June 2013

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This newsletter is intended to provide general information and may not be reproduced or transmitted in any form or by any means without the prior written approval of Drew & Napier LLC. It is not intended to be a comprehensive study of the subjects covered, nor is it intended to provide legal advice. Specific advice should be sought about your specific circumstances. Drew & Napier has made all reasonable efforts to ensure the information is accurate as of 10 June 2013.

SINGAPORE COMPETITION LAW WATCH

Table accurate as at 10 June 2013

COCA-COLA CHANGES BUSINESS

PRACTICES IN THE LOCAL SOFT

DRINKS MARKET In January 2013, the Competition Commission of Singapore (“CCS”) ceased its investigations into Coca-Cola Singapore Beverages Pte Ltd’s (“CCSB”) supply agreements with its on-premise retailers. This comes after almost a year of investigations, which was initially launched in March 2012 following a complaint that CCSB’s supply agreements with its on-premise retailers contained restrictive provisions such as exclusivity conditions and conditional rebates. According to CCS’s press release, CCSB voluntarily amended its supply agreements “to remove potentially anti-competitive provisions and [gave] an undertaking to CCS as follows: (a) not to impose any exclusivity restrictions on

its on-premise retailers for CCSB brands of non-alcoholic beverages, except in limited circumstances;

(b) not to require its on-premise retailers who wish to sell other brands of beverages to first negotiate with CCSB;

Score Board

Number Status

Concluded Pending

Notified Agreements or Conduct

11 9 2

Notified Mergers or Anticipated

Mergers

36 36 0

Infringement Decisions 7 7 0

Appeals 7 7 0

In this issue

Singapore Competition Law Watch 1 Regulatory Updates 3 Industry News 6 – Anti-Competitive Agreements 6

– Abuse of Dominance 10

– Merger Regulations 13

Feature Article 17 COMESA Competition Commission commences operations Do you know? 19 3rd ASEAN Competition Conference 4th & 5th July 2013 Singapore

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(c) not to grant loyalty-inducing rebates that have an effect of inducing on-premise retailers to purchase exclusively or almost exclusively from CCSB; and

(d) to allow its on-premise retailers to use up to

20% of the space in coolers provided by CCSB to store other brands of beverages, where these retailers have no access to alternative cooling equipment on their premises.”

Despite closing its investigation, CCS emphasised that it will continue to closely monitor practices in the local soft drinks market. Whilst CCS did not reveal any further details about its investigation, it would have likely been an investigation into whether CCSB’s practices amounted to the abuse of a dominant position, prohibited under section 47 of the Competition Act. Under this prohibition, undertakings that hold a dominant position in the market are prevented from using that position to engage in conduct that protects, enhances or perpetuates the dominant position in ways unrelated to its competitive merits. Examples of such abusive practices include imposing exclusivity agreements on downstream retailers and granting loyalty inducing rebates that foreclose competition. SINGAPORE FINES 12 MOTOR

VEHICLE TRADERS FOR BID-RIGGING

AT PUBLIC AUCTIONS On 28 March 2013, the Competition Commission of Singapore (“CCS”) handed down fines totalling S$179,071 on 12 motor vehicle traders (“parties ”) for bid-rigging at public motor vehicle auctions held by various government agencies (including the Singapore Civil Defence Force, the Land Transport Authority, the National Environment Agency, Singapore Customs and the Singapore Police Force). The affected government agencies regularly conduct public auctions to dispose of decommissioned motor vehicles and other vehicles taken into custody for reasons such as unpaid taxes. With the exception of two government agencies which switched to online auctioning (“online auctions ”) after May 2010, these auctions are held at hotel ballrooms or at the

agencies’ premises (“physical auctions ”). The auctions are conducted by agency-appointed auction houses and are open to the general public. Individuals who make a bid at the physical auctions will be identifiable by everyone else present because the bidder has to either raise his hand or an allocated number tag to indicate his bid. In contrast, the identities of bidders in the online auctions are not known to other bidders because each online bid is anonymised. After investigations, CCS concluded that there was sufficient evidence to show that there was an agreement or concerted practice amongst the parties not to bid against each other for vehicles at these public auctions. At the public physical auctions, CCS found that a sole bidder would bid for the vehicles under the bid-rigging agreement. After the public auction, the motor vehicle traders would meet to conduct their own “private” auctions for the vehicles. At the “private” auctions, the bids will open at the price paid at the public auction. The difference in the bid price of the vehicles for the public auctions and the “private” auctions would be put into a common pool which would subsequently be shared (“rebates ”) amongst those present at the “private” auction and who did not bid at the public auction. Apart from sustaining the bid-rigging agreement by incentivising parties not to bid at the public auctions through the use of such rebates, some parties informed CCS that they were “scolded” when they entered a competing bid at the public auctions. With regard to bid-rigging in the online auctions, CCS observed a pattern amongst four of the cartelists not to enter competing bids against each other. Along with an incriminating statement provided by one of the parties, CCS concluded that there was a “deliberate agreement and/or concerted practice” amongst four parties not to bid against each other. The parties were found to have infringed section 34 of the Competition Act, which prohibits agreements or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within Singapore. Consequently, CCS imposed fines ranging from S$8,000 to S$37,759 on each party. It is also noteworthy that while CCS sent section 63 notices to various individuals to request for

