevent new competitors from entering the market.

7. Standard terms and conditions in contracts

Competitors may establish standard terms amongst themselves regarding the conditions on which they sell and purchase goods and services (e.g. industry-wide terms set by regulators or trade associations). Such standard terms may infringe the Act if they affect price competition, are unnecessarily prescriptive and/or extensive, or relate to important factors of competition such as output or the scope of the product.

3. CCCS Guidelines on Directions and Remedies

The changes to these guidelines, previously entitled the CCCS Guidelines on Enforcement, provide greater clarity on how the CCCS substantively assesses breaches of the Act, and how the CCCS exercises its discretion to accept commitments from businesses in competition investigations. The changes also touch on the procedural requirements for proposing commitments, and how the CCCS will engage with businesses to determine the appropriate directions and remedies to address the competition concerns in each case.

4. CCCS Guidelines on the Appropriate Amount of Penalty in Competition Cases

These changes seek to clarify the mitigating factors that the CCCS will take into account when determining the appropriate amount of penalty to impose on businesses that have breached the Act. Certain helpful examples have been provided. For instance, in the context of an infringement involving cartel conduct, a business’ limited involvement in the cartel and adoption of competitive conduct in the market will be considered a mitigating factor.

5. CCCS Guidelines on the Treatment of Intellectual Property Rights

These amendments were made to address the evolving legal landscape relating to IP rights. A number of important changes include:

1. Explaining how “pay for delay” arrangements may give rise to competition concerns if they are made between actual or potential competitors in exchange for a significant value transfer.
2. Indicating that a refusal by the owner of a Standard Essential Patent (ie. a patent which is considered essential to an industry’s technical guidelines) to license its technology on Fair, Reasonable and Non-Discriminatory (FRAND) terms may create competition concerns, where the owner has a dominant position in a market.
3. Updating all references to intellectual property legislation such as the Geographical Indications Act 2014. These changes recognize new statutes and regulations which were introduced since these guidelines had first been published.

6. CCCS Guidelines on the Section 34 Prohibition (Anti-Competitive Agreements)

Among other things, these amendments provide guidance on how network effects will be assessed in determining an undertaking’s market power. Network effects refer to a situation where the increased number of users of a product or service improves its value. Network effects are especially relevant in the context of online services, provided through multi-sided platforms, which facilitate interactions between multiple groups of users and creates value for sellers or buyers by matching them with other sellers or buyers.

7. CCCS Guidelines on the Section 47 Prohibition

These changes provide insight on how the CCCS will assess an abuse of dominance cases in the context of digital markets. They also touch on several factors which may affect the assessment of market power. These include:

1. The tendency of customers to switch to other suppliers;
2. The control or ownership of key inputs such as physical assets, proprietary rights or data;
3. The potential incentive and/or ability for customers to join or use more than one digital platform;
4. The difficulty of competing effectively with a competitor that produces multiple products and enjoys economies of scope; and
5. Whether an entity leverages its market power in one market to favour itself or any other undertakings, thereby affecting competition in another market.

8. CCCS Guidelines on the Substantive Assessment of Mergers

The amendments to the CCCS Guidelines on the Substantive Assessment of Mergers provide further clarity as to how the CCCS assesses the effect that mergers have on competition, especially those involving digital platforms. One major change is the increased focus on innovation as a relevant factor e.g. the recognition that a merger may lead to non-coordinated effects if one of the merging parties is an important innovator, even if that party does not have a significant market share.

Other amendments seek to: (1) clarify that the CCCS may consider whether data protection is a significant parameter of competition in its assessment; (2) clarify that proprietary rights and data may be considered barriers to entry and expansion; and (3) elaborate further on how conglomerate mergers are assessed.

9. CCCS Guidelines on Merger Procedures

The changes to the CCCS Guidelines on Merger Procedures are intended to reduce business costs for entities submitting information to the CCCS, and to address various procedural matters.

They include the following:

1. Streamlining the process of notifying the CCCS. This includes requiring parties to submit materials electronically rather than in hard copy, and encouraging applicants to pay notification fees by bank transfer rather than cheque;
2. Clarification that the first day of a Phase 1 and Phase 2 review is the working day after the complete notification is received;
3. Providing more opportunities, in particular in Phase 2, for merging entities to engage CCCS about potential competition concerns that may arise; and
4. Requiring merging entities to provide information on each of its top 10 rather than its top 5 customers as part of Form M1.

10. CCCS Guidelines on Market Definition

The amendments to the CCCS Guidelines on Market Definition take into account the CCCS’s findings from its 2020 market study on e-commerce platforms, and seek to address the proliferation of e-commerce platforms, their business strategies and competition dynamics in the market.

Key changes made include the following:

1. An introduction to the concept of “multi-sided platforms” and how such platforms, being characterised by innovation, may result in the evolution of market definition. Such clarification is welcome as it is a business model adopted by many e-commerce and online businesses.
2. An explanation of how the CCCS will evaluate a situation where sellers bundle distinct products to be sold together. This may be considered when defining the relevant market; and
3. To explain how the CCCS will evaluate a situation where competition concerns affect markets outside of Singapore’s geography. In such a situation, the CCCS has stated that it will only consider competitive constraints which impact competition in Singapore specifically.

11. Conclusion

The new amendments are welcome given the proliferation of online services in recent years. These changes provide further clarity as to how both traditional and newer business models will be assessed under competition law by providing guidance on the analytical and procedural frameworks administered by the CCCS under the Competition Act.

For further information, the new changes and the amended guidelines may be found here.

This article has been co-authored by Jeremiah Chew, Abigail Wong and Einson Pang from Ascendant Legal LLC