CCCS Market Study on E-commerce Platforms Recommends Update to Competition Guidelines

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1. The Competition and Consumer Commission of Singapore (“CCCS”) has issued its findings and recommendations for its market study on e-commerce platforms. The market study focused on gaining an in-depth understanding of the business models and operating environment of e-commerce platforms that compete or potentially compete across multiple market segments offering distinct products and/or services. It also identified potential competition and consumer issues which may arise from the proliferation of such e-commerce platforms.^[1] Taking into consideration the issues identified, CCCS has reviewed its existing assessment toolkit to ensure that it is sufficiently robust to address the issues identified.

2. Digitalisation has opened new ways of doing business, work and play. The recent years have seen a proliferation of digital platforms^[2] globally. In Asia and Southeast Asia, including Singapore, there is an emerging trend of e-commerce platforms that generally start their growth in a single product or service market segment, before expanding to other market segments (for example, “super apps” that offer an integrated range of distinct products and/or services). CCCS focused on such e-commerce platforms operating in the region in its market study as their operations tend to be more localised, with the effects on market competition and consumers being potentially more direct and immediate. Further, such e-commerce platforms have not been the subject of similar studies overseas.^[3]

3. The market study is part of CCCS’s on-going efforts to monitor key developments in the digital economy and understand the impact of these developments on competition and consumers in markets within Singapore.^[4]

Competition findings and recommendations

4. Based on industry feedback^[5], CCCS did not identify any current major competition concerns involving e-commerce platforms in Singapore. Currently, CCCS’s existing competition framework is sufficiently robust to address major competition issues that may arise from the proliferation of e-commerce platforms that compete in multiple market segments in Singapore^[6]. Other findings from the market study include:

a. Consumers check multiple platforms for better offers, and consider both price and non-price factors in deciding which platform to use. While price plays an important role in a consumer’s initial choice of e-commerce platform and in a consumer’s decision to switch to another platform, non-price factors (including ease of use, trust and familiarity with the platform) contribute to longer term customer loyalty.

b. E-payment services by e-commerce platforms are unlikely to be a pre-requisite for a platform’s success in Singapore. There are a wide range of e-payment systems used in Singapore, and most consumers still use the e-payments systems by banks or credit cards for their transactions.

c. The lack of data is currently not a critical barrier to entry for e-commerce platforms. However, the digital economy is rapidly developing and the importance of data for e-commerce platforms may gradually increase over time with the further use of artificial intelligence and algorithms; and

d. Data protection is not a key parameter of competition amongst e-commerce platforms currently. E-commerce platforms appear to perceive data protection as an important part of building trust with their users. However, consumers do not currently view data protection as a key feature in their choice of e-commerce platform(s).

5. However, the market study identified certain areas where further clarity and guidance by CCCS could be beneficial to assist businesses in the application of the Competition Act (Cap. 50B) in the digital space. In this regard, CCCS intends to update its competition guidelines^[7] to clarify the following:

a. Defining the market for multi-sided platforms, including specific features of multi-sided platforms (e.g. number of markets to be defined, indirect network effects, price structure) that may be taken into consideration as well as how consumption synergies^[8] may be taken into account when assessing whether there is a “product ecosystem” comprising multiple products and/or services sold by the same seller. With these amendments, businesses can better understand how CCCS assesses which market(s) is/are affected in cases involving multi-sided platforms and/or digital platform companies;

b. The assessment of market power and abuse of dominance, including the relevant factors (e.g. control of data) that may be considered in assessing market power and potential new theories of harm such as “self-preferencing”^[9]. With these amendments, businesses can better understand how CCCS assesses whether a company has market power, as well as how to avoid engaging in anti-competitive conduct; and

c. The assessment of mergers and acquisitions, where one or more of the firms to the merger are important innovators that may change competitive dynamics even if they do not have a large market share, or involving firms that operate in different product markets (i.e. conglomerate mergers). Businesses, including digital platforms, seeking to enter into mergers or acquisitions can better understand when these transactions may give rise to competition concerns.

Consumer protection findings and recommendations

6. Successful e-commerce platforms rely on providing a good customer experience and fostering trust to sustain business from consumers. This has encouraged e-commerce platforms to institute a range of measures to not only earn and keep consumer trust, but to also protect consumers from unfair practices. As the intermediary between sellers and consumers and sometimes as a direct seller to consumers, e-commerce platforms play an important role in safeguarding consumers’ interests.

7. CCCS notes that some e-commerce platforms have put in place targeted measures to protect consumers against unfair practices. For example, some e-commerce platforms have put in place a non-compliance points system to discourage sellers from engaging in misleading claims about the price or nature of goods. Additionally, some e-commerce platforms have guarantee features or pre-payment protection measures that protect consumers against defective goods or non-delivery of goods. However, based on a survey^[10], some consumers indicated that they have encountered certain unfair practices on some e-commerce platforms. The most common unfair practices reported by consumers are false claims of limited-time discounts, misrepresentations regarding limited quantities and false claims of discounts or benefits.