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specific documents and interviews by CCS, three individuals failed to respond to the notices. Separately, three parties did not respond to CCS’s section 63 notice requesting for information on their financial information. In response to the latter breach, CCS conducted a dawn raid of these parties’ premises to obtain the requested information. Companies are reminded that any agreement to refrain from bidding against other parties in an auction is considered a form of bid-rigging and therefore constitutes a breach of section 34 of the Competition Act. Even if the bids are conducted online, CCS has demonstrated that the supposed anonymity of an online bid is not a barrier to its investigations and a finding of an anti-competitive agreement. Companies and individuals are also reminded to co-operate with CCS in its investigations. Otherwise, CCS may obtain such information through a surprise dawn raid, and criminal liability may also attach to the non-cooperating individual or company.

REGULATORY UPDATES MOFCOM RELEASES DRAFT

MERGER REGULATIONS FOR PUBLIC

CONSULTATION China’s Ministry of Commerce (“MOFCOM”) has released two sets of draft regulations relating to merger control for public consultation, namely its draft regulation on the imposition of merger remedies (“Merger Remedies Regulations ”) on 27 March 2013, and its draft regulations on “simple” mergers (“Simple Merger Regulations ”) on 3 April 2013. Simple Merger Regulations The proposed Simple Merger Regulations come in the wake of the recognition that there was a need to speed up merger reviews, which had previously been identified as a priority for MOFCOM. MOFCOM began working on merger control

reforms at the end of 2011, after experiencing high numbers of merger filings and delays in clearing these mergers. The Simple Merger Regulations identify the following situations as “simple” mergers: (a) mergers between parties in the same

horizontal market, with parties’ having a combined market share of under 15%;

(b) mergers between parties in an upstream and

downstream market, with parties’ market share in the vertical market at under 25%; and

(c) mergers between parties not in a vertical

relationship, with each parties’ market share being under 25% in each of their respective markets.

It also classifies as “simple” joint ventures not engaged in economic activities in China, and the acquisition of foreign entities not engaged in economic activity in China. Notwithstanding the new regulations, MOFCOM still reserves the power to conduct a detailed review if the relevant market is difficult to define, or if the merger may have adverse effects on the development of the national economy. Notably, the Simple Merger Regulations currently do not specify procedural details (such as timings and filing requirements). Merger Remedies Regulations The draft Merger Remedies Regulations provide guidance on how MOFCOM implements merger remedies, and have reportedly been welcomed “as a significant improvement on existing legislation in terms of content and transparency.” The Merger Remedies Regulations provide MOFCOM with greater flexibility because it is now able to modify and enforce remedies after issuing them, particularly where the terms of the transaction change. Notably, the new regulations provide for behavioural remedies (in addition to the structural remedies that were already at MOFCOM’s disposal). The regulations also provide more

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guidance on the implementation and effect of remedies, for example article 13 provides that all behavioural remedies shall be implemented for ten years unless otherwise stated by MOFCOM. It has been observed that such guidance is especially helpful because in practice, most of the remedies imposed by MOFCOM have been behavioural in nature. The draft regulations also allow merging parties to propose commitments to MOFCOM to address MOFCOM’s anti-competitive concerns regarding their merger situation. Such commitments must be submitted to MOFCOM no later than 20 days before the end of the merger review period. In Singapore: Singapore’s merger control processes are detailed in the Competition Commission of Singapore’s (“CCS”) Guidelines on Merger Procedures 2012 and Guidelines on the Substantive Assessment of Mergers. There is no “simple merger” notification procedure currently specified, and the filing system is ultimately voluntary (with parties encouraged to self-assess their mergers). With regard to remedies, the Guidelines on Substantive Assessment of Mergers discusses both structural and remedial remedies that CCS can impose, either as a condition for approving a merger or as a remedy to restore competitive conditions in a market where an anti-competitive merger has already taken place. Structural remedies that CCS can adopt include requiring parties to dispose of certain business operations, or even directing the unwinding of an entity that has already merged. CCS has also recently imposed behavioural remedies (albeit in the assessment of a joint venture), where it required Emirates and Qantas to provide 8,246 seats weekly on each of the Singapore-Melbourne and Singapore-Brisbane routes as a condition for approval.

