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FEATURE |
Procedure and Appellate Process Under the Singapore Competition Act
A quick guide to the procedures under the new Competition Act (‘Act’) for lodgment of complaints, investigations and enforcement actions by the Commission and the appellate process.
Lodging a Complaint
A person who suspects that anti-competitive behaviour amounting to infringement of the s 34 prohibition, the s 47 prohibition or the s 54 prohibition (see summary of prohibitions at Appendix 1) may complain to the Competition Commission of Singapore (‘the Commission’).
A complaint may only be made to the Commission by a person who is not a party to a prohibited agreement.1 However, any person may complain about abusive conduct or about a merger without any need to prove that he has a legitimate interest in the claim or that he will suffer any loss as a result of the alleged infringement.2
Investigations
The Commission may, at its own initiative or on receipt of a complaint, conduct an investigation if there are ‘reasonable grounds’ for suspected infringements.3 Such discretion will allow the Commission to decide whether there is a bona fide case that merits investigation and hopefully weed out the frivolous claims. It is unclear at this juncture what evidence would amount to ‘reasonable grounds’. However, the Commission will not attempt to catch all forms of anti-competitive activities but will focus on those that have an ‘appreciable adverse effect’ on competition in Singapore4 or that do not have any net economic benefit.5
The Commission has four powers in respect of investigations under the Act:
1 Production of documents: The Commission may, by notice in writing to any person, require that person to produce specified or specified categories of documents or information which the Commission considers to be related to any matter relevant to the investigation.6
2 Entry into premises without warrant: Any authorised officer or inspector of the Commission may enter any premises in connection with an investigation. In general, written notice which gives at least two working days’ notice of the intended entry must be given.7
3 Entry into premises under warrant: The Commission or any inspector may apply to a court for a warrant authorising a named officer to enter the premises specified in the warrant, using such force as is reasonably necessary for that purpose. No prior notice is required and these ‘dawn raids’ empower the inspector to search the premises or any person on those premises and take copies or extracts from any relevant document.8
4 Interim measures: If the Commission has not completed its investigations into the matter and considers that there is an urgent necessity to prevent serious damage to particular persons or to protect the public interest, the Commission may give such directions as it considers appropriate for that purpose. The directions may require an agreement or conduct to be terminated or modified or require a merger to be dissolved.9 It is not clear at this juncture whether a complainant or any person may apply for such interim measures to be applied by the Commission on the basis that he will suffer serious economic losses or go out of business.
Decisions
If the Commission wishes to make a decision that there has been an infringement after considering the evidence obtained in the course of its investigation or after considering the report of its appointed inspector, the Commission has to give written notice to the person likely to be affected by such decision and give such person an opportunity to make representations. The Commission may make a decision only after considering any representations made.10
Remedies and Enforcement Actions
Apart from the interim measures which may be directed by the Commission, if the Commission makes a decision that there has been an infringement, the Commission may give such directions as it considers appropriate to bring the infringement to an end, to eliminate the harmful effect of such infringement or to prevent the recurrence of such infringement.
A direction may require:
(a) parties to an agreement to modify or terminate the agreement;
(b) a party to modify or cease its conduct;
(c) a merger to be dissolved or modified;
(d) any party to enter into legally enforceable agreements, to dispose of its operations, assets or shares or to pay a financial penalty; and
(e) the provision of performance bonds, guarantees or other forms of security.
The most important sanction for a party found to be in infringement is likely to be the imposition of the financial penalty. The Commission may impose a financial penalty only if it is satisfied that the infringement has been committed intentionally or negligently. The financial penalty may amount to 10% of the turnover of the undertaking for each year of infringement (up to a maximum of three years).11
Offences
The Act makes it an offence for a person to fail to comply with a requirement imposed on him in an investigation by the Commission (including a requirement to produce a document) or to destroy or falsify documents which are required to be produced to the Commission.12
It is also an offence for a person to provide information which is false or misleading in a material particular to the Commission.13
Where an offence under the Act is committed by a corporation with the consent or connivance of an officer or is attributable to any neglect on his part, that officer will also be guilty of the offence. This principle also applies to partners in partnerships, and officers and members of the governing body of unincorporated associations.14
Appeals
The Competition Appeal Board will hear appeals against the decisions of the Commission. There are further appeals against the decisions of the Board to the High Court and to the Court of Appeal, but only on points of law and the amount of the financial penalties.15
Stage one — Appeal to the Board
The Competition Appeal Board (‘the Board’) will be established to hear appeals against the decisions of the Commission. In the context of appeals, ‘decision’ means a decision of the Commission that the s 34 prohibition, the s 47 prohibition or the s 54 prohibition has been infringed, and include pre-decision interim measures and post-decision enforcement measures directed by the Commission.16
Any party in respect of which the Commission has made a decision may appeal to the Board against that decision within the period prescribed by the Minister.17 However, no act or proceeding of the Commission may be questioned on the ground of any omission, defect or irregularity in the procedure of the Commission not affecting the merits of the case.18
It should also be noted that only parties against which the Commission has made a decision may appeal to the Board. This rules out appeals by disappointed complainants or third parties if the Commission rejects the complaints or decides that there is no infringement.
