Competition And Consumer Commission Of Singapore Imposes Penalty For Anti-competitive Conduct
Legal News & Analysis - Asia Pacific - Singapore - Competition & Antitrust
6 February, 2019
On 12 September 2018, the Competition and Consumer Commission of Singapore ("CCCS") imposed a record penalty of approximately S$26.9 million in a single case. The penalty was imposed on 13 fresh chicken distributors in Singapore, each of which were also directed to provide a written undertaking not to use industry associations as a platform or front for anti-competitive activities.
In March 2014, CCCS commenced investigations into the fresh chicken distribution industry after it received a confidential tip-off about alleged anti-competitive conduct from an ex-employee of one of the distributors. Subsequently, CCCS conducted simultaneous dawn raids at the registered offices of several distributors.
CCCS' investigations revealed that between September 2007 and August 2014, certain members of The Poultry Merchants' Association, Singapore (the "Association") made agreements and/or engaged in concerted practices with each other to coordinate the price and timing of price increases of fresh chicken products sold in Singapore and to not compete for each other's customers. In one instance, the distributors "cooperated" through the Association by agreeing that no slaughtering of live chickens would be carried out on 1 May 2013.
The collusion restricted competition in the market and likely contributed to price increases of fresh chicken products in Singapore.
On 8 March 2016, CCCS issued a Proposed Infringement Decision against the distributors. During the course of representations, further information was provided to CCCS regarding the distributors' participation in price discussions and coordination of price increases. Consequently, CCCS conducted further investigations before issuing its Infringement Decision.
CCCS considered the seriousness of the infringement, the turnover of the business, the geographic markets affected by the infringement, the duration of the infringement and certain aggravating and mitigating factors when determining the appropriate quantum of the financial penalty. CCCS took into account the following factors:
- Chicken is the most consumed meat in Singapore. The average amount of chicken consumed per person on an annual basis is significantly higher than other types of meat;
- The distributors collectively supplied more than 90% of fresh chicken products in Singapore;
- The total turnover of the distributors in Singapore amounted to approximately half a billion dollars annually;
- The distributors' collusion likely contributed to price increases of certain fresh chicken products in Singapore and restricted choices available to consumers;
- The distributors' conduct affected a wide range of consumers including end-consumers, supermarkets, restaurants, hotels, wet market stalls and hawker stalls;
- Market sharing is a serious form of anti-competitive conduct;
- The conduct took place over seven years; and
- The extent of cooperation in the CCCS's investigation.
In response to submissions made by some distributors, CCCS stated the fact that a participant was "passive" or merely a "follower" is not a mitigating factor (this is discussed in detail below).
Further, CCCS made clear that it will adjust the financial penalty imposed after taking into account the relevant aggravating and mitigating factors, if it considers that the preliminary penalty is insufficient to meet the objective of deterrence.
Other Relevant Principles
In the Infringement Decision, CCCS also addressed other matters in relation to competition law in Singapore.
Single Economic Entity
CCCS stated that a single economic entity is a single undertaking between entities which form a single economic unit. CCCS reiterated that a subsidiary company and parent company may form a single economic unit when the subsidiary company has no real freedom to determine its course of action in the market and enjoys no economic independence, notwithstanding that it is a separate legal entity. Ultimately, whether or not the entities form a single economic unit will depend on the facts and circumstances of the case.
Pertinently, when various entities form a single economic entity, liability for any infringement of competition law can be attributed to that single economic entity as a whole without having to establish the personal involvement of the subsidiary.
Further, in the context of organisational succession or changes such as mergers and business acquisitions, wrongdoers are not absolved of liability and their economic successors would be liable for any infringement.
The CCCS highlighted that liability for an infringement cannot be avoided simply by reason that the original legal entity responsible for the anti-competitive conduct no longer exists.
Where the original legal entity no longer exists, it is necessary to consider whether there is functional and economic continuity between the original entity and any new entity which succeeded it. However, where the undertaking that is responsible for the infringement is still in existence, it remains liable for the infringement.
Party to an Agreement or Concerted Practice: Participation and Silence
Citing European decisions, the CCCS stated that mere participation by an undertaking in a meeting where an anti-competitive agreement was concluded is tantamount to a tacit approval of that unlawful initiative, if the undertaking does not express manifest opposition to, or publicly distance itself from, the unlawful initiative.
The reason underlying this principle is that an entity, by having participated in the meeting without publicly distancing itself from what was discussed would have led the other participants to believe that it subscribed to and would comply with the unlawful initiative.
In that respect, CCCS stated that silence at such meetings or mere disagreement with what was proposed at the meeting would not constitute public distancing as it is not an "unequivocal communication that the undertaking disagrees with the unlawful initiative".
Further, a participant that plays only a limited part does not mean that it was not a party to the agreement or concerted practice. This includes participants who: (1) played only a limited role in setting up the agreement or concerted practice; (2) may not have fully committed to the implementation of the agreement or concerted practice; (3) participated only under pressure from the other parties. CCCS emphasized that active steps should be taken by an undertaking to distance itself from the unlawful initiative.
Similarly, a participant who “cheats” by attempting to gain market share through acting differently from the agreement or concerted practice at the expense of other participants is liable for the infringement.
Receipt of Information
Liability can be also attributed even if a party is a mere recipient of information that could influence future conduct on the market unless that party distances itself from the unlawful initiative.
This is because such information may significantly reduce or eliminate uncertainty as to competitors’ future conduct in the market and thereby allow an undertaking to alter its behaviour, instead of relying only on its own perceptions, predictions and experience of the market. Accordingly, the likely outcome of such an exchange of information is that the market will not be as competitive as it might otherwise have been.
This decision clearly demonstrates CCCS' willingness to impose heavy penalties on parties that blatantly infringe competition law.
In particular, market participants should be cautious of what may be considered to be "informal" or "social" understandings or agreements as these may give rise to anti-competitive agreements. This is pertinent in the context of small and tightly knit markets or industries where individuals may have personal relationships with each other.
Participants in industry meetings which may potentially result in an anti-competitive agreement or concerted practice should actively and promptly take steps to express firm, unequivocal and unambiguous disapproval and, if necessary, leave the meeting.
Further, members of industry associations should not disclose commercially sensitive information such as pricing or discount strategies and customer information at association meetings.
Lastly, companies should conduct appropriate due diligence on proposed corporate transactions such as mergers and acquisitions and restructurings. Pertinently, companies should not assume that an entity's liability for contravention of competition law will be extinguished if that entity ceases to exist, e.g., through amalgamation.
For further information, please contact:
Dawn Tan, Partner, Ashurst ADTLaw