MYCC TO PRIORITISE BID-RIGGING

FOR 2013 The Chairman of the Malaysian Competition Commission (“MyCC”), Tan Sri Dato’ Seri Siti Norma Yaakob, has indicated that MyCC will prioritise bid-rigging in its enforcement efforts in 2013. She was

speaking at the opening of MyCC’s new headquarters on 17 January 2013. Tan Sri Dato’ Seri Siti Norma Yaakob said that bid-rigging is one of the most common problems faced by many countries, and is prevalent across all sectors. Other countries, such as Japan, the United States and the United Kingdom, have identified bid-rigging as a focus area for enforcement. More regionally, competition law enforcement in Indonesia has been particularly focussed on detecting and penalising bid-rigging. According to Tan Sri Dato’ Seri Siti Norma Yaakob, bid-rigging adversely impacts all industries, whether in the private sector or the public sector, and also indirectly burdens taxpayers, who have to pay significantly more for goods and services. MyCC’s chief executive, Shila Dorai Raj, also said that MyCC will educate procurement officers in the public and private sectors and the public, and warn businesses of the consequences of infringement. A bid-rigging infringement could incur penalties of up to 10% of the company’s global turnover. In Singapore: Bid-rigging is the act of colluding to fix bids in tender or auction procedures. It is, by its very nature, regarded as restrictive of competition to an appreciable extent and accordingly is strictly prohibited under section 34 of the Competition Act. Examples of bid-rigging behaviour include suppressing bids or submitting unrealistic bids to allow an agreed party to win, or rotating bids among parties. To date the Competition Commission of Singapore has taken enforcement action in relation to bid-rigging on three separate occasions (in relation to the supply of pest control services in 2007, in relation to the supply of electrical and building works in 2010, and in respect of motor vehicle trading in 2013). PHILIPPINES CONTEMPLATES

PASSING ANTITRUST BILL The Philippines is on the verge of passing its Antitrust Bill, the Fair Competition Act (“Antitrust Bill ”), which would make it the sixth ASEAN country to introduce competition law. The Antitrust Bill has been stuck in a series of debates in the

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Philippine Congress, but there has been a new push for President Benigno Aquino III to certify the proposal as urgent, which would expedite the process. Once certified urgent, both chambers of Congress would be able to pass the Antitrust Bill after the second and third readings on the same day. Without this expedited process, the Bill would have to first be approved by the upper chamber before being approved by the lower chamber. The Antitrust Bill prohibits businesses from abusing a dominant position, entering into anti-competitive agreements or entering into anti-competitive mergers. The antitrust bill will also establish the Philippine Fair Competition Commission, granting it powers to investigate alleged violations and issue cease-and-desist orders. The Antitrust Bill is modelled after similar antitrust legislation in the United States. The Bill has the backing of at least 75 congressmen and also reportedly receives strong support by local business groups and the Joint Foreign Chambers. The Antitrust Bill was initially passed after the second reading last August 2012. However, this was subsequently reversed because of complaints from members of Congress that they did not have the opportunity to debate and suggest amendments to the Bill. OFT RELEASES REPORT ON UK

PETROL AND DIESEL SECTOR In January 2013, UK’s Office of Fair Trading (“OFT”) released a report on the UK petrol and diesel sector and noted that “competition in the UK road fuels sector is working relatively effectively”. After a four month investigation into the sector, the report observed that the increase in average petrol prices from 76p a litre in 2003 to 136p a litre in 2012 was caused largely by higher crude oil prices and increases in taxation. No evidence was found that the increase was attributable to anti-competitive conduct. The report also addressed the widespread perception that pump prices showed signs of “rocket and feather” pricing – increasing rapidly when crude oil prices rise but dropping slowly when it falls – and concluded that there was