Except in the case of an appeal against the imposition or the amount of a financial penalty, making an appeal does not suspend the effect of the decision to which the appeal relates.19
Powers of the Board
The Board has all the powers and duties of the Commission.20 In addition, the Board has the powers, rights and privileges vested in a District Court on the hearing of an action, including the enforcement of the attendance of witnesses, the compelling of the production of documents and the award of such costs or expenses as may be prescribed by the Minister.21
The Board may:
(a) confirm or set aside the decision which is the subject of the appeal, or any part of it;
(b) remit the matter to the Commission;
(c) impose or revoke, or vary the amount of, a financial penalty; or
(d) give such direction, take such other step or make any other decision as the Commission could itself have given, taken or made.
If the Board confirms the decision which is the subject of the appeal, it may, nevertheless, set aside any finding of fact on which the decision was based. Any decision of the Board on an appeal has the same effect, and may be enforced in the same manner, as a decision of the Commission.22
Stage two — Appeal to the High Court
An appeal against a decision of the Board shall lie to the High Court on the following limited grounds in respect of:
(a) a point of law arising from a decision of the Board; or
(b) any decision of the Board as to the amount of a financial penalty.
An appeal to the High Court may be made only at the instance of a person who was a party to the proceedings of the Board in which the Board makes a decision.23
Powers of the High Court
The High Court has to hear and determine the appeal and may:
(a) confirm, modify or reverse the decision of the Board; and
(b) make such further or other order on such appeal as to costs or otherwise. 24
In addition, it is submitted that judicial review of the decision-making processes and the exercise of discretion of the Commission and the Board will be possible.25
Stage three — Final appeal to the Court of Appeal
There is a final right of appeal to the Court of Appeal from decisions of the High Court as exists in the case of decisions made by the High Court in the exercise of its original civil jurisdiction.26
The Court of Appeal has all the authority and jurisdiction of the High Court, from which the appeal was brought and has full power to determine any question necessary to be determined for the purpose of doing justice in any case before it.27 However, such appeal may be brought only on limited grounds in respect of:
(a) points of law; or
(b) any decision as to the amount of a financial penalty.
Concluding Remarks
The Commission will be developing guidelines in the course of 2005 to clarify the terms used in the Act and to lay down the implementation processes and enforcement procedures.28 It remains to be seen how these guidelines will steer business conduct and impact businesses in Singapore.
Sandra Seah
Alban Tay Mahtani & de Silva
E-mail: sandraseah@atmdlaw.com.sg
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Endnotes:
1 Inferred from s 45(2)(d) of the Act. 2 This is in contrast with the EC position where complainants must demonstrate a ‘legitimate interest’ in the outcome of the case: Art 7 of Regulation (EC) No 1/2003. Complainants must state how the conduct complained of affects them and explain how intervention by the Commission will remedy the alleged grievance. 3 Section 62(1) of the Act. 4 The concept of ‘appreciability’ has not been defined in the Act. In the EC, ‘appreciability’ can be measured both in relative terms (market share) or in absolute terms (turnover). For example, AEG [1983] ECR 3151, para 60 (appreciability requirement fulfilled when sales of the undertakings concerned accounted for about 5% of the market share) and Musique Diffusion Francaise [1983] ECR 1825, para 86 (products account for just above 3% of market share but the court held that the high turnover of the parties and the relative market position of the products compared to the competing suppliers’ products were capable of appreciably affecting trade between member states). It is important to note that agreements and practices need to be assessed in the legal and economic context to determine whether the ‘appreciability’ criterion has been fulfilled. 5 It is likely that the Commission will investigate conduct which affects efficient market conduct, promotion of overall productivity, innovation and competitiveness of markets in Singapore or which has adverse effect on competition in Singapore: cf s 6(1)(a) and (b) of the Act (functions and duties of Commission). 6 Section 63(1) and (4) of the Act. 7 Section 64 of the Act. 8 Section 65 of the Act. 9 Section 67 and s 69(2)(a)–(c) of the Act. 10 Section 68(1) and (2) of the Act. 11 Section 69 of the Act. 12 Section 75 and s 76 of the Act. 13 Section 77 of the Act. 14 Section 81 of the Act. A person convicted will be punished with the fine or imprisonment as prescribed in the offence-creating provision, or where there is no penalty provided, with the general penalty under s 83. 