Guidance note on collaborations among competitors in response to COVID-19

By Sandra Seah, Jonathan Kao

09-2020

COVID-19 has presented significant economic challenges to businesses across all industries, disrupting daily operations and global supply chains.

During this time, temporary collaborations among competitors have become an important means of sustaining or improving the supply of essential goods and services. Any collaboration between competitors which prevent, restrict or distort competition within Singapore is prohibited under Singapore's Competition Act (Chapter 50B) (the "Act") unless they are exempt or they can be shown to have net economic benefits. The Competition and Consumer Commission of Singapore ("CCCS") has released a timely guidance note ("GN") to provide clarity on the criteria for such collaborations to be deemed to have net economic benefits during these uncertain times, providing businesses some relief and greater certainty from the prohibition against anti-competitive agreements under section 34 of the Act.

Improving Production or Distribution

The GN makes it clear that the collaborations have to be related to sustaining or improving the supply of essential goods or services. The efficiencies brought about by the collaboration must be objective and quantifiable.

The relevant essential goods or services are based on the list of essential goods and services maintained by the Ministry of Trade and Industry as of 1 June 2020. These goods and services are broadly categorised under, but are not limited to, the following:

  • Health and social services

  • Food

  • Energy

  • Water, waste, environment

  • Transportation and Storage

  • Information and Communication

  • Defence and Security

  • Construction, Facilities Management and Critical Public Infrastructure

  • Manufacturing and Distribution

  • Banking and Finance
Agreement or Restriction Must Be Indispensable

There must be a direct causal link between the collaboration and the efficiencies. The collaboration and any restrictions must also be necessary to increase supply or bring about the efficiencies; there should not be any better alternatives available to the collaborators to do the same.

These collaborations may include (but are not limited to):

  • Joint purchasing

  • Joint production

  • Joint distribution and marketing

  • Information sharing
Does not eliminate competition in respect of a substantial part of the good/service

The collaboration must also be limited in nature to a particular good or market, and for a limited period of time.

The GN, and the assumption that the collaboration brings about net economic benefits, only applies to collaborations that are effective during the period 1 February 2020 to 21 July 2021.

As far as possible, competition should still be preserved in the market even while the collaboration is in place. For example, a collaboration that involves sharing of output information should still require parties to compete on other areas such as price and quality.

Price-fixing, Bid-rigging, Output Limitation and Market Sharing

Collaborations that involve price-fixing, bid-rigging, output limitation and market sharing will not readily be assumed to bring about net economic benefits.

However, the GN notes that these can still be carefully assessed to determine if they do bring about net economic benefits. The GN provides an example of companies that may need to collaborate and coordinate to optimize the production and supply of certain medicines avoiding oversupply and shortages. Such collaboration and coordination may involve output limitations that are necessary but sufficiently limited in nature, and there may still be sufficient opportunity for other suppliers to compete.

Going Forward

Businesses considering collaborations, cooperations or alliances with their competitors should take note that the GN does not establish any new exemptions from the Act. The GN only sets out criteria that would likely lead to an assumption that the collaboration brings about net economic benefits. CCCS remains empowered to investigate any such collaboration for infringements of the Act and the GN should not be used as a cover for anti-competitive conduct.

Businesses are encouraged to self-assess to determine if their collaboration meets the criteria set out in the GN. CCCs' existing guidance and notification framework remain available if clarifications or decisions are required.

The Bird & Bird team has been working closely with our clients on various competition concerns during this time and we would be pleased to discuss any queries you may have on this GN or any other competition concerns.

For more information please contact Sandra Seah or Jonathan Kao.

 
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