limited evidence to show that such phenomena actually occurred in reality. In considering independent fuel dealer complaints that they are unable to compete fairly with supermarkets and oil company owned sites, the OFT noted that many of them have been pressured by supermarkets who were able to utilise their buyer power to purchase wholesale fuel on better terms than the independent dealers. In August 2012, for example, supermarkets sold fuel that was 4.3p per litre cheaper than that sold by independent fuel dealers. However, there was insufficient evidence to indicate any anti-competitive conduct by supermarkets and oil company owned retailers that justified further investigation by the OFT. While the report noted that there was no evidence of anti-competitive behaviour in the fuel market at a national level, the OFT stated that it was prepared to take action at the local level if cogent evidence of anti-competitive conduct was received. The OFT began studying the sector in September 2012 in response to a complaint from the Petrol Retailers Association (“PRA”). In response to the report, PRA chairman Brian Madderson reportedly said that the OFT missed a “prime opportunity” to “tackle market manipulation of UK wholesale prices and retail prices by the big players”. Instead of the limited OFT study based on information voluntarily submitted by market players, the PRA has called for a full scale market study to be conducted. In Singapore: In May 2011, the Competition Commission of Singapore released its own occasional paper on the retail petrol market in Singapore. The paper noted that petrol prices in Singapore are generally competitive by international standards and that price data did not demonstrate that “rocket and feather” pricing patterns were observable in pricing trends. It also noted that petrol retailer’s profit margins fluctuated counter-cyclically in relation to crude oil prices – the higher the crude oil prices, the lower the retailer’s profit margins – and this suggested that there was no successful price coordination effects in the market. The paper concluded that while the market structure of the retail petrol market generally contained a material

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risk of collusive or coordinated practices, the market data and facts did not support the proposition that petrol retailers were actually engaged in anti-competitive collusive behaviour.

INDUSTRY NEWS

ANTI-COMPETITIVE AGREEMENTS

Fines imposed on confectionery manufacturer cartel in Germany

Germany’s Federal Cartel Office, the Bundeskartellamt, has imposed a fine of €60m (S$98m) on 11 confectionery manufacturers for exchanging information and fixing the price of chocolate products. The companies include Kraft, Alfred Ritter, Nestlé, Mars and Haribo. A twelfth company, Mars applied for leniency under the Bundeskartellamt’s leniency regulations and received no fine. The president of the Bundeskartellamt said that the companies colluded to offset increases in the cost of raw materials such as milk and cocoa. These materials underwent sharp price increases in 2007. Three separate infringements were found. On the first count, Kraft and Alfred Ritter were involved in telephone exchanges in 2007 informing each other about intended price increases for chocolate bars. Selling prices were then increased in 2008 by 15%-20%, and recommended retail prices were increased by 15%-20%. On the second count, senior employees from Mars, Nestlé, Alfred Ritter, and Haribo are alleged to have met regularly in 2007 and agreed on price increases. Chocolate packet contents were downsized to make it easier for price increases to be implemented. Thirdly, members of a German candy manufacturers’ association exchanged information about planned price increases and discussions with retailers, within a commercial conditions working group.

The investigation commenced in February 2008 following Mars’ application for immunity. A number of other participants also had their fines reduced for cooperating with the investigation. In Singapore: Price fixing is a hardcore prohibition under section 34 of the Competition Act. Agreements to fix prices are, by their very nature, regarded as restrictive of competition to an appreciable extent, and no appreciable adverse effect needs to be shown before enforcement action is taken. Sharing of information can also breach section 34 of the Competition Act, as the Competition Commission of Singapore (“CCS”) notes in paragraphs 3.17 to 3.24 of the CCS Guidelines on the Section 34 Prohibition, if such information sharing has an appreciable adverse effect on competition. Whether this is the case depends on the market characteristics, the type of information and the way it is exchanged. However, the exchange of forward-looking price information is likely to be considered tantamount to price fixing by CCS, as it was in its recent decision involving the sharing of such information by two ferry operators in Decision CCS 500/006/09. Germany’s Federal Cartel Office fines household product manufacturers and trademark association for information exchange Germany’s Federal Cartel Office, the Bundeskartellamt, has fined six manufacturers of branded drugstore products and their trademark association a total of €39m (S$64m) for anti-competitive information exchange. With the fines, the Bundeskartellamt concluded its proceedings against drugstore product manufacturers for information exchange, according to a press release of 18 March 2013. The six companies are Beiersdorf AG, Erdal-Rex GmbH, Gillette Gruppe Deutschland GmbH & Co. oHG, GlaxoSmithKline Consumer Healthcare GmbH & Co. KG, L’Oréal Deutschland GmbH and Procter & Gamble GmbH. The trademark association is Markenverband e.V. Nine other companies had already been fined a total of €24m (S$39m) between 2008 and 2011 for related anti-competitive conduct.

