Competition regulations are important for every company that plans to play a major role in its industry in any region or country. Singapore makes no difference. In general, competition regulations seek to maintain market competition by regulating anti-competitive conduct by participants in the market. The Competition Act of Singapore as well aims to protect consumers and businesses from anti-competitive practices of private entities by declaring three business practices as illegal:
- anti-competitive agreements, decisions, and practices;
- abuse of a dominant position;
- mergers and acquisitions that substantially lessen competition
In this post, we shall explore briefly each of these three prohibitions.
Аnti-competitive Agreements, Decisions, and Practices
The Competition act calls these practices “Agreements, etc., preventing, restricting or distorting competition”. This is a general prohibition on practices the object of which is the prevention, restriction, or distortion of competition within Singapore. The law specifies the unlawful effects of such agreements, decisions etc., as follows:
- directly or indirectly fixing purchase or selling prices or any other trading conditions;
- limiting or controlling production, markets, technical development or investment;
- share markets or sources of supply;
- applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
- making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Simply put the Competition act prohibits cartels, price fixing, preferential treatment, and collusion. There are some exceptions to the rules, including agreements between parent companies and subsidiaries, agreements between parties that are not actual or potential rivals, and block exemption orders issued by the government.
Abuse of a Dominant Position
Under this section fall all kinds of restrictions on dominant market participants. The Competition act lists certain activities that are prohibited, as follows:
- predatory behavior towards competitors;
- limiting production, markets or technical development to the prejudice of consumers;
- applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
- making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts.
This specific section (Section 47 of the Act) does not prohibit entities to have a dominant position on the market in general as long as it is achieved or sustained through practices in competitive merit. Unlawful behavior here is simply placing other companies in a competitive disadvantage.
An undertaking is considered to be enjoying a dominant position in the market if it’s individual market share exceeds 60 percent of the total market, and if it possesses the ability to profitably sustain prices, eliminate or weaken competition, countervail buyer’s power and create barriers to entry of new market players. The rules against the abuse of a dominant position apply not only to Singapore entities but also to foreign companies
Mergers that Reduce Competition
Mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore for goods or services are prohibited under the Competition act. A merger can be any of the following:
- 2 or more businesses, previously independent of one another, merge;
- one or more entities acquire direct or indirect control of the whole or part of one or more other undertakings;
- acquisition of assets by one entity from another with an effect that the other entity is replaced in its business.
Under the local regulations, mergers that reduce competition can include acquisition of assets or control or actual merging. There are some exceptions to the rules that may be allowed to happen by the Competition & Consumer Commission:
- Mergers are allowed if the combined market share of the merged entities stays under 40%;
- Mergers that aid competition or are neutral in terms of their impact on competition are exempted.
If an entity wants to engage in a merger that may reduce competition it must notify the CCS and apply to it for a decision (permit).