On 28 December 2021, the Competition and Consumer Commission of Singapore (“CCCS”) issued the Business Collaboration Guidance Note (“Guidance Note”). The CCCS had issued a prior Guidance Note on Collaboration Between Competitors in Response to the COVID-19 Pandemic (“COVID-19 Guidance Note”) in July 2020 to provide businesses with guidance on collaborations that may have been necessary to deal with the effects and severe disruptions during the COVID-19 pandemic. Although the COVID-19 Guidance Note expired on 31 July 2021, the clarity and guidance it provided remained relevant in light of the prevailing market sentiment and business conditions. The current Guidance Note was thus issued following a public consultation from 30 July to 27 August 2021.
The Guidance Note addresses seven common types of business collaborations, each with potential commercial and economic benefits but also having a risk of infringing Section 34 of the Singaporean Competition Act. Section 34 prohibits agreements, decisions, or concerted practices that have as their object or effect the prevention, restriction or distortion of competition (“Section 34 Prohibition”). The CCCS has already published the CCCS Guidelines on the Section 34 Prohibition (recently revised and to take effect from 1 February 2022) (“Section 34 Guidelines”), and the current Guidance Note is intended to “supplement and not modify” the Section 34 Guidelines.
Generally, if the collaboration is not purely vertical in nature and does not restrict competition by object, businesses can refer to the conditions and factors set out in the Guidance Note to assess whether the collaboration will infringe the Competition Act. Businesses can also refer to the Section 34 Guidelines to determine if their collaborations nonetheless result in Net Economic Benefits and, therefore may be excluded from the Section 34 Prohibition.
The seven types of business collaborations addressed in the Guidance Note are:
Competition concerns will generally tend to arise when there are collaborations between actual competitors unless excluded or exempted. Collaborations among businesses in different markets can still raise competition concerns if they are potential competitors. Pursuant to the Guidance Note, businesses may be treated as potential competitors if it is likely that a business, within a short period of time, would supply a competing product; a business that enters the market fast enough may constrain the behaviour of existing businesses in the market with the threat of its entry. The CCCS has indicated that a period of 2 years can be considered as a “short period of time”, but also other factors such as market characteristics and dynamics and specific capacities of the potential market entrants may be taken into account.
Purely vertical collaborations or agreements are excluded from the Section 34 Prohibition, but the Guidance Note includes footnote stating that vertical agreements can nonetheless be used to implement a horizontal agreement among competitors through an undertaking at a different level of the supply chain.
The CCCS has clarified that the exclusion under Section 33(4) of the Competition Act for activities carried on by, any agreement entered into or any conduct on the part of the Government, any statutory body, or person acting on behalf of the Government or that statutory body, will be construed narrowly.
Encouragement or endorsement of any collaborations by government agencies or statutory bodies would not by itself qualify for the exclusion. The collaborations will generally have to be done on behalf of the Government or statutory body, and the exclusion will only apply to that specific activity, agreement or conduct being done on behalf of the Government or statutory body.
Businesses should clarify the nature of any initiatives or engagements with the relevant government agency or statutory board prior to undertaking any collaborations in pursuit of such initiatives or engagements.
In its response to the public consultation for the Guidance Note and Guidance Note itself, the CCCS recognised the role that trade associations can play in various areas from information sharing and price recommendations, to setting technical, quality or service standards and standardising terms and conditions, as well as engaging with businesses and relevant authorities to support various initiatives and compliance with obligations under the Competition Act and development of further guidance such as the Guidance Note.
The Guidance Note specifically addresses the role that trade associations can play in advancing the interests of its members in a number of the collaborations described in the Guidance Note. It highlights the factors to consider and precautions to take to safeguard against any conduct that may infringe competition law.
Such precautions include setting a clear and specific agenda prior to the meeting and keeping records of the minutes so that the discussions are properly documented.
For more information, please contact Sandra Seah.