3. Competition Act & Dominance in Singapore

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Questions and Answers

What may be considered a factor in assessing market dominance?

Market entry barriers

Sunk costs (correct)

Brand loyalty

Consumer preferences

Which of the following practices is NOT classified as an abusive use of market power?

Price discrimination

Price matching (correct)

Predatory pricing

Exclusive contracts

What is the presumption of dominance based on market share percentage?

50 percent

80 percent

60 percent (correct)

70 percent

Which of the following is an example of price-based exclusionary conduct?

Loyalty rebates Signup and view all the answers

In the context of unilateral conduct, which behavior involves leveraging market power through preferential treatment?

Preferential leveraging Signup and view all the answers

Which of these pricing strategies may constitute predatory behavior?

Pricing below average variable cost Signup and view all the answers

What is a common characteristic of loyalty rebates as part of a market strategy?

Incentives to purchase exclusively Signup and view all the answers

Which conduct is classified under vertical restraints?

Exclusive purchasing Signup and view all the answers

What is the main purpose of Section 47 of the Competition Act?

To prevent the abuse of dominant market positions Signup and view all the answers

Which step is NOT part of the three-step test for determining abuse of dominant position?

Analyzing the pricing strategy of the dominant firm Signup and view all the answers

What is the first step in the three-step test for unilateral conduct under the Competition Act?

Defining the relevant product and geographic markets Signup and view all the answers

Which of the following is NOT a component when defining the relevant product market?

Assessing consumer preferences over time Signup and view all the answers

In the context of competition law, what does the acronym SSNIP stand for?

Small but Significant Non-transitory Increase in Price Signup and view all the answers

What is the consequence of being in a dominant position in a market according to the Competition Act?

It is not an offense unless abused Signup and view all the answers

Which division of the Prohibitions Regime deals specifically with merger control?

Part III, Division 4 Signup and view all the answers

What must occur for conduct to be considered abusive under Section 47 of the Competition Act?

There must be a clear dominant position in the relevant market Signup and view all the answers

What was a significant issue investigated regarding Coca-Cola Singapore Beverages in 2013?

Exclusivity conditions in supply agreements Signup and view all the answers

What conduct was identified in the SISTIC.com case related to market power?

Exclusive agreements and artificial perpetuation of dominance Signup and view all the answers

Which of the following did Coca-Cola Singapore Beverages agree to eliminate from their supply agreements?

No exclusivity restrictions Signup and view all the answers

What did the circular theory of harm in the SISTIC.com case rest upon?

Concurrent effects of discounts and exclusive agreements Signup and view all the answers

In the context of unilateral conduct, what aspect does conditional rebate imply?

Rebates given only with the purchase of certain items Signup and view all the answers

What outcome can be inferred from the CCCS's approach in the SISTIC.com case?

Willingness to establish independent theories on market conduct Signup and view all the answers

What was one of the findings from the investigation into Coca-Cola Singapore Beverages’ agreements?

Exclusivity conditions were seen as anti-competitive Signup and view all the answers

What benefit is often derived from exclusive agreements in the context of monopolies?

Creation of barriers for new entrants Signup and view all the answers

What is one of the limitations set by Coca-Cola Singapore Beverages regarding cooler space?

Retailers can use up to 20% of cooler space for other brands. Signup and view all the answers

Which rationale is associated with Ramsey Pricing?

Adjusting prices based on the price elasticity of demand. Signup and view all the answers

In the case study regarding SATS Ltd, which type of market segment is NOT categorized under the provision of contract food services?

Retail grocery Signup and view all the answers

What is a key characteristic of 'long-run incremental costs'?

Considers the long-term costs associated with providing an output. Signup and view all the answers

Which of the following is NOT mentioned as a category of market segmentation in contract food services?

Hospitality Signup and view all the answers

What aspect does the CCCS consider when evaluating responses from customers in contract food services?

Specific requirements of customers. Signup and view all the answers

What type of pricing strategy might involve raising individual prices above marginal cost?

Ramsey Pricing Signup and view all the answers

Which of the following phrases best describes the market definition mentioned for the acquisition case of SATS Ltd?

Customer-driven market segments. Signup and view all the answers

Study Notes

The Section 47 Prohibition

The Competition Act prohibits conduct that amounts to the abuse of a dominant position in any market in Singapore.

