Protect Your
BUSINESs.
Recognise
Abuse Of
Dominance.
The Competition Act prohibits 3 types of business practices:
1.Anti-competitive agreements;
2.Abuse of a dominant position, where companies with substantial market power prevent
others from competing in the market; and
3.Mergers that create a player with so much market power that competitors are driven out
from the market.
This brochure provides you with information about Abuse of Dominance. For more information
on anti-competitive agreements, please refer to the CCS booklet titled: Protect Your Business:
Know The Dos & Don’ts Of The Competition Act.
The publication is available on our website at http://www.ccs.gov.sg.
The Competition Act
Singapore has always embraced competition among companies so as to
develop a strong and resilient economy. It is through the competitive process
in the marketplace that companies sharpen their efficiency and increase
their productivity.
Some businesses, however, may be tempted to create barriers in the marketplace
for their own benefit through anti-competitive practices. These are practices
aimed at driving out rivals.
The Competition Act seeks to protect companies and consumers from anticompetitive practices such as price fixing, bid rigging, abuse of market power
by a dominant player, and mergers that monopolise markets.
Enforcer Of The
Competition Act
The Competition Act is administered and enforced
by the Competition Commission of Singapore
(CCS), an independent statutory board under the
Singapore Ministry of Trade and Industry. CCS
promotes competitive markets through rigorous
enforcement actions aimed at steering affected
markets back to a competitive state.
3 key prohibitions
Abuse of a
dominant
position
Me
sub rgers
sta that
nt
comlessen ially
pet
itio
n
Anti-itive
pet
m
co ements
e
agr
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“Competition in the marketplace lies at the core of a vibrant economy. It is
necessary to drive productivity growth, economic resilience and consumer
choice. CCS, in enforcing the Competition Act, protects the competition
process by ensuring that it is free from manipulation by businesses out to
gain greater market share or profits through anti-competitive means.”
Teo Eng Cheong
Chief Executive, the Competition Commission of Singapore (CCS)
28 March 2009
Business Times
Protect Your Business
Against Abuse
of Dominance
As a businessman, your energy and resources should be devoted to growing
your business. Similarly, your rivals would seek to maximise their commercial
interest. This is part and parcel of competition in the marketplace.
However, certain business tactics are objectionable. A market leader, for
instance, may block you from competing in the market by creating artificial
barriers for you. When this happens, you find that instead of focusing your
attention on growing your business, you have to expend energy and resources
in order to overcome these hurdles. This is abuse of dominance.
Competition law prohibits market leaders from engaging in abusive business
practices that harm rivals. If the conduct by a market leader is deemed to be
illegal under the Competition Act, CCS will intervene and put a stop to it.
To better protect your business, learn to recognise what type of business
conduct by market leaders is regarded as an abuse of dominance.
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Predatory
Pricing
Discount
Schemes
ve
i
s
u
l
Exc aling
De
Refusal
to Supp
ly
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What Qualifies As Abuse Of
Dominance?
Being big or dominant is not an infringement of the Competition Act.
It is perfectly legitimate if a dominant market player achieves its strong market
power by being more efficient or innovative, or simply because it enjoys greater
economies of scale due to its size.
However, the Competition Act prohibits any ABUSE of a dominant position. This
happens when a market player is not only dominant, but also abuses its market
power to either block rivals from competing against itself or stop rivals from
entering the market. Where the abusive conduct has a significant adverse
impact on competition in the marketplace, CCS will take the necessary action.
To decide whether there is an abuse of dominance,
CCS will look for 2 features:
#1: The company must be dominant in the market.
#2: The company’s business conduct must be abusive.
Both features must be present for CCS to establish a case
of an abuse of dominance.
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What Does
Dominance
Mean?
“He is likely to be dominant because he holds
more than 60% of the market share.”
MARKET SHARE
A market share above 60%
indicates that a company is likely
to be dominant.
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“Company X is a dominant player because it
has very few or no competitors.”
THE LACK OF
COMPETITION
A company has great market power
if there are few or no competitors
that its customers can go to if the
company were to raise its prices.