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The companies involved are manufacturers and suppliers of branded drugstore products, including body care products, cleaning agents and detergents. The companies met regularly between 2004 and 2006 at meetings of the trademark association’s working group on “body care, cleaning agents and detergents”. At these meetings, the manufacturers exchanged information about upcoming price increases, new demands for rebates from the retail trade and the state of negotiations with retailers. According to the President of the Bundeskartellamt, such information is “competition relevant” and must not be exchanged. He added that competition is impaired by such practices, even if they do not constitute classical hardcore agreements like price-fixing. In Singapore: The Competition Commission of Singapore’s (“CCS”) Guidelines on the Section 34 Prohibition cite information sharing as an example of conduct that may infringe the Section 34 Prohibition. Information sharing may have an appreciable adverse effect on competition where it serves to reduce or remove uncertainties inherent in the process of competition. Exchange of price information may lead to price coordination and diminish competition, particularly where the information exchanged is recent or current, or relates directly to prices charged or to elements of pricing policy. Collation of historical price information and price trends is less likely to have an appreciable adverse effect on competition. The exchange of forward-looking price information is likely to be considered tantamount to price fixing by CCS, as it was in its recent decision involving the sharing of such information by two ferry operators in Decision CCS 500/006/09. Amazon’s online pricing policies under scrutiny

In February 2013, Germany’s Federal Cartel Office, the Bundeskartellamt, commenced investigations into whether Amazon’s online pricing policies were anti-competitive. The Bundeskartellamt was concerned that Amazon’s practice of including a price parity clause, that disallowed retailers who used its online marketplace from selling their goods at a lower price on other online platforms such as eBay, may have the effect creating a cartel.

President of the Bundeskartellamt, Andreas Mundt, noted that Amazon’s practice “could violate the general ban on cartels…this applies in particular if the restriction of the seller’s freedom to determine prices also restricts competition between the different internet marketplaces. Such a restraint of competition seems likely as, under normal circumstances, sellers have an interest in offering their products on several internet marketplaces.” Apart from the concern that the practice might foreclose competition between different internet marketplaces, the Bundeskartellamt also expressed concern that this restriction on price competition might also allow Amazon to enforce high seller fees (fees paid to utilise the online marketplace) which could result in higher price levels for consumers without any concurrent benefits. As part of its investigations, the Bundeskartellamt has launched a web survey of 2,400 sellers to solicit information on the effect of Amazon’s price parity clause and the importance of its online marketplace. The Bundeskartellamt has indicated that it may require Amazon to remove the price parity clause as a term when dealing with retailers, if it finds that the practice is anti-competitive. Separately, UK’s Office of Fair Trade has also reportedly been conducting its own investigation into Amazon’s pricing practices. It is currently at the information gathering stage, and reportedly plans to decide whether to issue a statement of objection by August 2014. In Singapore: Cartels and other forms of price fixing are absolutely prohibited as an infringement under section 34 of the Competition Act. While the Competition Commission of Singapore has not considered price fixing in the context of an online retail platform, it has taken action against cartels formed for the purpose of rigging bids in public motor vehicle auctions, price fixing agreements amongst modelling agencies and price fixing of coach bus services. MOFCOM criticises US$162m fine on Chinese vitamin C manufacturers On 19 March 2013, China’s Ministry of Commerce (“MOFCOM”) criticised a New York federal jury’s decision to impose a US$162m (S$210m) fine on

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two Chinese companies, North China Pharmaceutical Group Corp. and Hebei Welcome Pharmaceutical Co. Ltd, for price-fixing of vitamin C in the United States. In a press statement on the matter, MOFCOM stated that the fine was unfair and improper. During the US civil antitrust suit, the Chinese manufacturers had attempted to claim immunity under the “foreign sovereign compulsion doctrine”. The companies argued that they were confined to adhering to volume and pricing restrictions as required by Chinese laws and regulations, and they would have been subject to punishment including denial of permission to export, if they failed to do so. It is noteworthy that MOFCOM took the unprecedented step of filing amicus briefs backing the Chinese companies’ arguments that the companies were in fact acting on the Chinese government’s requirements. MOFCOM also urged a withdrawal of the case, on the basis that the principles of international comity and foreign sovereign immunity as well as the foreign sovereign compulsion doctrine were applicable in the case at hand. Notwithstanding MOFCOM’s representations, the federal jury hearing the case rejected these arguments and proceeded to award US$54.1m (S$70.3m) in damages, which were tripled under US antitrust laws. In response, MOFCOM has raised concerns that this move by the US would set a worrisome precedent for global society and companies, going forward, and potentially lead to increasing international disputes. In Singapore: The questions of foreign sovereign compulsion and international comity of laws have not arisen to date in respect of a decision of the Competition Commission of Singapore (“CCS”), nor has CCS made any such public representations in respect of cases overseas. How such issues might apply in respect of Singapore cases are complex and likely to involve international law and conflict of law issues.

