Digital platforms have experienced significant growth and popularity in Singapore in recent years and COVID-19 has accelerated its proliferation. The rapid pace of innovation and broad adoption of these platforms have raised significant competition concerns both local and abroad.
In September 2020, the Competition and Consumer Commission of Singapore ("CCCS") published a market study on e-commerce platforms in Singapore. Apart from one acquisition in the ride-hailing sector that was subject to investigation and an infringement decision, CCCS found that no major competition concerns had been identified at the time of the market study.
CCCS nonetheless highlighted potential concerns in the e-commerce area, some of which are similar to those identified by authorities in other jurisdictions:
i) The complexity of market definitions for multi-sided platforms: there are ongoing challenges in defining single-sided markets or a multi-sided market for multi-sided platforms as well as non-positive price strategies for certain markets adopted by certain multi-sided platforms;
ii) Lock-in effects and product ecosystems: there is an observed tendency for digital platforms to expand into multiple lateral or adjacent markets and provide multiple services, raising concerns about lock-in effects and requiring markets to potentially be defined in terms of product ecosystems;
iii) Shift in focus of competition assessments: the dynamic nature of digital markets may require a shift in the focus of competition assessments to barriers to entry, switching behaviour and multi-homing, and digitization;
iv) Merger control: there is increased concern over “killer acquisitions”, being acquisitions of small innovative companies by incumbent platforms to eliminate potential competition, although the Singapore’s current merger regime is likely robust enough to address such concerns;
v) Importance of data and as a barrier to entry: the importance of data as an input, and control, ownership and access to such data as potential barriers to entry have to be balanced against innovative data collection and use by organisations;
vi) Potential theories of harm involving discrimination and abuse using data: personalised pricing that is discriminatory, exclusive dealing, tying or bundling of products in the platform’s ecosystem, and self-preferencing by a platform.
A similar market study focused on the Online Travel Booking Sector published by CCCS in 2019 highlighted a number of potential consumer protection concerns on the widespread use of pricing algorithms but there was no clear evidence of collusion among competitors or consumer detriment arising from personalised pricing using these algorithms.
CCCS has put forth several recommendations to update its existing guidelines in order to provide clarity on and improve the application of competition and consumer protection laws in light of the potential concerns that have been identified. These recommendations include:
i) Updating Guidelines on Market Definition
a. The market definition exercise will consider specific features of multi-sided platforms;
b. Consumption synergies may need to be considered as an additional factor when assessing whether the focal product may be a product ecosystem comprising distinct products sold by the same seller.
ii) Updating Guidelines on Section 47 Prohibition (Abuse of Dominance)
a. Potential broadening of the considerations in the assessment of dominance for cases involving digital platforms beyond market share indicators to take into account additional factors such as barriers to entry, network effects and the control, ownership of and limited access to data;
b. Possible assessments of dominant digital platforms that engage in self-preferencing.
iii) Updating Guidelines on Substantive Assessments of Mergers
a. Provide guidance on the assessment of mergers involving markets where innovation is an important feature of competition, and one or more of the merger parties is an important innovator, regardless of the markets in which they operate;
b. Recognition of data protection as an aspect of competition on quality in cases where data protection is valued or a feature in the relevant market;
c. Conglomerate mergers may be assessed by considering the ability and incentive of the merged entity to foreclose competitors through tying, bundling or other forms of exclusionary conduct.
iv) Further study and monitoring of the use of AI or algorithms: in particular when that result in the alignment of market behaviour without prior or ongoing communication among competitors, in order to understand how and when collusive outcomes may be achieved.
The disruption caused by COVID-19 has put the digital economy, the importance of data and our growing reliance on them into sharp focus. In various jurisdictions around the world authorities are making good headway in formulating policies to safeguard competition and consumers or scrutinising various practices by big tech companies for competition concerns.
As businesses continue to navigate these unique times by diversifying their offerings, exploring synergies with or acquiring promising undertakings in the age of digital transformation, they will do well to be familiar with the various competition concerns and develop a strategy harness the benefits of the digital economy whilst averting risks.
For more information please contact Sandra Seah and Jonathan Kao.