Dominant companies are powerful. Generally, ‘dominance’ can be defined as
the ability to act without the need to consider the reactions of its customers or
competitors. If the company does not have dominant power, affected parties
can turn to its competitors easily. The extent of dominance can be measured in
a few ways. They include:
“He is the dominant player because others
find it difficult to enter the market.”
Barriers to entry
It may be difficult for newcomers to
enter a market because of reasons
such as the high capital cost or
technological requirements. In such
instances, existing market players
are less concerned about potential
competition. They are therefore more
likely to be considered dominant.
“He can behave like a dominant player because
his customers have no bargaining power.”
How powerful the
customers are
If a company is dependent on a
few sizeable customers, it is less
likely to be able to make demands
on these customers. The player
is therefore less likely to be
considered dominant.
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Abusive
Business Tactics
There are certain illegal ways in which a market leader may abuse its market
power to prevent you from operating or growing your business.
Sorry, no business for
you because I was told
to order only from that
dominant supplier.
RETAILER
SUPPLIER
Exclusive Dealing
You are shut out from the market.
A dominant supplier may dictate that a retailer buys only from him and not from
his competitors. Another example is where a requirement is imposed on the
retailer to resell a minimum volume of the product. Such requirements from a
dominant supplier may have the effect of preventing the retailer from sourcing
even small quantities from a competitor, thereby cutting off any opportunities
for the competitor to grow.
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I will be closing down.
I don’t stand a chance
when the market leader
sets prices below cost
to drive me out!
BUSINESSMAN
CUSTOMER
Predatory Pricing
You are forced out of the market when you cannot compete
on extreme low prices.
An example of predatory behaviour is when a market leader sets prices below
cost so as to force you or others out of the market. The market leader is deliberately incurring losses in the short run to hurt you and other players, so that it
can charge higher prices after you are gone.
While consumers may benefit in the short run from lower prices, in the longer
term, consumers will be worse off due to weakened competition which, in turn,
leads to higher prices, reduced quality and less choice.
Potential rivals are also deterred from entering the market in the future because
they expect their entry to be met with a similar aggressive response.
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How am I to continue
my business when you
tie down all the
customers with your
discount schemes?
DOMINANT
PLAYER
COMPETITOR
Discount Schemes
You are shut out of the market when discounts lock
down all your potential customers.
Discount schemes are a legitimate form of price competition. However,
there are certain types of discount schemes by dominant players that may
harm competition. They include:
• Discount schemes that are used to bring prices down to predatory levels;
• Discounts that are conditional on exclusive purchases;
• Discounts that are conditional on the purchase of other products and services.
This is unreasonable!
How can you just decide not to
supply me with materials
needed for production
without any reasons?
DOMINANT
PLAYER
COMPETITOR
Refusal To Supply
You cannot operate when your major supplier stops
supplying to you and leaves you with no alternatives.
If a major producer refuses to supply to your company, this will affect your
company’s ability to produce the goods or services. This is called refusal to
supply. A dominant player may also refuse to allow you access to an essential
facility that is critical to your production.
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How CCS Can Help You
Contact CCS if your company’s ability to compete on merit has been
affected by the anti-competitive conduct of the dominant player in your
market. CCS will assess and conduct an investigation if it suspects any
anti-competitive activities.
After investigations are completed, CCS has the discretion to make a ruling
which the infringing company has to comply with. CCS may, for example,
instruct the company to cease or modify agreements that result in the
abusive conduct.
CCS receives
complaint
CCS investigates
suspicious
business conduct
CCS instructs
dominant player to
stop its actions
after investigation
confirms the conduct
is abusive
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Do you know
you can seek
CCS’ advice?
If you have serious concerns as to whether your business conduct or behaviour
violates the law, you may seek legal advice or approach CCS to file notifications
for Guidance or Decision. An application to CCS for Guidance or Decision allows
you to seek clarity (for Guidance) or certainty (Decision) as to whether the
conduct is likely to or will infringe the law. To know more about the application
process, please contact us.
Contact CCS on our hotline at: 1800-3258282
or email us at: [email protected]
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Contact CCS
Hotline : 1800-325 8282
Email a Complaint : [email protected]
Email us : [email protected]
By Post : 5 Maxwell Road #13-01 Tower Block MND Complex Singapore 069110
By Fax : 6224 6929
All calls and callers’ identitity are treated in strict confidence.