As previously reported, the Competition and Consumer Commission of Singapore (CCCS) will issue a Business Collaboration Guidance Note (“Guidance Note“) to provide businesses with more clarity on common horizontal, vertical and lateral collaborations between competitors. The draft Guidance Note also aims at encouraging collaborations that have pro-competitive effects. It covers six common types of business collaborations: information sharing, joint production, joint commercialization, joint purchasing, joint research and development, and standardization.
The draft Guidance Note further discusses how trade associations can support collaboration initiatives between their members. It also reminds businesses involved in cross-border collaboration of the extra-territorial application of the Competition Act (Cap 50B) (“Act“). Even though an agreement is made outside of Singapore, or any party to the agreement is outside of Singapore, the Act could still be applicable where competition in a market in Singapore is affected.
The CCCS’s public consultation exercise to seek feedback on the draft Guidance Note ends on 27 August 2021.
This is a welcome development. It is the first guidance note issued by the CCCS that applies to business collaborations for all types of products and services, and it does not have an expiry period.
Its predecessor, the Guidance Note on Collaborations between Competitors in Response to the COVID-19 Pandemic (“COVID-19 Guidance Note“) expired on 31 July 2021. The COVID-19 Guidance Note was issued on the back of the COVID-19 pandemic that disrupted the supply of essential goods and services around the world, including Singapore. The disruptions required competitors to temporarily collaborate to sustain or improve the supply of essential goods and services in/to Singapore. The COVID-19 Guidance Note applied to collaborations that fell within the “Applicable Period,” i.e., 1 February 2020 to 31 July 2021.
The draft Guidance Note covers six common types of business collaborations: information sharing, joint production, joint commercialization, joint purchasing, joint research and development, and standardization. The draft Guidance Note also explains how the CCCS will consider relevant assessment factors (e.g., market shares and market structure) when determining whether each type of business collaboration complies with section 34 of the Act; when they give rise to competition concerns; and conditions under which competition concerns are unlikely to arise. Section 34 of the Act prohibits agreements, decisions and practices that prevent, restrict or distort competition.
The proposed market share thresholds in the draft Guidance Note are as follows:
- 20% for collaboration between competitors (actual or potential)
- 25% for collaboration between non-competitors
- 20% if it is difficult to classify whether a collaboration is between competitors or non-competitors
These are the same thresholds that the CCCS currently uses to determine whether an agreement has an appreciable adverse effect on competition. Likewise, the CCCS emphasizes that where any of these six types of business collaborations facilitate price-fixing, bid-rigging, output limitation and market sharing, they will always be considered to have an appreciable adverse effect on competition.
Apart from highlighting the extra-territorial application of the Act, the CCCS also reminds businesses in the Guidance Note that “local collaborations could also be subjected to competition law in affected overseas markets, including within the Association of Southeast Asian Nations (ASEAN) countries,” and businesses should refer to the “website of the ASEAN Experts Group on Competition which contains useful information on the competition law and regime(s) in the various ASEAN countries.” This is the second instance where the CCCS makes direct reference to competition law compliance in Singapore and other ASEAN jurisdictions ̶ the first being in the Handbook on Competition & E-Commerce in ASEAN published in 2017, which contains a checklist for businesses engaged in e-commerce in the ASEAN.
This is a timely reminder because as the ASEAN moves towards greater economic integration, business operations in more economic sectors will become more cross-border in nature.
A copy of the draft Guidance Note can be accessed here.
* * * * *
For further information and to discuss what this development might mean for you and how it might affect you, please get in touch with your usual Baker McKenzie contact.