1. What is Abuse of Dominance?
The Competition Act prohibits businesses with substantial market power from engaging in abusive business practices that prevent rivals from competing against them. If such abuses are not stopped, potential/existing competitors will not be able to enter the market or grow in size, industries affected will be less competitive and customers will lose out eventually.
A company would infringe the Competition Act only if it is both dominant in the relevant market and engages in abusive conduct.
If a company does not have substantial market power in the relevant market, then even if it tries to prevent its competitors from entering the market or growing its customer base, it is not likely to succeed. Therefore, the anti-competitive effect arising from its actions, if any, is likely not to be significant. As a guide, a market share of more than 60% is likely to indicate a dominant position. However, CCS also takes into account other factors, such as the barriers to entry and the bargaining power of customers to assess dominance. It should also be stressed that dominance by itself does not infringe the Competition Act.
Whether a business practice is abusive depends on many factors that are unique to each case. In general, an abusive conduct is one aimed primarily at preventing existing or potential competitors from having access to customers. Some examples include:
Exclusive dealing – a dominant company preventing its customers from buying competing products.
Refusal to supply – a dominant company refusing to sell some essential products/input it controls upstream to competitors or other third parties, thereby monopolising the downstream market.
Tying – a dominant company forcing its customers who wish to buy its product to also buy another product.
Predatory pricing – a dominant company deliberately setting its selling price at a loss-making level to eliminate competitors and subsequently, raising its price to reap profits once competitors are eliminated.
2. What is CCS's position on Price Increases and Price Parallelism?
CCS does not regulate prices or price increases of goods and services. In a free market, prices are set by market forces (i.e. demand and supply), and suppliers should set their prices independently based on their own business operating circumstances.
The fact that prices across various suppliers are the same, similar or move in tandem does not necessarily mean that there is price collusion. It could be a reflection of competitive market forces and that suppliers are responding to market signals efficiently (e.g. where there is stiff competition for homogeneous products, high degree of price transparency and businesses operating under similar or same circumstances). Under the Competition Act, suppliers have broken the law only if there is collusion in relation to prices, and CCS will commence investigations only when sufficient evidence suggests this. Observations that prices are the same, similar or moving in tandem alone are not sufficient for CCS to commence investigations on price fixing possibilities – further evidence is needed before CCS will commence investigations.
3. What is CCS's position on Price Recommendations?
In a competitive market, prices are determined by supply and demand. Price recommendations by trade or professional associations, binding or non-binding, harm the competitive process through the distortion of independent pricing decisions. A likely outcome is that sellers are induced to cluster their prices around the recommended levels, irrespective of their individual business profiles such as costs, service standards and target customers.
Recommendations of minimum prices, in particular, discourage price competition. When producers believe that other competitors will adhere to the minimum fee, they have an incentive to follow suit instead of cutting costs and prices where possible. Even recommendations of maximum prices can be anti-competitive as they may lead to a convergence of prices at or just below the maximum level. They may also dissuade producers from offering premium products that should rightly be priced above the maximum level, thereby reducing choice for consumers.
In some cases, price recommendations can harden into price fixing which is one of the most serious forms of anti-competitive behaviours and has been shown to result in significant over-charging, borne by customers.
Competition authorities worldwide have found that price recommendations and fee guidelines, mandatory or voluntary, are generally harmful to competition. Similarly, CCS adopts a rigorous standard in evaluating various price recommendations in Singapore and has found no exceptions to date.
CCS encourages all businesses to set their prices independently and not use price recommendations issued by trade and professional associations as a form of justification for charging higher prices. CCS supports price transparency and is of the view that businesses should be upfront about the price they charge customers and avoid imposing hidden charges.
4. What is Exclusive Dealing?
The term "exclusive dealing" typically refers to an arrangement between a buyer and seller whereby the buyer will purchase all or a substantial portion of a product or service from the seller. It is possible that an arrangement that requires less than “all” purchases (or sales) may still be unlawful if it nonetheless is anti-competitive by foreclosing a substantial share of the market.
Exclusive dealing generally involves two parties entering into an agreement, in which Party A imposes upon Party B, an obligation to deal only with Party A, to the exclusion of all competitors to Party A.
Exclusive dealing can take many forms along the supply chain and can have varying degrees of restrictions. For example:
A manufacturer/supplier requires a distributor/retailer to sell or carry its products only and not its competitors’;
A manufacturer/supplier requires customers to buy its products only and not its competitors’; and
A distributor/retailer/customer requires a manufacturer/supplier to sell or supply inputs to itself only and not to its competitors.
Some exclusive dealing arrangements have these restrictive clauses imposed by the seller contractually, while others will have the de facto effect of exclusivity.
For instance, some sellers offer a discount or rebate to the buyers in exchange for the latter entering into these agreements. Some exclusive dealing arrangements may set out certain volume targets for the buyer to achieve in order to be eligible for the discounts and rebates, instead of imposing exclusivity explicitly.
The CCCS considers exclusive dealing imposed by a party to likely raise competition concerns if the following two conditions are met:
the party imposing the exclusive obligation is dominant; and
a significant proportion of the market is foreclosed to competitors as a result of the exclusive dealing.
In its assessment, CCCS will take into consideration the following:
the extent of the exclusive dealing, e.g., the number of exclusive dealing agreements signed, the proportion of the market affected and the duration of the exclusive dealing.
the constraints imposed by the exclusive dealing, e.g., explicit or induced, standardised or individualised rebates, preferential or total.
the structure of the market, e.g., relative bargaining power of customers, degree of fragmentation of downstream players.
possible efficiencies arising from exclusive dealing.
whether the exclusive dealing has led to actual, observable adverse effects on competition in a market, such as an increase in prices, lower quality or variety of goods/services, exit of existing competitors, lack of new entrants over an extended period of time.