Collaborations between competitors typically come under close scrutiny of the CCCS, as they may infringe the prohibition against anti-competitive agreements under section 34 of the Competition Act (Cap. 50B) ("Section 34 Prohibition"). 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 Singapore. The COVID-19 Guidance Note applies to collaborations that fall within the 'Applicable Period', i.e., 1 February 2020 to 31 July 2021.
Compared to the COVID-19 Guidance Note, the Business Collaboration Guidance Note is likely to be wider in scope, as it will cover 'common collaborations' between competitors, instead of business collaborations for the supply of goods or services designated as 'essential' by the Ministry of Trade and Industry during the COVID-19 pandemic. It is also likely that the application of the Business Collaboration Guidance Note will not be time-limited.
That said, like the COVID-19 Guidance Note, the Business Collaboration Guidance Note will similarly not provide an absolute safe harbour for businesses to engage in anti-competitive behaviour with competitors or apply to collaborations that involve price fixing, bid rigging, market sharing or output limitation. For background, the CCCS's Guidelines on the Section 34 Prohibition 2016 currently clarify that an anti-competitive agreement will generally have no appreciable adverse effect on competition:
- if the aggregate market share of the parties to the agreement does not exceed 20% on any of the relevant markets affected by the agreement where the agreement is made between competing undertakings (i.e., undertakings that are actual or potential competitors on any of the markets concerned)
- if the market share of each of the parties to the agreement does not exceed 25% on any of the relevant markets affected by the agreement, where the agreement is made between non-competing undertakings (i.e., undertakings that are neither actual nor potential competitors on any of the markets concerned)
- in the case of an agreement between undertakings where each undertaking is an SME. In general, agreements between SMEs are unlikely to be capable of distorting competition appreciably within the section 34 prohibition. Nevertheless, the CCCS will assess each case on its own facts and merits and the markets concerned.
Where it may be difficult to classify an agreement as 'an agreement between competitors' or 'an agreement between non-competitors', the CCCS will rely on the 20% market share threshold. The CCCS will also consider other relevant factors such as market power of the parties to the agreement, the content of the agreement, the structure of the market, and markets affected by the agreement.
We will issue another client update as soon as the CCCS publishes its draft Business Collaboration Guidance for public consultation. For further information, and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.
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