ABA SIL 2015 Asia Forum:
Managing Pricing and Distribution for Global
Companies – Price Maintenance and Vertical
Restraints around the World
(Singapore segment)
Daren Shiau
Partner
Competition & Antitrust
2 March 2015
Introduction
Southeast Asia
• ASEAN Economic Community by 2015: Competition law and
policy to be implemented in 10 member states.
• However, different political and economic systems.
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Introduction
2
Singapore
• Small and open economy. Reliance on foreign investment and
trade. Most markets international.
• World’s busiest port and transport hub. Imports are constraint
on competition.
• Internet a significant distribution channel.
Vertical agreements in Singapore
CCS’ characterisation
• Chicago School approach:
– Vertical agreements are excluded from Section 34 of the
Competition Act which prohibits cartels.
– Vertical agreements are not excluded from Section 47 of
the Competition Act which prohibits abuse of a dominant
position.
• Therefore vertical agreements are likely to have an effect on
competition only: (1) where the firm imposing a vertical
restraint is already dominant, or (2) where the vertical
agreement is used to enforce an upstream or downstream
cartel.
3
Vertical agreements in Singapore
4
Example of exclusive dealing
• Therefore, the CCS considers exclusive dealing imposed by a
party to likely raise competition concerns if:
– The party imposing the exclusive obligation is dominant.
– A significant proportion of the market is foreclosed to
competitors as a result of the exclusive dealing.
Vertical agreements in Singapore
5
Example of exclusive dealing
• The CCS will also take into consideration the following factors
in its assessment:
– The coverage of the exclusive dealing.
– The constraints imposed by the exclusive dealing.
– The structure of the market.
– Possible efficiencies of the exclusive dealing.
– Whether the exclusive dealing has led to actual,
observable effects in a market.
• Tests used include the ‘profit sacrifice’ test and ‘no economic
sense’ test.
Vertical agreements in Singapore
6
Example of MFN clauses
Website Y
Website X
Cx
Cy
Sellers
Px
Pdirect
Consumers
Pdirect ≥ Px and Py ≥ Px
Py
Vertical agreements in Singapore
7
Abuse of a dominant position by SISTIC.com Pte Ltd
Case Number: CCS/600/008/07
Restrict event
organisers’
choice
Exclusive
agreements
with venues &
event
organisers
Artificial
perpetuation
of dominance
Raise booking
fee
Ticketing
services
industry
Ticket buyers
pay more
Offer discounts and other incentives
Vertical agreements in Singapore
8
Abuse of a dominant position by SISTIC.com Pte Ltd
• The exclusive agreements entered into by SISTIC, the venue
operators and the event promoters “left ticket buyers with no
choice but to purchase tickets through SISTIC”. CCS decided
that:
– Operators and promoters’ were restricted in the choice of
ticketing service providers, artificially perpetuating SISTIC’s
dominant position, and affording SISTIC the ability to
charge ticket buyers higher prices.
– Higher revenues generated from ticket buyers in turn
provided SISTIC the buffer to sustain discounts and other
incentives used to attract and retain operators and
promoters exclusively.
Regulators other than CCS
9
Illustration of electricity transmission
Generation
Potentially
competitive
Transmission
Distribution
Lines services exhibit economies of
scale resulting in a natural monopoly
Retail
Potentially
competitive
• Generation and retail businesses structurally separated from
network business.
• Profits of monopoly transmission grid owner regulated by
Energy Market Authority in 2001, limiting financial benefit of
vertical restraints.
• Transmission Code sets out obligations for monopoly
transmission grid owner to provide non-discriminatory access
to transmission system.