Merger control is one of the key pillars in Singapore’s antitrust framework. Its main objective is to preserve the competitive landscape of markets despite mergers, takeovers or the formation of long-lasting joint ventures.
Given that Singapore has a voluntary merger control regime, merger parties generally have the freedom to complete a merger without incurring administrative time and costs in the process of notifying the Competition and Consumer Commission of Singapore (CCCS). This position stems from a pro-business objective which seeks to reduce onerous obligations and unnecessary costs for businesses.
However, oblivious to many, there are several risks merger parties assume when an anti-competitive merger goes un-notified. Such risks have not been fully explored until the Uber-Grab merger in 2018.
The following provides a recap of the events leading up to the issuance of CCCS’s infringement decision and subsequently, the Competition Appeal Board’s (CAB) decision:
Whilst Grab had accepted the infringement decision, Uber proceeded with an appeal to the CAB on several grounds. In December 2020, two years after the sale of Uber's Southeast Asian business to Grab, CAB affirmed the decision of CCCS thus confirming that the transaction had violated Section 54 of the Act which prohibits anti-competitive mergers which substantially lessen competition (SLC) in a market in Singapore. Importantly, the CAB decision highlighted the following salient points which merger parties should consider in their transactions:
Notwithstanding Singapore’s voluntary notification regime, the CAB’s decision highlights that merger parties may run the risk of violating Section 54 of the Act where they choose not to notify CCCS prior to the consummation of the transaction. Reiterating the position taken by the then-Minister of State for Trade and Industry, Mr. Lee Yi Shyan, the CAB confirmed that even though Singapore has a voluntary notification regime, merger parties should conduct their own assessment and due diligence of any potential anti-competitive effects that may result from their transaction.
Following a cogent self-assessment (based on a realistic market definition), if merger parties are genuinely unclear if the transaction would give rise to an SLC, it would be wise for merger parties to err on the side of caution and seek CCCS’s guidance via the confidential process (provided the qualifying conditions are met) or for merger parties to proceed with a formal notification prior to the completion of the transaction.
A key point to note is that merger parties who violate Section 54 of the Act face several risks including but not limited to the risk of an investigation by CCCS, financial penalties (if the transaction is found to have been undertaken intentionally or negligently) and directions to alter their behaviour through contractual obligations and even structural directions such as divestments. It is therefore clear that the only way to address such risks is to notify and obtain clearance from CCCS.
As noted above, Uber and Grab had put forth several voluntary commitment proposals to CCCS, which ultimately did not mirror the directions ordered by CCCS in its infringement decision. In its decision, the CAB confirmed that CCCS had the discretion to halt discussions with Uber and Grab relating to the proposed voluntary commitments after giving sufficient and reasonable opportunities for Uber and Grab to put forward such commitments as they deemed appropriate. Accordingly, the position is clear, CCCS has no obligation to accept voluntary commitments offered by merger parties.
Generally, CCCS will have regard to the voluntary commitments offered by the merging parties, though this is underpinned by CCCS’s statutory power to consider the suitability of the voluntary commitments offered. To determine whether the voluntary commitments proposed by the merger parties are adequate, CCCS will not only consider whether the voluntary commitments address the SLC arising from the transaction, but whether it does so in a sufficiently timely and effective manner.
Therefore, when merging parties proceed with a transaction without prior notification to CCCS, they will be at further risk of CCCS finding that the voluntary commitments offered by the merger parties post-completion are inadequate or inappropriate to address the CCCS’s concerns.
To address this point, CCCS has proposed to amend its Guidelines on Remedies, Directions and Penalties to clarify the discretion held by CCCS, and the process and timeline within which commitments shall be proposed by merger parties and the market testing process of such commitments volunteered.
Another salient point to note is that the definition of the relevant market applied in a self-assessment should reflect the realities of the markets within which the merger parties compete in. In the case of Uber and Grab, they had sought to include alternative intra-city transportation options such as street-hail taxis, public transportation and private cars in the definition of its relevant market. This was significant as they concluded that their combined market shares would fall below the jurisdictional thresholds set out in CCCS’s guidelines. Their assessment of the relevant market also considered that taxi operators offering street-hail services would provide sufficient competitive constraints on the merged entity.
However, both CCCS and CAB found that the inclusion of these alternative intra-city transportation options into the relevant market definition did not truly reflect the parties’ operations and the services that they provided. The parties’ services were more akin to a platform matching service rather than a transportation service provider, based on inferences from various sources including but not limited to the parties’ terms of use and third party feedback.
This highlights the importance of merger parties identifying a realistic market definition since this affects the cogent self-assessment that parties undertake to determine whether the jurisdictional thresholds set out in CCCS’s guidelines are met. Acknowledging the challenges that merger parties may face in arriving at an appropriate market definition, particularly for multi-sided e-commerce platforms, CCCS’s proposed amendments to its Guidelines on Market Definition seeks to offer greater guidance on the fluidity of market definitions particularly in markets characterised by innovation.
The Act provides that CCCS may impose a financial penalty on any person whose conduct infringes Section 54 of the Act, provided that the infringement has been intentionally or negligently committed. The maximum penalty imposed may be up to 10% of the turnover of the business of the merger party in Singapore for each year of infringement.
In determining an appropriate amount, CCCS may consider the seriousness of the infringement, the relevant turnover of the merger parties, the duration of the infringement and other relevant factors such as whether policy objectives of punishment and deterrence are adequately achieved.
In its decision, the CAB confirmed that a margin of appreciation is granted to CCCS in determining the financial penalty so long as the financial penalty imposed is just and appropriate – which was found to be so in this case. Furthermore, the CAB highlighted, amongst other points, that the parties’ conduct in structuring the transaction to be irreversible was particularly egregious and that there was a need to deter merger parties from entering into irreversible transactions which give rise to a SLC. This would be in line with the policy objectives of imposing financial penalties.
A voluntary merger notification regimes provides much convenience and cost savings to the majority of merger transactions that do not raise competition issues. This then fosters a pro-business environment, as Singapore’s Parliament had intended. However, the decision on the Uber appeal by the CAB has highlighted that where transactions are likely to raise competition issues, the notification regime becomes more mandatory rather than voluntary. This mirrors the approach adopted by UK’s Competition and Markets Authority as they have become more hands-on in reviewing and assessing transactions, whether they are voluntarily notified or not. As global M&A activity has seen an increase in monopoly power across multiple markets and the creation of “super apps”, CCCS may increase its surveillance for transactions that are potentially anti-competitive to maintain and enhance efficient market conduct and to promote overall productivity, innovation and competition in the Singapore markets. Therefore, the only way to avoid the perils of an un-notified merger is to seek guidance early on in the transaction.
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