15 Section 74(4) of the Act. 16 Section 71(3); cf s 67 or s 69 (including the imposition of any financial penalty under s 69 or the amount of any such financial penalty) 17 Section 71(1) of the Act. 18 Para 17(c) of First Sch, of the Act. 19 Section 71(2) of the Act. 20 Section 73(2) of the Act. 21 Section 73(3) and s 72(15)(f) of the Act. 22 Section 73(8) and (9) of the Act. 23 Section 74(1) and (2) of the Act. 24 Section 74(3) of the Act. 25 Cf s18 and First Sch, Supreme Court of Judicature Act (Cap 322). The position is clearer in the EC. The ECJ has the jurisdiction to consider whether the acts of the Council or the Commission are lawful. The grounds for judicial review are lack of competence, infringement of an essential procedural requirement, infringement of the Treaty or any rule of law or misuse of powers: Art 230 (ex 173) of EC Treaty. 26 Section 74(4) of the Act. 27 Subsections 29A(3) and (4), Supreme Court of Judicature Act. 28 For instance, there will be guidelines on the meaning of ‘appreciable adverse effect’, the trigger for the use of investigative powers and details of leniency programmes.
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Appendix 1
Summary of Prohibitions of Anti-Competitive Behaviour Section 34 Prohibition This covers anti-competitive agreements, decisions and concerted practices which have the object or effect of preventing, restricting or distorting competition within Singapore.
These include agreements, decisions or concerted practices which:
• directly or indirectly fix purchase or selling prices or any other trading conditions; • limit or control production, markets, technical development or investment; • share markets or sources of supply; • apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or • make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
The provisions of any agreement or any decision that infringes this prohibition will be rendered void on or after the date the s 34 prohibition comes into force to the extent of the infringement.
The s 34 prohibition applies with retrospective effect to agreements, decisions and concerted practices before the Act comes into operation. As a matter of policy, it was decided that agreements which have been in existence for more than five years before the Act will be allowed a longer transitional period to be negotiated or amended so as to be compliant with the requirements of the Act.
The Minister may make an order, following the recommendation of the Commission, to exempt certain categories of agreements from this prohibition (Block exemptions) if such agreements improve production or distribution, or promote technical or economic progress. There are no individual exemptions. Section 47 Prohibition This covers conduct by one or more undertakings which amounts to an abuse of a dominant position (within Singapore or elsewhere) in any market in Singapore. The Act does not prohibit dominance or substantial market power per se.
Examples of practices which infringe the s 47 prohibition include:
• predatory behaviour towards competitors; • limiting production, markets or technical development to the prejudice of consumers; • applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or • making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or commercial usage, have no connection with the subject of the contracts.
Section 34 and Section 47 Exclusions The Third Sch sets out the matters excluded from the s 34 prohibition and the s 47 prohibition. These exclusions relate to:
• services of general economic interest or having the character of a revenue-producing monopoly in so far as the prohibition would obstruct the performance of the particular tasks assigned to the undertaking; • agreements or conduct resulting from compliance with legal requirements imposed by or under any written law; • avoidance of conflict with an international obligation of Singapore; • exceptional and compelling reasons of public policy; • goods and services regulated by sectoral regulators; • specified activities such as postal services, supply of piped potable water, supply of wastewater management services, supply of scheduled bus services, supply of rail services and cargo terminal operations; • agreements or conduct relating to clearing houses; and • vertical agreements (including concerted practices) entered into between two or more undertakings each of which operates at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services.
Section 54 Prohibition Only mergers and acquisitions which substantially lessen competition within any market in Singapore for goods or services are prohibited. A merger shall not be deemed to occur if all the undertakings involved in the merger are, directly or indirectly, under the common control of a single undertaking.
Firms are not mandated to seek approval or to notify the Commission of any merger, but those that wish to seek the Commission’s guidance or decision can do so on a voluntary basis.
For mergers involving public interest considerations, the Minister will decide whether such mergers may be exempted from this prohibition and the Minister’s decision is final.
Section 54 Exclusions The Fourth Sch sets out the matters excluded from the s 54 prohibition. These exclusions relate to:
• any merger approved under any written law or any code of practice issued under any written law relating to competition; or • any merger involving any undertaking relating to specified activities such as postal services, supply of piped potable water, supply of wastewater management services, supply of scheduled bus services, supply of rail services and cargo terminal operations.
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