April 1, 2013
The Competition Commission of Singapore (CCS) issued two decisions on Friday, 28 March 2013, one decision related to the proposed alliance between Emirates and Qantas Airways and the other decision was an infringement decision against 12 motor vehicle traders for bid rigging activities which took place over a period of three years. This alert summarises the main points relating to these decisions.
Emirates-Qantas Alliance cleared
On 12 October 2012, Emirates Airline and Qantas Airways Limited notified the CCS in relation to a proposed alliance between them which was scheduled to take effect from 1 April 2013. Both Emirates and Qantas intended to coordinate their business activities such as network, scheduling, pricing, marketing, purchasing, customer service, frequent flyer programs and resourcing decisions in their passenger and freight operations globally for an initial term of ten years.
During its assessment, the CCS found that some areas of the proposed alliance would raise competition concerns under section 34 of the Competition Act, Chapter 50B of Singapore (the "Act") such as price and capacity coordination between the two airlines on the routes served by both airlines i.e. Singapore-Melbourne and Singapore-Brisbane. In response to the CCS concerns, both Emirates and Qantas provided voluntary undertakings to the CCS to increase seat capacity for passengers flying to and from Singapore on the routes involving Singapore- Melbourne and Singapore-Brisbane.
The voluntary undertakings aim to provide a combined total of 8,246 seats weekly on each of the routes of Singapore-Melbourne and Singapore-Brisbane. The CCS believes that the result of this is that the state of competition in these two routes would be preserved by alleviating any concern that the proposed alliance may reduce seat capacities. As a result, the CCS cleared the proposed alliance by concluding that the proposed alliance will result in net economic benefits. Both Emirates and Qantas have also agreed to appoint an independent auditor to monitor their compliance with the voluntary undertakings given to the CCS.
Apart from the voluntary undertakings, the CCS may further require Emirates and Qantas to increase the seat capacities if their load factors and route profitability cross certain thresholds for any given 12 month period. The CCS also explicitly reserved its right to investigate should Emirates and Qantas fail to comply with their voluntary undertakings.
In assessing this proposed alliance the CCS conducted a public consultation and received feedback from several airlines and related parties. The Australian Competition & Consumer Commission also gave its approval recently subjected to a minimum seat capacity condition for Trans-Tasman routes.
Motor Vehicle Traders fined for Bid Rigging
The CCS also issued yet another section 34 prohibition infringement decision, this time it did so against 12 motor vehicle traders for bid-rigging activities. The infringing motor traders had engaged in anti-competitive arrangements to suppress bids at public motor auctions in Singapore from January 2008 to March 2011.
The CCS commenced its investigation after receiving information on the alleged bid-rigging activities at public auctions by the certain government agencies. During its investigation, the CCS uncovered that fairly elaborate arrangements took place during and after public auctions. There were agreements between the infringing motor traders to refrain from bidding against each other at public motor vehicle auctions held by the government agencies. In such auctions, a sole bidder would usually bid for the vehicles and thereafter, the infringing parties involved would conduct their own "private" auctions for the vehicles that were earlier won. The difference in the bid price of the vehicles between the public auctions and the "private" auctions would be put into a common pool and shared among those present at the "private" auctions.
The CCS considers that bid-suppression has as its object, the restriction of competition and is therefore a serious infringement of section 34 of the Act. It imposed financial penalties which amounted to a total of S$ 179,071 on the infringing motor traders.