3. Antitrust And Merger Control Lecture 3 PDF

Corporate and Commercial Practice Competition Law Antitrust and merger control (3) Daren Shiau, BBM, PBM Copyright © 2024, Singapore Institute of Legal Education 1 The Section 47 pr...

Corporate and Commercial Practice Competition Law Antitrust and merger control (3) Daren Shiau, BBM, PBM Copyright © 2024, Singapore Institute of Legal Education 1 The Section 47 prohibition Unilateral conduct Market definition Copyright © 2024, Singapore Institute of Legal Education 3 Unilateral conduct Market definition Prohibitions Regime (Singapore) Behavioural Structural Part III, Division 2 Part III, Division 3 Part III, Division 4 Section 34 Section 47 Prohibition – Section 54 Prohibition – Prohibition – abuse of dominant merger control anti-competitive position “substantial lessening of agreements competition” Copyright © 2024, Singapore Institute of Legal Education 4 Unilateral conduct Market definition Section 47(1) of the Competition Act prohibits any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in any market in Singapore. Copyright © 2024, Singapore Institute of Legal Education 5 Unilateral conduct Three-step test Three-step test: 1. What is the relevant market? 2. Is there a dominant position in the relevant market? 3. Has there been abuse of the dominant position? Dominance is not an offence in itself. Copyright © 2024, Singapore Institute of Legal Education 6 Unilateral conduct Step 1 First, define the relevant product and geographic markets. o Relevant product market: − Define all the products on the demand side that buyers regard as reasonable substitutes to the “focal product” (product being examined). − Identify all the suppliers of the focal and substitute products. − Apply the SSNIP test. o Geographic market: − Define the geographical market. Copyright © 2024, Singapore Institute of Legal Education 7 Unilateral conduct Step 2 Second, establish whether the relevant undertaking is dominant. o Legal test: Ability to profitably sustain prices above competitive levels or to restrict output or quality below competitive levels. o Presumption of dominance at 60 per cent. market share. This is indicative. Factors that may be considered in an assessment of dominance: Sunk costs, economies of scale, economies of scope, network effects, purchasing efficiencies, innovation, and production differentiation. Copyright © 2024, Singapore Institute of Legal Education 8 Unilateral conduct Step 3 Step 3 involves the question of whether an undertaking has abused its market power, assuming it is dominant. Examples of conduct that may amount to an abuse are set out in Annex C in Chapter 3 of the CCCS Guidelines (Section 47 Prohibition): o Predatory Behaviour o Vertical restraints o Pricing below cost o Exclusive purchasing (i.e. quantity forcing, full-line forcing) o Pricing below AVC o Tying and bundling o Pricing is above AVC but below ATC o Preferential leveraging of market o Fidelity discounts power o Price discrimination o Refusal to supply o Margin squeeze o Essential facilities Copyright © 2024, Singapore Institute of Legal Education 9 Unilateral conduct Step 3 Horizontal foreclosure Vertical foreclosure Single branding Non-price Tying/Bundling Discrimination based exclusion Line forcing Constructive refusal Exclusive contracts Price based Loyalty rebates Margin squeeze exclusion Predation Constructive refusal Copyright © 2024, Singapore Institute of Legal Education 10 Unilateral conduct Case study: Loyalty inducing rebates Factors to consider include: o Structure of the scheme: E.g. retroactive rebate schemes; x% discount for purchase volume X. y% retroactive discount for purchase volume Y. Price per unit Price per unit Unit price x% x% y% X X Y Quantity Quantity Copyright © 2024, Singapore Institute of Legal Education 11 Unilateral conduct Case: SISTIC.com CCS 600/008/07 – Abuse of a Dominant Position by SISTIC.com Pte Ltd Willingness of the CCCS to establish its own theories on exclusionary conduct. Relied on circular theory of harm which rests on concurrent effects of discounts and exclusive agreements. Artificial perpetuation of dominance Exclusive Reap agreements monopoly with venues benefits from and ticket buyers promoters Copyright © 2024, Singapore Institute of Legal Education 12 Unilateral conduct Case: Coca-Cola Singapore Beverages In 2013, CCCS investigated into Coca-Cola Singapore Beverages’ supply agreements with on-premise retailers. The CCCS had received a complaint that Coca-Cola had incorporated restrictive provisions in its supply agreements with on-premise retailers of soft drinks, e.g.: o Exclusivity conditions; and o Conditional rebates. The CCCS launched an investigation. Copyright © 2024, Singapore Institute of Legal Education 13 Unilateral conduct Case study: Coca-Cola Singapore Beverages Consequently, Coca-Cola Singapore Beverages amended its supply agreements to remove potentially anti-competitive provisions and gave an undertaking to the CCCS as follows: o No exclusivity restrictions. o No right of first refusal. o No loyalty-inducing rebates. o No exclusive use of display space. − To allow its on-premise retailers to use up to 20% of the space in coolers provided by Coca-Cola Singapore Beverages to store other brands of beverages. Copyright © 2024, Singapore Institute of Legal Education 14 Unilateral conduct Objective justification defence Examples in jurisprudence of objective justifications: o “Ramsey Pricing” − Raises individual prices above marginal cost in according to each service's price elasticity of demand. − Example: Movie tickets. o “Long-run Incremental Costs” − Examines the long-run cost of providing an output rather than on a short-term per unit basis. − Example: Infrastructure sectors. Copyright © 2024, Singapore Institute of Legal Education 15 Unilateral conduct Case study: Market definition CCCS 100/1303/08 – Acquisition of Singapore Food Industries Limited by SATS Ltd Parties SATS submits that the relevant product markets for the purposes of this notification are: The provision of contract food services The supply of processed foods The wholesale distribution of food products Copyright © 2024, Singapore Institute of Legal Education 16 Unilateral conduct Case study: Market definition CCCS 100/1303/08 – Acquisition of Singapore Food Industries Limited by SATS Ltd CCCS Provision of contract food services can be categorised into the following market segments: 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) Respondents Customers often have specific requirements. From the supply-side feedback perspective, a provider require technical expertise (such as dieticians and nutritionists to devise menus that cater to patients’ need) and management experience in running contract food services in hospitals. Copyright © 2024, Singapore Institute of Legal Education 17 Copyright Notice Copyright © 2024, Singapore Institute of Legal Education. All rights reserved. The Course materials are developed by the Singapore Institute of Legal Education, based on the content, syllabus, and guidance provided by the Chief and Principal Examiners and their teams. No direct or indirect reproduction, publication, communication to the public, adaptation or any other use (that is prohibited and/or proscribed by copyright laws) of the Course materials in whole or in part in any form or medium is allowed without the written permission of the Singapore Institute of Legal Education. Part B Candidates should refer to the Code of Conduct for more information, particularly, the sections on conduct and behaviour, and the use of SILE resources. 18