CPL 4 - Structure

Competition Law - Section 54 Prohibition

• Singapore's Section 54 prohibition deals with merger control.
• Merger control reviews mergers and acquisitions under competition law to identify anti-competitive combinations.
• The relevant threshold for a merger under Section 54 is whether it results in, or may be expected to result in, a substantial lessening of competition (SLC) in any Singapore market.
• A customary effect of a merger is that a competitor exits the market due to consolidation.
• This results in changes to the post-merger market structure and competition dynamics.

Analyzing Merger Control

• A mind map is a valuable tool for analyzing the application of Singapore's merger control.
• The Competition and Consumer Commission of Singapore (CCCS) will determine if a merger fits the definition in the Competition Act and if excluded by the 4th Schedule.
• CCCS identifies the theories of harm associated with the merger.
• A "counterfactual" analysis is used, considering competition with and without the merger to evaluate competition effects.

Types of Mergers

• Horizontal Merger: A merger between two companies in the same market at the same production level.
  • Example: two semiconductor manufacturers merging.
  • Potential examination of non-coordinated and coordinated effects of the merger.
• Vertical Merger : A merger between companies at different complementary production stages.
  • Example: a car company acquiring a tyre manufacturer.
  • Potential impact (lessening of competition) if competitors can't access inputs (tyres).
• Conglomerate Merger: A merger involving companies in different product markets.
  • Example: a jet engine manufacturer merging with an avionics equipment manufacturer.
  • Potential for reduced competition if one firm controls the entire customer portfolio.

Merger Control Initiation

• A merger occurs generally via acquisition of control (legal or de facto).
• Legal control often involves owning over half of the voting rights.
• A "rebuttable presumption" of decisive influence exists when ownership is between 30-50%.
• De facto control occurs when one undertaking is dependent on another.
• Minority shareholders may exert decisive influence, established legally or de facto.
• Joint ventures constitute a merger if they function autonomously on an ongoing basis.

Merger Control Considerations for SLC

• A merger may not be prohibited if factors indicate that it creates neither coordinated nor non-coordinated effects leading to a lessening of competition.
• Assessing economic efficiencies against adverse effects (which include lessening of competition).
• Relevant markets, competitors, barriers to entry are key considerations in this determination.

Section 54—2 Relevant Factors

• A merger situation is triggered by two or more previously separate undertakings merging, one or more persons/entities acquiring control, or one entity acquiring assets including goodwill of another.
• The acquired entity must be in a position to replace or dominate the other in the given market.

Counterfactual Analysis

• The CCCS examines the counterfactual scenario to evaluate competitive conditions with and without the merger.
• This evaluation assesses the likelihood of substantial lessening of competition.

Determining if a Merger Is Excluded

• Mergers qualify if net economic efficiencies outweigh the adverse effects of competition lessening in the relevant market.
• The claimed efficiencies must be demonstrable and specific to the merger.
• These efficiencies need to be quantified and measurable.
• Efficiencies must arise within a reasonable period.

Completion of Merger Review

• Parties are strongly encouraged to notify the CCCS before merger completion if it hasn't already cleared it to allow time to assess possible conditions.
  • If notified after closing, there's a potential risk that the CCCS may investigate, potentially leading to fines or other penalties for proceeding with the merger without prior notification.
• Public investigations are made only for cases where the CCCS proposes an infringement decision.
• There is a no definitive time frame for the initiation of an investigation by the CCCS of a merger.

Merger Control Regime and Penalties

• Singapore's merger review regime is voluntary prior to completion and mandatory post-completion.
• The outcome of the review may lead to the approval of a merger with conditional approval from the CCCS in some cases.
• Financial Penalties (up to 10% of annual turnover in Singapore; maximum of three years) can be imposed if infringements are found.