8. In this regard, e-commerce platforms should continue to enhance their measures to protect consumers. They should also consider raising sellers’ awareness and understanding of the Consumer Protection (Fair Trading) Act (Cap. 52A) as well as encouraging sellers to adopt good trade practices. CCCS has developed an infographic containing good trade practices for sellers to promote responsible selling on e-commerce platforms (Annex). E-commerce platforms, such as Lazada and Shopee, have committed to the dissemination of such good trade practices to their sellers.

9. The fostering of trust in e-commerce platforms is the shared responsibility of all relevant stakeholders, including consumers. Consumers who are aware of unfair practices and who exercise due care when transacting on e-commerce platforms will make more informed decisions and better protect themselves.

10. The full market study report is available here.

-End-

Annex - Infographics: Good Practices for Sellers

^[1] CCCS appointed Frontier Economics Pty. Ltd. to conduct a consultancy study, comprising (a) interviews with industry stakeholders; (b) an online survey of e-commerce platform users; and (c) a literature review covering relevant economic literature and experiences in other overseas jurisdictions.

^[2] These digital platforms facilitate interactions between two or more groups of users over the internet, and provide value for users on one side of the platform by matching or connecting them with users on the other side(s) of the platform.

^[3] Studies have also been undertaken by the governments or competition authorities in other jurisdictions to understand the growth of digital platforms, in an effort to determine if their existing competition regulatory frameworks and policies should be revised to better address the issues arising from the growth of digital companies. This includes the United Kingdom Digital Competition Expert Panel’s review of competition in digital markets, and the accompanying report “Unlocking Digital Competition”, which was published on 13 March 2019; the European Commission’s report “Competition Policy for the Digital Era”, which was published on 4 April 2019; the digital platforms inquiry conducted by ACCC, and the accompanying “Digital Platforms Inquiry Report” which was published on 26 July 2019; and the United Kingdom and the final report published on 1 July 2020.

^[4] For example, in September 2019, CCCS published a market study report on the online travel booking sector in Singapore. Following the study, CCCS developed a set of guidelines on price transparency to provide guidance to suppliers. The CCCS Guidelines on Price Transparency were published on 7 September 2020 following public consultation, and are available here. In February 2019, CCCS collaborated with the Personal Data Protection Commission (“PDPC”) to publish a discussion paper on data portability, setting out the benefits and concerns which might arise with the introduction of a data portability requirement. These two studies were built on the earlier studies in 2015 and 2017. In 2015, CCCS had looked into the e-commerce markets in Singapore and ASEAN respectively. In 2017, CCCS collaborated with the PDPC and the Intellectual Property Office of Singapore on a research project to study the implications of the proliferation of data analytics and data sharing on competition policy and law, personal data protection regulation and intellectual property law in Singapore. These studies assisted CCCS in its understanding of digital markets as they develop.

^[5] As part of the market study, interviews were conducted with a range of industry stakeholders, including (i) e-commerce platforms that compete, or potentially compete in multiple market segments offering distinct products and/or services in Singapore or in the Southeast Asian region; (ii) e-commerce platforms that offer their own dedicated e-payment services (e.g. e-wallets); (iii) e-commerce platforms that do not offer their own dedicated e-payment services; (iv) companies that offer e-payment services; (v) companies supplying services relating or adjacent to e-commerce platforms; and (vi) specialist consultancy that advises platform companies on business strategy. In addition, an online survey of platform consumers (individuals who purchase products or services on an e-commerce platform) and platform suppliers (either businesses or individuals who supply products or services on an e-commerce platform) was conducted.

^[6] The market study found that while a number of e-commerce platforms compete in multiple market segments, e-commerce platforms generally start off in a single market segment, before expanding into other market segments. Such e-commerce platforms first seek to establish a position of viability in the market segment by employing a wide range of strategies to attract a critical mass of users and build trust in the platform. The user acquisition strategies employed by e-commerce platform operators include creating responsive feedback systems for consumers and implementing a range of customer protection policies. An e-commerce platform may then achieve a competitive advantage in the second or subsequent market segment through leveraging its existing user base from the first market segment, particularly if the users are loyal to the platform. Thus, e-commerce platform operators seek to foster greater platform loyalty through both price (e.g. rewards or subscription-based benefits) and non-price strategies (e.g. using data to understand users’ preferences). The market study also found that an e-commerce platform operator’s decision to expand into subsequent market segments in Singapore may be influenced by commercial considerations or strategies for a broader market (e.g. Southeast Asian regional market).

^[7] More details on the proposed amendments to the CCCS’s competition guidelines will be announced on 10 September 2020.

^[8] Consumption synergies refer to benefits such as convenience, savings in transaction costs and time,  from purchasing multiple distinct products or services from the same supplier instead of purchasing each product or service from different suppliers.

^[9] Self-preferencing occurs when a company gives preferential treatment to its own products and/or services when they are competing with other products and/or services that are supplied using the company’s platform.

^[10] Survey was conducted by Frontier Economics Pty. Ltd., an economic consultant appointed by CCCS as part of the market study.