CCCS issues Business Collaboration Guidance Note to enable businesses to collaborate with greater confidence: Allen & Gledhill

17 January 2022

The Competition and Consumer Commission of Singapore (“CCCS”) has published the Business Collaboration Guidance Note (“Guidance Note”) to provide clarity to businesses and trade associations on the ways to collaborate without harming competition. This includes providing greater guidance on the assessment factors (such as market share and structure) that CCCS would generally consider in determining whether a collaboration complies with section 34 of the Competition Act (“Act”), when specific types of collaborations may give rise to competition concerns, and the conditions under which competition concerns are unlikely.

The Guidance Note focuses on seven common types of business collaborations as follows:

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

Minimising competition concerns

The Guidance Note sets out the following conditions under which competition concerns are less likely to arise:

For information sharing

Information is publicly available or is not related to price or other important factors that impact how businesses compete;
Information is historical, aggregated (especially by independent third parties) and cannot be attributed to individual businesses;
The market has a large number of players with frequent entry and exit, and the relevant goods/services are highly differentiated or change rapidly (on condition the information shared does not facilitate price-fixing, bid-rigging, market sharing or output limitation); or
In the context of a collaboration where commercially sensitive and individual information is needed, only information strictly necessary to implement the collaboration is shared and there are safeguards to ring-fence commercially sensitive information so that businesses are unable to access information affecting competition between them.

For joint production and joint commercialisation

The collaboration does not facilitate price-fixing, bid-rigging, output limitation and market sharing;
Collaborating businesses do not have market power. For example, they have aggregate market shares of less than 20%;
The collaboration does not result in collaborating businesses having a significant proportion of common costs unless there is significant cost reduction that outweighs the potential harm arising from such common costs; and
The collaboration does not raise concerns in relation to the types of information sharing or contain safeguards to minimise concerns with information sharing.

For joint purchasing

The collaboration does not facilitate price-fixing, bid-rigging, output limitation and market sharing;
Collaborating businesses (a) do not have buyer power in the purchasing market, and (b) do not have market power in the selling market(s);
The available supply in the purchasing market is not limited and other competing purchasers continue to be able to obtain supplies from suppliers;
The collaboration does not result in collaborating businesses having a significant proportion of common costs unless there is significant cost reduction that outweighs the potential harm arising from such common costs; and
The collaboration does not raise concerns in relation to the types of information sharing or contain safeguards to minimise concerns with information sharing.

For joint R&D

The collaboration is between businesses that are not actual or potential competitors or does not remove a maverick competitor from the market;
Where the collaborating businesses are actual or potential competitors for existing products or technologies, they do not have market power; or
Where the collaboration is on new products or technologies, there are multiple viable, on-going alternative R&D projects undertaken by competing innovators that can produce close substitutes to the collaborators’ resulting product or technology.

For standards development

Where all stakeholders that are likely to be affected by the eventual, established standards have the unrestricted right to participate or provide feedback during the standard-setting and adoption process.
The established standards are not used to discriminate or exclude certain interested businesses. There should not be any restrictions for members to develop alternative standards or products, which help to provide room for competition.
There is availability of alternatives in the market. For example, for industries where existing competition to the standards is present, competition concerns are less likely to arise.

For standard terms and conditions in contracts

Absence of overly prescriptive terms or terms relating to important factors of competition. For example, if the metrics of competition such as price, output or the scope of product including ancillary terms such as cancellation charges, after-sale service, warranty and refund policies are established as binding standard terms, individual competitors will have little incentive to deviate from the standard terms and conditions, eliminating competition in that respect.
Where there are credible alternatives to the established terms. For example, when firms retain the choice to not follow the standard terms and remain free to adopt or adapt standard terms according to their preference.
Less extensive standard terms. For example, standard terms can cover a large proportion of the market when most of the terms relating to a product offering are included, or if the vast majority of businesses are using the standard terms, leaving little room for competitors to innovate or compete in other ways.

Cross-border collaborations and additional information for trade associations

The Guidance Note also includes a short section each on cross-border collaborations and information for trade associations regarding their role in supporting collaborations among their members.

Notify CCCS for guidance or decision when in doubt

According to the Guidance Note, if businesses remain in doubt as to whether a specific collaboration complies with the Act, they may wish to notify the collaboration to CCCS for guidance or decision as to whether it would be likely to infringe or has infringed the section 34 prohibition respectively.

Background

The Guidance Note takes into consideration the feedback received from a public consultation exercise on a draft version of the Guidance Note that was held from 30 July 2021 to 27 August 2021.

Reference materials

The following materials are available on the CCCS website www.cccs.gov.sg: