OECD kpcdb

1. Section 54 prohibition

 

Section 54 of the Competition Act prohibits mergers which have resulted or are expected to result in a substantial lessening of competition (SLC) within any market in Singapore. This prohibition does not apply to mergers that give rise to economic efficiencies, outweighing the adverse effects of restricting competition.

 

Under Section 54, a merger occurs in situations as follows:

 

a)  merger between two or more independent undertakings

b)  acquisition of direct or indirect control of the whole or part of one or more undertakings by one or more persons or other undertakings

c)  an acquisition by one undertaking (the first undertaking) of the assets (including goodwill) or a substantial part of the assets of another undertaking (the second undertaking) which result in placing the first undertaking in a position to replace or substantially replace the second undertaking in the business or a part of the business in which that undertaking was engaged immediately before the acquisition

d)  the creation of a joint venture to perform, on a lasting basis, all the functions of an autonomous economic entity

 

Section 54(7) sets out categories of transactions that do not constitute a merger under the Act:

 

a)  the person acquiring control is acting as a receiver, liquidator or underwriter

b)  all of the undertakings involved in the merger are, directly or indirectly, under the control of the same undertaking;

c)  acquisition of control solely as a result of a testamentary disposition, intestacy or the right of survivorship under a joint tenancy

d)  acquisition of control by an undertaking which carries out transactions and dealings in securities under circumstances as specified in Section 54(9) 

 

Mergers approved by any Minister, regulatory authority or the Monetary Authority of Singapore and mergers under the jurisdiction of any regulatory authority are also excluded from Section 54 prohibition. The merger may also exempted by the Minister on the ground of public interest considerations. Under Section 68(3), parties to a merger or anticipated merger may apply to the Minister for exemption on grounds of public interest within 14 days from CCS’s notice proposing to make an infringement decision.

 

2. Notification

 

Notification of a merger is not mandatory under the Competition Act. It is possible, however, for parties to notify a merger to the CCS and apply for a decision on the conformity of the merger with Section 54. Although the merger provisions of the Act apply to completed mergers, parties to an anticipated merger may also apply for notification for decision if the anticipated merger is known to the public. The CCS Guidelines on Merger Procedures 2012 provide an indication as to when it would be appropriate for parties to notify the CCS.

 

The CCS may investigate on its own initiative mergers that have not been notified to it.

 

Procedure for review: The review by the CCS on a merger is divided into two phases. Although there is no legal deadline for the review, the CCS endeavours to complete the review before indicative timeframes. In Phase 1, the CCS carries out a quick assessment within an indicative timeframe of 30 working days and give a favourable decision with regard to mergers that clearly do not raise any competition concerns under the Competition Act. Where the CCS is unable during the Phase 1 to make a favourable decision, it provides the merger parties with a summary of its key concerns.

 

In Phase 2 review, the CCS proceeds to a more detailed assessment within an indicative timeframe of 120 working days. At the end of Phase 2, where the CCS takes a preliminary view that the merger is likely to result in SLC, it issues a Statement of Decision (provisional) which sets out the reasoning behind its conclusion and any commitments or directions that the CCS considers appropriate.

 

Procedural fairness: The CCS gives the merger parties an opportunity to make written representations and/or oral representations to the CCS. The merger parties may be permitted to inspect the documents in CCS’ file. Internal CCS documents and information, and confidential information provided by third parties will not be available for inspection as part of access to the file. The merger parties’ written response to the Statement of Decision (provisional) is also an opportunity for the parties to propose commitments. Once the CCS has issued a notice setting out its preliminary views, the merger parties can apply in writing to the Minister for Trade and Industry for the merger situation to be exempted on public interest considerations. “Public interest consideration” means national or public security, defence and such other considerations as the Minister may by order published in the Gazette, prescribe (Section 2(1) of the Act). 

 

For merger or anticipated merger cases, the CCS may also impose an interim measure where it considers necessary to prevent any prejudice to its investigation and its powers to give directions on such cases (Section 69).

 

3. Assessment

 

The Guidelines explain that the CCS considers that an SLC is unlikely to occur unless the merged entity will have a market share of 40% or more; or the merged entity will have a market share of between 20% and 40% and the post-merger combined market share of the three largest firms is 70% or more. However, the thresholds are indicative: the CCS may investigate mergers that fall below these indicative thresholds; conversely, merger situations that exceed the thresholds are not necessarily prohibited.

 

The CCS is unlikely to investigate a merger involving only small companies whose turnover in Singapore in the financial year preceding the transaction of each of the parties is below SGD5 million and the combined worldwide turnover in Singapore in the financial year preceding the transaction of all the parties is below SGD50 million.

 

The Act excludes mergers that are found to significant lessen competition if the merger generates efficiencies which outweigh the adverse effects due to any substantial lessening of competition which may result from the merger (Fourth Schedule of the Act).

 

4. Remedies and sanctions

 

Under Section 69, where the CCS has made a decision that parties have infringed Section 54, it may prohibit anticipated mergers from being implemented or require mergers to be dissolved or modified. Directions may also include request to parties to modify or terminate any agreement directly related and necessary to the implementation of the merger. 

 

The CCS may also accept, under Section 60A commitments to remedy, mitigate or prevent adverse effects of a merger before taking a decision. 

 

Financial penalties may be imposed up to 10% of the turnover of the business of the undertaking in Singapore for each year of the infringement (maximum three years) where the infringement was committed intentionally or negligently.

 

 

* This information is based on Competition Law in Asia-Pacific: A Guide to Selected Jurisdictions (2018).