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Competition Commission Consults on Draft Guidelines of the Competition Act
Posted on Thursday, March 31, 2005 - 12:00 AM

As part of the preparation for Phase II implementation of the Competition Act 2004 (Act), the Competition Commission of Singapore (CCS) today issued draft guidelines for public consultation. Guidelines indicate how the CCS will interpret and give effect to the provisions of the Act, which will come 1 January 2006.

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31 March 2005

Competition Commission Consults on Draft Guidelines of the Competition Act 2004

1. As part of the preparation for Phase II implementation of the Competition Act 2004 (Act), the Competition Commission of Singapore (CCS) today issued draft guidelines for public consultation. Guidelines indicate how the CCS will interpret and give effect to the provisions of the Act, which will come 1 January 2006.

2. Guidelines are intended to help businesses understand how the CCS will administer and enforce infringements of the prohibitions in the Act. This will improve transparency and provide greater clarity to businesses on the competition law regime. There will be public consultations to seek inputs and feeback before the guidelines are finalised.

3. The CCS invites views and comments on the first set of three draft guidelines pertaining to the section 34 prohibition, the section 47 prohibition and market definition. The remaining guidelines will be issued progressively for public consultation in the ensuing months. The CCS aims to complete the process by November 2005.

4. Section 34 prohibits agreements, decisions and concerted practices, that prevent, restrict or distort competition in Singapore. These include agreement between competing firms to fix prices, fix tender bids, reduce the quantity of goods and services sold, or to share markets. The provisions of any agreement that infinge this prohibition will be rendered void on or after 1 January 2006 to the extent of the infringement. The CCS will focus principally on anti-competitive agreements that have an appreciable adverse effect on markets in Singapore. The section 34 prohibition guideline sets out some of the factors and circumstances which the CCS will consider in determining whether agreements are anti-competitive.

5. Section 47 prohibits firms from abusing their dominance in ways that are anti-competitive and which work against longer term economic efficiencies. However it does not prohibit dominance or substantial market power per se - firms can, and should, seek to increase or maintain their market positions through offering better quality, more competitive pricing or wider range of goods at higher quality of service standards. The section 47 prohibition guideline sets out some of the factors and circumstances which the CCS will consider in determing whether an undertaking has engaged in conduct amounting to an abuse of a dominant position in a market.

6. The market definition guideline provides the analytical framework on how the CCS will define markets when investigating possible infringements of the
section 34 and section 47 prohibitions under the Act.

Guiding Principles and Framework of the Draft Guidelines

7. The key function and duty of the CCS is to promote healthy competitive
markets in Singapore. In drafting the guidelines, CCS took into account our specific needs and circumstances, in particular, that Singapore is a small and open economy.

8. The CCS will prioritise its enforcement and target those that are clearly more harmful and warrant regulatory intervention. The application of the guidelines will depend on the facts of each case.

9. Commenting on the drafting process, Mr Ng Wai Choong, Chief Executive of the CCS said, "In crafting the the guidelines, we avoided being prescriptive; instead, our guidelines outline the conceptual, analytical and procedural framework within which the CCS will investigate and assess complaints and undertake enforcement.? He added, ?Ultimately, we want to see competitiveand robust markets which are not heavily burdened by complex compliance issues."

Public Feedback

10. The consultation documents on the draft guidelines can be from the CCS website at www.ccs.gov.sg under the section "Guidelines" and the Government Online Consultation Portal at www.feedback.gov.sg .

11. The closing date for submissions is on or before 12 noon, 13 May 2005.

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Annex 1

Notes to Editor:

1. The Competition Act 2004 (Act) was passed in Parliament on 9 October 2004. The new law will improve Singapore?s international competitiveness by enhancing the efficient functioning of markets in Singapore. Instead of attempting to catch all forms of anti-competitive activities, our principal focus will that have an appreciable adverse effect on competition in Singapore or that do not have any net economic benefit. The Act is being implemented in phases:

Phase I - On 1 January 2005, the provisions establishing the Commission of Singapore (CCS) were brought into force.

Phase II - On 1 January 2006, the provisions on anti-competitive agreements, decisions and practices; abuse of dominance; enforcement; appeal process; and miscellaneous areas will come into force.

Phase III - The remaining provisions relating to mergers and acquisitions will likely come into force at least 12 months after Phase II.

Draft guideline on the section 34 prohibition (Agreements, etc., preventing, restricting or distorting competition)

2. This draft guideline sets out some of the factors and circumstances which the CCS will consider in determining whether agreements are anti-competitive. it indicates the manner in which the CCS will interpret and give effect to the provisions of the Act when assessing agreements between undertakings.

3. Agreements or concerted practices between undertakings at different levels of the production and distribution chain, for example manufacturers and retailers; or dealers and retailers; are excluded from the section 34 prohibition (Third Schedule). As a result, only anti-competitive agreements or concerted practices between undertakings at the same level (competitors), for example manufacturers or dealers, as among themselves, are prohibited. In practice most anti-competitive agreements and concerted practices occur between those who compete in the same market(s).

Draft guideline on the section 47 prohibition (Abuse of dominant position)

4. This guideline sets out some of the factors and circumstances which the CCS will consider in determining whether an undertaking has engaged in conduct amounting to an abuse of a dominant position in a market. It indicates the manner in which the CCS will interpret and give effect to the provisions of the Act when assessing abuse of dominance.

Draft guideline on market definition

5. Market definition is the first step in a full competition analysis. It provides a
framework for competition analysis. It is also a key step in identifying the competitive constraints acting on a seller of a given product.

6. Market definition and the measurement of market shares are important in determining

a. whether agreements, decisions between associations of undertakings or concerted practices have their object or effect an appreciable prevention, restriction or distortion of competition in a market (the section 34 prohibition) or

b. whether an undertaking with substantial market power amounting to a dominant position in a market has abused its market power (the section 47 prohibition).

7. Once the relevant market has been defined, market shares can be measured. The other aspects of the competition analysis, including the potential for new entry into the market, will then be considered. In cases where it may be apparent that an activity is unlikely to have an appreciable adverse effect on competition, or the undertaking under investigation does not possess substantial market power within any sensible market definition, it would not be necessary to formally establish a definition of the market.

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