An exclusive interview with Mr Teo Eng Cheong, Chief Executive of the Competition Commission of Singapore (CCS) in Lianhe Zaobao, dated 20 December 2009. This is an English translation of the original Mandarin interview.
Very recently, CCS has pointed out that SISTIC, the largest ticketing service and solution provider in Singapore, is abusing its dominant position via various exclusive arrangements. Not long ago, CCS fined the Express Bus Agencies Association and its 16 coach operators $1.7 million for fixing the prices of coach tickets to various destinations in Malaysia from 2006 till June last year. The Competition Commission of Singapore (CCS) under the Ministry of Trade and Industry, has handled 104 cases to date since its short establishment period of five years. Under what circumstances will businesses be considered to breach the Competition Act? How does CCS protect the interests of consumers?
When a sales person tells you that his charges are based on what his association or society has set, you may have a reason to suspect if this retailer has breached the Competition Act.
The Express Bus Agencies Association and its 16 coach operators have been fined $1.7 million by CCS for fixing the prices of coach tickets to various destinations in Malaysia from 2006 till June last year. This case reflects that many people are unfamiliar with the Competition Act that was enacted since January 2006. The local coach travel industry has traditionally been using mutually agreed coach prices to operate their businesses even before the Competition Act was effected in 2006. The coach operators opined that by fixing coach prices, it helps to support the viability of their businesses and avoid throat-cutting competition amongst them, without ever intending to become monopolistic or dominate the market. However, their business practice has not benefitted consumers in any way.
Upsetting Market Competition
Based on Singapore’s Competition Act, businesses who collude to fix prices have breached the Act. By fixing prices, they have flouted the rules of market competition and harm the interests of consumers.
The Competition Act prohibits price-fixing, bid rigging and market sharing practices. If a company is found to have breached the Competition Act, it may be fined, up to 10% of the company’s relevant turnover.
Mr Lee Yi Shyan, Minister of Trade and Industry, and Manpower, pointed out that when businesses collude to fix prices, they are not allowing free market competition from taking place. This will lead to businesses to become uninnovative and not raise the quality of their goods and services. Mr Lee added that it is only in a free market economy that businesses will be motivated to innovate and improve quality of goods and services, which will in turn provide consumers with a wider choice of products and services to choose from. He expressed that as the Competition Act is still relatively new in Singapore, all of us, including businessmen, will need some time to be familiar with the Competition Act.
Discriminating Newer Market Players
Just as price-fixing is harmful to competitive markets, price guidelines in general are also harmful. This is because price guidelines may reduce the incentive for businesses to compete on prices. For new market entrants, if a majority of industry players are controlling the market prices, this will result in a very uneven level playing field for market competition.
Mr Theng Teng Dar, Executive Director of the Singapore Business Federation, commented that when competitors agree to fix prices, they are edging newer entrants out of the competition. To sustain a competitive market economy, competitors should compete based on their merit and services they provide to outbid their counterparts. He added that in a more mature market economy where growth rate may be slower, there’s increasing urgency to prevent anti-competitive practices from taking place.
Is Free Competition a Misfortune or Blessing for Consumers?
Mr Teo Eng Cheong, CCS Chief Executive, in his interview, said that in a free market, the operating business environment will not be so stable and predictable. As there will be evolving changes in the market, businesses will need to respond to these changes through continous adaptation to new challenges, continuous innovation, raising their productivity level, and improving the quality of their goods and services. If business fail to do that, they may find themselves ousted from this competitive environment, and they will then have to re-look into their operating business model to sharpen their competitiveness.
In other words, a competitive free market enables companies to maintain their competitiveness by ensuring continuous improvements are always made. This will in turn benefit consumers as they will be able to obtain better quality of goods and services at competitibve prices.
Though a competitive market is beneficial to businesses and consumers in the long run, businesses and consumers who have been used to price guidelines which are regarded by them as lending a form of stability to businesses, may be sceptical.
Take the recent battle of broadcast rights for the Barclay Premier League (BPL) between Singtel and StarHub. There are consumers who find it bothersome to set up another cable box in their homes, and are worried that they will have to pay more to watch football matches in time to come. This has in turn led to some who begin to doubt if competition in this instance benefits consumers.
Mr Teo Eng Cheong expressed that a broad and not a narrow perspective should be used to regard market competition. If the product is an essential service, the government will step in to set guiding principles. If the product is a non-essential item, consumers will have to make a conscious purchasing decision based on their financial capabilities.
Mr Teo suggested that consumers will need to make price comparisons and request for a detailed breakdown of the cost components to ensure there are no hidden charges, when making purchases for higher cost products and services.
CCS has established a Leniency Programme that encourages companies who participate in cartels to come forward to CCS to provide evidence of the cartel.
Mr Teo also mentioned that CCS will consider a company’s business model and market share before determining the penalty imposed on breaching the Competition Act. CCS will adopt a more maganimous stance towards smaller businesses. This helps explain the stance CCS adopts towards the Singapore School Transport Association (SSTA) who announced to Lianhe that they will recommend their members to levy fuel surcharges. CCS responded by issuing a media statement that SSTA to take the appropriate remedial action as such recommendations are not helpful to free market competition. Similarly, in the case of the four “Fa Gao” manufacturers jointly decide to increase prices, CCS only issued a warning and did not take any legal action against them.
Conversely, in the case of the 16 coach operators, their combined market share is 60%, and hence this sizable market share interferes market competition and cannot be ignored. Hence, their penalties are more severe.
To date, CCS has handled many cartel cases, that include price-fixing arrangements, bid-rigging, market share and controlling production.
104 Cases Reported on Breach of Competition Act; 76 Cases Completed
Since the enactment of the Competition Act, CCS has received a total of 104 reported cases, out of which 76 cases have been investigated. These cases were reported to CCS through members of the public contacting CCS’ hotline or feeback channels, while some were leads that CCS conducts further investigations.
CCS also provides advisories, and enables companies to file for either Notification for Decision or Notification for Guidance. For example, the Singapore Medical Association (SMA) applied to CCS for a Notification for Decision if its Guidelines on Fees runs contrary to the principles of the Competition Act.
The Institute of Estate Agents (IEA) had applied to CCS for decision on whether its published Professional Fees/Commission Guidelines set up since 1999 are likely to infringe the Competition Act.
Those who apply to CCS for guidance or decision, are required to pay $3000 and $5000 fees respectively.
CCS contact information are [email protected], hotline: 1800 3258282 and fax: 6224 6929.
Outcomes of Breaching the Competition Act
Fines
-
In 2008, six pest companies were fined up to $267,750 for bid rigging
-
In Nov 2009, the Express Bus Agencies Association and its 16 coach operators were fined $1.7 million for fixing the prices of coach tickets
Warnings
-
In 2008, the Singapore School Transport Association (SSTA) was warned by CCS after SSTA recommends its members to levy a fuel surcharge. This warning was issued as such price recommendations or guidelines will disrupt free market competition.
-
In 2008, four “Fa Gao” (发糕 or Chinese New Year Cake) manufacturers were warned by CCS when they jointly announced they had agreedto raise the prices of “Fa Gao”
This article was first published here
