New Guidance Note on Business Collaborations in Singapore

The Guidance Note addresses seven common types of business collaborations, each with potential commercial and economic benefits but also having a risk of infringing Section 34 of the Singaporean Competition Act. Section 34 prohibits agreements, decisions, or concerted practices that have as their object or effect the prevention, restriction or distortion of competition (“Section 34 Prohibition”). The CCCS has already published the CCCS Guidelines on the Section 34 Prohibition (recently revised and to take effect from 1 February 2022) (“Section 34 Guidelines”), and the current Guidance Note is intended to “supplement and not modify” the Section 34 Guidelines.

Generally, if the collaboration is not purely vertical in nature and does not restrict competition by object, businesses can refer to the conditions and factors set out in the Guidance Note to assess whether the collaboration will infringe the Competition Act. Businesses can also refer to the Section 34 Guidelines to determine if their collaborations nonetheless result in Net Economic Benefits and, therefore may be excluded from the Section 34 Prohibition.

The Seven Common Business Collaborations

The seven types of business collaborations addressed in the Guidance Note are:

1. Information sharing – Exchange of both price and non-price information;
2. Joint production – Collaboration to jointly produce a product, share production capacity or subcontract production;
3. Joint commercialisation – Collaboration in the selling, tendering, distribution or promotion of a product;
4. Joint purchasing – Collaboration to jointly purchase from one or more suppliers;
5. Joint research & development (“R&D”) – Collaboration on R&D activities, such as joint investment;
6. Standards development – Setting of industry or technical standards; and
7. Standard terms and conditions in contracts – Usage of terms shared amongst competitors establishing conditions of sale and purchase of goods and services between them and their customers.

Horizontal, Vertical and Lateral Collaborations

Competition concerns will generally tend to arise when there are collaborations between actual competitors unless excluded or exempted. Collaborations among businesses in different markets can still raise competition concerns if they are potential competitors. Pursuant to the Guidance Note, businesses may be treated as potential competitors if it is likely that a business, within a short period of time, would supply a competing product; a business that enters the market fast enough may constrain the behaviour of existing businesses in the market with the threat of its entry. The CCCS has indicated that a period of 2 years can be considered as a “short period of time”, but also other factors such as market characteristics and dynamics and specific capacities of the potential market entrants may be taken into account.

Purely vertical collaborations or agreements are excluded from the Section 34 Prohibition, but the Guidance Note includes footnote stating that vertical agreements can nonetheless be used to implement a horizontal agreement among competitors through an undertaking at a different level of the supply chain.

Engaging with Government Agencies and Statutory Bodies

The CCCS has clarified that the exclusion under Section 33(4) of the Competition Act for activities carried on by, any agreement entered into or any conduct on the part of the Government, any statutory body, or person acting on behalf of the Government or that statutory body, will be construed narrowly.

Encouragement or endorsement of any collaborations by government agencies or statutory bodies would not by itself qualify for the exclusion. The collaborations will generally have to be done on behalf of the Government or statutory body, and the exclusion will only apply to that specific activity, agreement or conduct being done on behalf of the Government or statutory body.

Businesses should clarify the nature of any initiatives or engagements with the relevant government agency or statutory board prior to undertaking any collaborations in pursuit of such initiatives or engagements.

Trade Associations

In its response to the public consultation for the Guidance Note and Guidance Note itself, the CCCS recognised the role that trade associations can play in various areas from information sharing and price recommendations, to setting technical, quality or service standards and standardising terms and conditions, as well as engaging with businesses and relevant authorities to support various initiatives and compliance with obligations under the Competition Act and development of further guidance such as the Guidance Note.

The Guidance Note specifically addresses the role that trade associations can play in advancing the interests of its members in a number of the collaborations described in the Guidance Note. It highlights the factors to consider and precautions to take to safeguard against any conduct that may infringe competition law.

Such precautions include setting a clear and specific agenda prior to the meeting and keeping records of the minutes so that the discussions are properly documented.

The press release of the CCCS on the Guidance Note can found here (in English) and the Guidance Notice here (in English).

For more information, please contact Sandra Seah.