European Commission closes probe into telecoms operators’ standardisation meetings The European Commission (“EC”) has closed its preliminary investigation into five of Europe’s largest telecommunications operators regarding potential anti-competitive collaboration over the setting of industry standards. The five operators are Deutsche Telekom, France Télécom, Telefónica, Vodafone and Telecom Italia. The five operators, nicknamed the “E5”, and the mobile carriers’ association GSMA, had been asked to supply information to the EC about the way standards for future mobile communications services are being developed. The E5 members had been regularly meeting since 2010 to discuss standardisation in the industry. The EC noted that the standardisation work formerly conducted by the E5 had been transferred to the GSMA and other industry associations. This, the EC said, would allow more stakeholder participation and reduce the risk of allowing standard-setting work to negatively affect competition. The EC therefore closed its preliminary investigation. The EC highlighted its policy of ensuring that standardisation processes led by major telecom operators are not being used strategically to foreclose competitors, and stated that it would remain watchful of how standardisation processes evolve in the telecommunications sector. In Singapore: Trade associations are cited in the Competition Commission of Singapore’s Guidelines on the Section 34 Prohibition as the “most common form of association of undertakings”. Decisions of associations of undertakings are covered by the section 34 prohibition against anti-competitive mergers, and may in some instances infringe the section 34 prohibition. The key consideration in deciding whether an action is a “decision” is whether the object or effect of the decision is to influence the conduct or to co-ordinate the activity of the members in some commercial matter. Such decisions will be prohibited if their object or effect is the appreciable prevention, restriction or distortion of competition in Singapore. Annex A of the Section 34 Guidelines contains a list of some examples of decisions of associations that may infringe the section 34

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prohibition. The setting of technical standards could have an appreciable effect on competition, if entry barriers are significantly raised as a result. Chinese LCD cartel hit with record fine On 4 January 2013, in its first international cartel decision, China’s National Development and Reform Commission (“NDRC”) imposed economic sanctions totalling RMB353m (S$71.2m) on LCD manufacturers Samsung, LG, AU Optronics, Chunghwa Picture Tubes, Chimei InnoLux and HannStar for colluding to fix the prices of LCD panels sold in China between 2001 and 2006. The penalty is the highest imposed by the NDRC on cartels to date, though the NDRC indicated that the fines had been reduced because the companies had cooperated during the investigation process and had voluntarily confessed to their cartel activities. The six LCD manufacturers were found to have breached Article 14(1) of the Chinese Price Law, which prohibits business operators from colluding with others to manipulate market prices to the detriment of the lawful rights and interests of other business operators or consumers. The NDRC fined the companies for breaching Article 40 of the Price Law, as well as separately fining the companies in accordance with their illegal profits. The NDRC had also ordered restitution, corresponding to the amount overpaid by customers due to higher prices imposed by the cartel, to Chinese TV makers damaged by the cartel. In addition to the economic sanctions, the NDRC also required that the six LCD makers undertake three commitments, as follows, and which appear to have wider industry-specific policy implications: (a) to strictly comply with Chinese laws, including

safeguarding market competition and protecting the lawful rights and interests of other business operators and consumers;

(b) to fairly supply new technologies to Chinese TV makers and consumers; and

(c) to extend the free warranty service period

attached to new LCD panel sales from 18 months to 36 months.

Notably, the NDRC clarified in its press statement that the companies had been found to have infringed the Price Law because the cartel had ended before the Chinese Anti-monopoly Law had come into effect. If the companies had instead been found to have infringed Anti-monopoly Law, the outcome would likely have been different and the penalties higher. Penalties for anti-competitive practices under the Chinese Anti-Monopoly Law are based on the sales turnover of the companies, rather than based on the illegal profits of the companies in the case of the Chinese Price Law. MyCC proposes block exemption for liner shipping agreements In February 2013, the Malaysian Competition Commission (“MyCC”) issued a proposal to grant a Block Exemption Order (“BEO”) under section 8 of the Malaysian Competition Act 2010 (“Act ”), exempting a category of liner shipping agreements from the scope of section 4(2) of the Act. Section 4(2) of the Act prohibits agreements that have the object of significantly preventing, restricting or distorting competition. The scope of the BEO will cover Vessel Sharing Agreements and Voluntary Discussion Agreements if they are made in Malaysia or if they have an effect on the liner shipping services market in Malaysia. MyCC has highlighted that the BEO does not apply to a section 10 infringement (which prohibits the abuse of dominance). The proposed BEO was issued by MyCC following a block exemption application submitted by the Malaysia Shipowners’ Association, the Shipping Association of Malaysia and the Federation of Malaysian Port Operators Council on 16 December 2011. In the course of assessing the block exemption application, MyCC consulted with the various government agencies, including the Ministry of Finance, the Ministry of Transport, as well as the Ministry of International Trade and Industry. MyCC held a public consultation from 19 February to 18 March 2013 and is expected to issue a final decision on the BEO in June 2013 after evaluating the submissions. The key considerations in granting the exemptions were: (a) whether it would give rise to “significant

identifiable efficiency benefits” which could

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not have been provided otherwise without having the effect of restricting competition;

