Jurisdiction - Singapore
Reports and Analysis
Singapore – Revised Advisory Guidelines For The IDA’s Telecom Competition Code.

9 May, 2014

 
 

Introduction


On 25 April 2014, the revised Telecom Competition Code Guidelines – the Reclassification and Exemption Guidelines” and the “Telecom Competition Guidelines” – issued by the Info-Communications Development Authority of Singapore (“IDA”) came into effect.


The Reclassification and Exemption Guidelines describe the procedures that IDA will generally use, and the standards that IDA will generally apply, in implementing the reclassification and exemption provisions contained in Section 2 of the Telecom Competition Code. The Telecom Competition Guidelines set out the procedures and the standards that IDA will generally apply in implementing the provisions involving abuse of dominant position, unfair methods of competition and agreements involving licensees that unreasonably restrict competition under Sections 8 and 9 of the Telecom Competition Code.


The revisions to the guidelines are to align with the changes made in 2012 to the Telecom Competition Code and to provide more clarity on how the IDA will implement the relevant sections of the Code, taking into account IDA’s experience in implementing the Code as well as best practices from other jurisdictions.


Key Changes To Guidelines


Reclassification And Exemption Guidelines – Overview


One key change has been to clarify that IDA would consider the concepts of bundles, chain substitutes and complements, where appropriate, in defining the relevant market.


IDA has also clarified that it will take into account whether the relevant market is a onesided market or a two-sided market when assessing the competitiveness of the market, in recognition that the telecommunication industry is characterised by two-sided markets. Two-sided markets are markets in which the firm provides a platform that enables two distinct but related groups of customers to obtain products or services; the two sides of the platform are linked, with interdependent prices and output and intertwined strategies.


IDA declined a respondent’s suggestion to remove the presumption contained in the guidelines that a market share of more than 40 per cent is indicative that a Dominant Licensee has Significant Market Power. IDA reiterated its previous position that the 40 per cent market share threshold is only an initial presumption of Significant Market Power which may be rebutted and that its assessment of the competitiveness of a market is guided by many other factors, including price competition.


IDA also declined a respondent’s suggestion that the IDA should move away from its current “entity-based approach”, in which a Dominant Licensee is presumed to be dominant, and regulated on an ex ante basis, in all the markets that it operates in, unless it seeks for and obtains an exemption from IDA. The respondent submitted that IDA should embark on a comprehensive market-by-market analysis of all the telecommunication markets in Singapore to identify only specific markets where ex ante regulation is necessary. In response, IDA highlighted that the “entity-based approach” is specified in the Telecom Competition Code, and should therefore not be considered under the present review of the guidelines. IDA encouraged respondents to raise these comments as part of the IDA’s next Telecom Competition Code review.


Telecom Competition Guidelines – Overview


One key change has been to introduce a leniency programme under the guidelines so as to give Licensees participating (or which have participated) in cartels an incentive to come forward and inform IDA of the cartel’s activities.


Under IDA’s leniency programme, IDA will grant a Licensee total immunity from financial penalties if it is the first to provide IDA with evidence of the cartel activity before IDA commences an investigation. The Licensee may benefit from a reduction in the financial penalty of up to 100 percent if it is the first to come forward but only does so after IDA has started an investigation and before IDA issues an infringement decision. Licensees which are not the first to come forward but which provide evidence of cartel activity before IDA issues the decision, may benefit from a reduction in the financial penalty of up to 50 percent. If the leniency applicant is unable to immediately provide IDA with all the necessary evidence at the point of application, it may apply to IDA for a marker to secure a position in the queue. A marker protects a Licensee’s place in the queue for a given limited period of time and allows it to gather the necessary information and evidence in order to perfect the marker.


Other changes have been to clarify the examples of conduct which IDA might consider to be competition infringements. For example, IDA had under the price-fixing section of the guidelines introduced a list of examples of indirect price fixing, which IDA clarified would constitute a contravention of the Telecom Competition Code. These include agreeing on or agreeing to recover certain cost components in prices changed, exchanging commercial sensitive or strategic information between competitors and agreeing on the amount of or incidence of discounts. IDA had also provided further details on when IDA would find a tacit agreement to exist, including taking into account whether the Licensees knowingly entered into practical cooperation and whether behaviour in the market has been influenced as a result of direct or indirect contact between Licensees.


IDA has also clarified that in determining whether an action constitutes an unreasonable restriction of competition, IDA will also consider whether the conduct may be objectively justified (in cases of alleged abuse of dominance) or whether it produces offsetting efficiencies that outweigh the anti-competitive effect (in the case of agreements).