Unilateral Conduct: Three-Step Test

The three-step test for identifying abuse of dominant position:
- Define the relevant market.
- Determine if there is a dominant position within the relevant market.
- Determine if there has been abuse of the dominant position.
Dominance is not an offense itself.
The presumption of dominance is at 60% market share.

Relevant Market Definition

The relevant product market includes all products buyers consider reasonable substitutes to the focal product.
The relevant geographic market considers where buyers are willing to purchase reasonable substitutes for the product.

Establishing Dominance

Dominance is assessed as:
- The ability to profitably sustain prices above competitive levels.
- The ability to restrict output or quality below competitive levels.
Factors that may be considered in dominance assessment:
- Sunk costs
- Economies of scale
- Economies of scope
- Network effects
- Purchasing efficiencies
- Innovation
- Production differentiation

Abusive Conduct

Abuse of dominant position includes conduct exemplified by:
- Predatory behaviour
- Pricing below cost
- Fidelity discounts
- Price discrimination
- Margin squeeze
- Vertical restraints, including:
  - Exclusive purchasing
  - Tying and bundling
  - Preferential leveraging of market power
  - Refusal to supply
  - Essential facilities

Abusive Conduct: Horizontal and Vertical Foreclosure

Horizontal foreclosure: Practices that exclude competitors from the same market, including:
- Non-price based exclusion:
  - Single branding
  - Tying/bundling
  - Line forcing
  - Exclusive contracts
- Price-based exclusion:
  - Loyalty rebates
  - Predation
Vertical foreclosure: Practices that exclude competitors from different, but linked, markets, including:
- Discrimination
- Margin squeeze
- Constructive refusal

Case Study - Loyalty-Inducing Rebates

Loyalty inducing rebate schemes can be abusive.
Factors to consider are:
- The structure of the scheme, including:
  - Retroactive rebate schemes: These schemes offer discounts based on past purchase volume.
  - Discounts on specific volumes: These schemes offer discounts proportionate to specific purchase volumes.

Case Study: SISTIC.com

In CCS 600/008/07, SISTIC.com Pte Ltd was found to have abused its dominant position.
The CCCS relied on the "circular theory of harm" which states that exclusive agreements and discounts can combine to artificially perpetuate dominance.
Specifically, SISTIC.com's actions involved:
- Exclusive agreements with venues and promoters: This restricted competition in the ticket sales market.
- Reaping monopoly benefits from ticket buyers.

Case Study: Coca-Cola Singapore Beverages

In 2013, the CCCS investigated Coca-Cola Singapore Beverages' supply agreements with on-premise retailers.
The investigation found:
- Restrictive provisions, such as:
  - Exclusivity conditions
  - Conditional rebates
Coca-Cola amended their agreements to remove potentially anti-competitive provisions and gave an undertaking to the CCCS that included:
- No exclusivity restrictions.
- No right of first refusal.
- No loyalty-inducing rebates.
- No exclusive use of display space.
- Allowance for retailer use of up to 20% of cooler space for other brands.

Objective Justification Defence

An undertaking can defend against allegations of abusive conduct by demonstrating an objective justification for their actions.
Examples of potential objective justifications:
- "Ramsey Pricing": The practice of setting individual product prices above marginal cost based on price elasticity of demand.
- "Long-run Incremental Costs": Examines the long-run cost of providing an output, rather than a short-term per-unit basis.

Case Study: Market Definition

In CCCS 100/1303/08, SATS Ltd. acquired Singapore Food Industries Limited.
SATS submitted that the relevant product market included:
- Provision of contract food services
- Supply of processed foods
- Wholesale distribution of food products
The CCCS examined these markets and found that provision of contract food services could be further categorized into segments including:
- Business industrial (e.g. factories, hotels)
- Education (e.g. schools, colleges)
- Healthcare (e.g. hospitals, nursing homes)
- Uniformed (e.g. Singapore Armed Forces, Policy Academy, Civil Defence Force)
The CCCS recognized that customers in each of these segments often have specific requirements.

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Description

This quiz covers key concepts of the Competition Act in Singapore, focusing on the prohibition of abusing a dominant market position. It includes details on the three-step test for identifying such abuse, the definition of relevant markets, and how dominance is established. Test your understanding of these regulatory measures.