(b) whether the reduction in competition is

“proportionate to the benefits”; and (c) whether there was an opportunity for liner

operators to eliminate competition completely in respect of a substantial part of the liner shipping services.

The proposed duration of the BEO is three years, with MyCC having the power to review the BEO after two years. Should the BEO be effectively implemented, this will be the first BEO issued by MyCC. In Singapore: In 2010, the Minister for Trade and Industry extended for five years, until 31 December 2015, an order that exempted Liner Shipping Agreements from the section 34 prohibition of the Competition Act. The exemption order was initially promulgated under section 36 of Singapore’s Competition Act in 2006 and lasted for an initial term of five years. Apart from the Liner Shipping exemption, there are no other block exemptions in force in Singapore.

ABUSE OF DOMINANCE

GlaxoSmithKline settlement agreements approved On 14 January 2013, the US District Court for the Eastern District of Pennsylvania proposed settlement agreements that would settle two class action lawsuits against GlaxoSmithKline (“GSK”), which alleged that GSK used drug approval and patent litigation processes to delay the entry of generic drugs. The two lawsuits concern the drugs Flonase, a nasal spray, and Wellbutrin SR, an anti-depressant and smoking cessation aid. With regard to Flonase, the class action lawsuit claims that GSK filed four groundless citizen petitions with the US Food and Drug Administration (“FDA”) to delay the approval of generic versions of Flonase.

The citizen petition process is meant to allow individuals to express genuine concerns about safety, scientific, or legal issues regarding a product. The claimants alleged that the citizen petitions filed by GSK were frivolous because they raised neither safety nor efficacy concerns, and “lacked any legitimate basis”. Indeed, the FDA dismissed the petitions, stating plainly that “GSK is not permitted to shield its market share when the [FDA] has reasonably determined that competing generic drug products may be approved.” The complaint further alleged that GSK developed a comprehensive strategy designed to extend its monopoly of the Flonase brand market beyond the expiration of the Flonase patent. The petitions were allegedly part of this strategy to delay the introduction of Flonase generics for as long as possible, with Flonase being worth over a billion dollars in annual sales revenue. The Wellbutrin SR claim alleged that GSK fraudulently obtained a patent and then filed patent infringement claims against manufacturers of generic versions of Wellbutrin SR based on the fraudulently obtained patent. Under US law, each patent infringement claim triggers a 30 month stay on the sale of generic versions, regardless of the merit or likelihood of success of the claim. Therefore, the patent infringement claims delayed the entry of generic competitors into the market. By preventing entry of generic versions, GSK was, as the claimants alleged, able to charge monopoly prices for Wellbutrin SR. The proposed settlement agreements with regard to the Flonase and Wellbutrin SR class action lawsuits include cash payments of US$35m (S$44m) and US$21.5m (S$27m) respectively. They are subject to fairness hearings and the court’s final approval. In Singapore: The Competition Commission of Singapore (“CCS”) recognises that ownership of an Intellectual Property (“IP”) right, such as a patent, does not in itself create market power (CCS Guidelines on the Treatment of Intellectual Property Rights). IP rights may confer a legal monopoly over a product, process or work, but do not necessarily confer an economic monopoly. There may be substitutes for the product, process or work protected by the IP right that constrain the exercise of market power by the IP owner.