Comments


Taking Industry-Specific Characteristics Into Account


The changes made to the guidelines to introduce the concepts of two-sided markets and bundles are a positive sign that IDA recognises and will be taking into account the specific characteristics of the industry when enforcing the Telecom Competition Code.


Bundling is indeed a trend in the Singapore telecommunications market as changes in technology and the opening up of services-based competition have given rise to more multi-play service providers. M1, for example, is no longer just a mobile operator but a multi-play operator that also provides broadband and TV offerings. As services become increasingly offered and consumed in bundles rather than as standalone services, traditional market definitions and the imputation of cost for the purposes of assessing price squeezes will need to evolve accordingly.


While it is therefore timely and necessary for IDA to take these concepts into account in its competition assessment, the mechanics of how IDA would do so have not been laid out in the guidelines. As IDA has rightly pointed out, it is not feasible for IDA to provide further and more specific details on its approach within the guidelines as the analysis would depend on the specific facts and circumstances of each case. It therefore remains to be seen how IDA will operationalise and apply these concepts in an actual competition case.


Leniency Framework


Another step in the right direction has been IDA’s introduction of a leniency framework, which comes at a time when consumers in Singapore are increasingly questioning whether telecommunication service providers are engaging in cartel practices. Consumers in Singapore have complained about what they view as too-similar prices and service offerings amongst the three mobile operators, and have viewed with suspicion certain practices such as the three mobile operators “following” one another in charging consumers for mobile data usage. Thus far, IDA has not issued any infringement decisions under section 9 of the Telecom Competition Code in relation to cartels and other anticompetitive agreements.


As IDA has recognised, given the secret nature of cartels, leniency programmes have been found to be a useful and effective tool in other jurisdictions to increase the detection of cartels. In Singapore, the Competition Commission of Singapore’s (“CCS”) latest provisional decision, a cartel case, was also pursued subject to a leniency application by one of the cartel participants. The introduction of a leniency framework might therefore increase IDA’s success in detecting and finding sufficient evidence against any cartels operating in the industry.


The leniency framework adopted under IDA’s guidelines mirrors the CCS’ leniency framework in terms of the reduction in penalties available to leniency applicants, the general criteria to be satisfied to qualify for leniency, as well as the availability of a leniency marker. It is sensible that IDA has chosen to align itself with the CCS’ leniency framework, which in turn is generally consistent with international best practice, to avoid having multiple standards in Singapore which might lead to confusion. Further, there are no sector-specific characteristics in this case to warrant a different approach towards leniency. It remains to be seen if the other sectoral regulators, such as the Media Development Authority of Singapore, will also consider introducing a leniency framework under their competition regulations or guidelines.


More Fundamental Review To Be Undertaken Under The Next Competition Code Review


As IDA has explained, some of the responses received during the public consultation relate to concepts specified in the Telecom Competition Code and therefore cannot be reviewed under the guidelines without the corresponding changes first being made to the Telecom Competition Code. These include comments relating to IDA’s entity-based approach, as well as the use of “average incremental cost” as the cost standard for assessing predatory pricing. IDA has therefore encouraged respondents to raise these comments as part of the next review of the Telecom Competition Code for IDA’s assessment or consideration instead.


The changes that have been proposed by respondents, particularly in moving from an “entity-based approach” to a “market-by-market approach”, represent fundamental changes to IDA’s framework and would need to be studied very carefully under the next Telecom Competition Code review. As a comparison, the European Commission’s approach for the regulation of communications markets is to take a targeted approach for ex ante regulation and it has, over time, been reducing the number of markets identified for ex ante regulation. Having adopted a “entity-based approach” for more than ten years since market liberalisation, IDA should review this matter carefully as part of the next Telecom Competition Code review, in view of the drastic technological changes and trends taking place in the industry.


Concluding Words


The changes made to the guidelines are generally a step in the right direction to align with best practices and better take into account the industry-specific characteristics during competition assessment.

 

Rajah & Tann

 

For more information, please contact:

 

Kala Anandarajah, Partner, Rajah & Tann
kala.anandarajah@rajahtann.com

 

Rajesh Sreenivasan, Partner, Rajah  & Tann
rajesh@rajahtann.com

 

Steve Tan, Partner, Rajah & Tann
steve.tan@rajahtann.com


Dominique Lombardi, Partner, Rajah & Tann

dominique.lombardi@rajahtann.com


Tanya Tang, Rajah & Tann
tanya.tang@rajahtann.com

 

Homegrown Competition & Antitrust Law Firms in Singapore

 
 

Comments are closed.