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Singapore – Key Issues For Your Business In 2015: Competition.

10 March, 2015

 


Enforcement Against International Cartels – Impact On Singapore Operations

 
In 2014, the Competition Commission of Singapore (“CCS”) issued infringement decisions against two international cartels, one involving ball bearing manufacturers and another involving international freight forwarders, whose anti-competitive effects were allegedly imported into Singapore through their local subsidiaries.

 
In the freight forwarding decision, the CCS imposed a financial penalty on both the parent and local companies, even though the CCS did not find any evidence that the Singaporean subsidiaries had knowledge of their parents’ anti-competitive agreements. The CCS also established the existence of a single economic entity as it imputed liability. Multinational corporations operating in a group structure need to recognise that whilst legal separation gives them a degree of protection against civil claims, the CCS will pierce this veil by relying on the fact that economically the entity operates as one thus imputing liability of one on the other in the group. To the extent possible, corporations need to avoid factors that could lead to them being viewed as a single economic entity.

 
Greater Incentives To Whistle-Blowers

 
As part of its cartel detection measures, the CCS introduced a financial reward scheme in 2014, offering a financial incentive of up to SGD 120k to informants who whistle-blow and provide information on anti-competitive conduct. This reward scheme offered to individuals is a complement to the CCS’ leniency programme which offers immunity or reduced penalty to undertakings for disclosing their participation in a cartel. On a going forward basis, it is critical that companies update their competition compliance policy, educate and train their employees on proper business protocol, as well as provide internal whistle-blowing channels so that any potential infringing activities can be nipped in the bud.

 
Increased Scrutiny On Mergers

 
While Singapore continues its voluntary merger notification regime, the record number of merger notifications made to the CCS in 2014 – a total of 10 mergers compared to 3 in 2013 – indicates that companies are increasingly seeing the advantages of notifying their mergers for certainty, and highlights the CCS’ increasingly proactive stance in scrutinising non-notified mergers. This increased scrutiny is evident in the fact that 2 out of the 10 mergers in 2014 proceeded to a Phase 2 review (which suggests a high risk of substantial lessening of competition) compared to 6 out of 37 mergers from 2007 – 2013.

 
With the CCS increasing its market surveillance on merger activity in both the local and global market, and its right to approach merger parties for information and possibly stall the transaction, business engaging in acquisitions, joint ventures or other forms of structures which results in control passing, whether the transaction is in Singapore or otherwise, must carefully analyse and ascertain if a merger filing is required. Failure to notify may result in financial penalties, imposition of behavioural and structural remedies, or an unwinding of the transaction.

 
Private Actions – Are We Ready For This?

 
Under the Competition Act, any person who suffers a loss or damage directly as a result of a cartel or an abuse of dominance has a right of action against the participants in the cartel or the dominant undertaking. Such private action can only be exercised within 2 years after the CCS issues an Infringement Decision and the appeal process has been exhausted. To date there have been no reported cases of private actions. Yet, the time might now be ripe, given the increased number of behavioural decisions (cartel and dominance) the CCS has issued. Private actions are fairly common in a number of jurisdictions, and businesses in Singapore must in their risk assessment bear this as a possibility and manage the same.

 
CCS May Conduct Market Studies

 
The CCS is empowered to conduct market studies as it deems necessary. This can be where it feels that some features of a market may produce an anti-competitive outcome. Over the years that CCS has thus reviewed various markets or industries, including the retail petrol market, the airline industry and even the industrial property market. Market studies are an efficient tool for the regulator as it may highlight structural or behavioural issues that would have not otherwise surfaced. A point to note is that from such market studies, the CCS could commence investigations as well. Possible markets that the CCS could decide to study this year include those with a small number of players and/or with market players that seemingly have market power falling short of dominance.

 

Rajah & Tann

 

For further information, please contact:

 

Kala Anandarajah, Partner, Rajah & Tann 

kala.anandarajah@rajahtann.com

 

Dominique Lombardi, Partner, Rajah & Tann

dominique.lombardi@rajahtann.com

 

Homegrown Competition & Antitrust Law Firms in Singapore

 

 

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