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It remains to be tested whether the misuse of regulatory procedures to delay the entry of competing generic products would constitute a breach of the Competition Act, particularly the section 47 prohibition against abuse of dominance. However, the CCS Guidelines on the Treatment of Intellectual Property Rights state that “conduct that protects, enhances or perpetuates the dominant position of an undertaking in ways unrelated to competitive merit” may constitute abuse of a dominant position. Heinz, Dial and NewsCorp embroiled in coupon war The Dial Corporation (“Dial ”) and H.J. Heinz Company (“Heinz ”) have commenced civil antitrust proceedings against News Corporation’s (“News Corp ”) marketing units, News America Marketing In-Store Services LLC and News America Marketing FSI Inc. (collectively, “News America ”), alleging abuse of dominance by News America in relation to in-store coupons. News America places in-store advertisements and has shelf promotions for consumer goods marketers such as Heinz and Dial. It also distributes free-insert coupon booklets in its various publications, including in more than 1,600 newspapers across the US. The lawsuit brought by Heinz and Dial alleges that News America has been abusing its dominance by tying exclusive contracts to discounts on sales of free-insert coupons. The companies argue that News America has monopoly power in the in-store advertising and coupon business, owing to its approximately US$400m (S$496m) sales in 2009 accounting for 84% of revenue generated in the business of printing coupons and in-store advertising. However, News America contends that the market is much larger as it includes promotions placed by retailers or advertisers themselves. According to News America, it has only a 2% market share based on its revenues in the in-store advertising and coupon business), whereas the combined spending by retailers, advertisers and agencies (such as News America) is approximately US$20bn (S$24.8bn) annually. News America has filed for a declaratory judgment against the companies that News America is not engaging in any antitrust or anti-monopolistic

practices and to dismiss the claims made against it. Over the past few years, News Corp marketing units have been the subject of multiple litigation proceedings including those commenced by its competitors, Insignia Systems Inc. (“Insignia ”) and Valassis Communications Inc. (“Valassis ”) alleging News Corp’s abuse of its dominance. In February 2011, Insignia claimed that News Corp had lied to manufacturers about Insignia’s business, paid retailers to boycott Insignia, removed Insignia signs from stores and bundled coupons and in-store promotion in attempts to force Insignia out of the market. News Corp subsequently agreed to a US$125m settlement (S$155m) to end the legal tussle with Insignia. In 2010, News Corp paid out US$500m (S$620m) in settlement to Valassis after the latter was awarded a US$300m verdict by a Michigan jury. Valassis had alleged that News Corp had used its “monopoly power” in the in-store promotion market to gain an unfair advantage in the newspaper coupon market. In Singapore: In assessing whether a practice is an abuse of dominance in Singapore, the Competition Commission of Singapore’s (“CCS”) primary concern will be the extent to which competition is foreclosed from the market by the conduct in question. To date, there has only been one enforcement proceeding by CCS relating to abuse of dominance, which was brought against SISTIC.com Pte Ltd (“SISTIC”) in 2010, in relation to various exclusive contracts entered into with event promoters and venue operators. The decision was upheld on appeal, but SISTIC’s fine was reduced by 20%. Italy’s highest court upholds ‘essential facilities’ doctrine in life sciences sector On 11 January 2013, Italy’s highest court, the Council of State, held that Bayer Cropscience SRL, together with Bayer Cropscience AG (the parent company of the Bayer Crop Protection division) (collectively, “Bayer ”), abused its position of dominance by failing to grant its competitors access to an ‘essential facility’. The essential

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facility in this case was certain studies that Bayer had conducted (irreplicable under law) and which were in its possession. The court upheld the €5.1m fine (S$8.3m) imposed by the Authorità Garante della Concerrenza e del Mercato, Italy’s Antitrust Authority, on Bayer Cropscience SRL for an abuse of dominance under Article 102 of the Treaty of the Functioning of the European Union, in the market for the production and commercialisation of fosetyl-based fungicides, which protect grapevines from peronospora. The studies conducted by Bayer were prohibited from being replicated under European Union (“EU”) regulation as they involved testing on vertebrate animals, but were essential for Bayer’s competitors to obtain the necessary permit renewals and market authorisations for their fosetyl-based products. The Italian court noted in its judgment that this meant that the studies were therefore equivalent to an “essential facility” for Bayer’s competitors to access the market. Under EU regulations, the court essentially determined that proprietors of such studies are obliged to grant equal, transparent and non-discriminatory access to any company submitting a legitimate request. However, as a result of Bayer’s conduct, competitors were unable to gain access to Bayer’s studies and were forced out of the market as they were precluded from renewing their existing permits and marketing authorisations. Instead, these competitors had to re-apply for new permits, which meant their re-entry into the market was delayed for an additional three years. This led to an overall reduction in the supply-side of the market, whereas Bayer leveraged on its market share growth (46% in 2007 to 56% in 2010) to increase the final sales prices for consumers. The Council of State’s decision quashes the ruling by the regional administrative court of Lazio, which had annulled the Italian Antitrust Authority’s findings. In Singapore: Refusal to supply an essential facility to a competitor could amount to an abuse of dominance in Singapore, as set out in the

Competition Commission of Singapore’s (“CCS”) “Guidelines on the Section 47 Prohibition”. However, as the concept has not arisen in an infringement decision to date, the concept and its parameters are yet to be fully set out by CCS. It is likely that CCS will be influenced by European Jurisprudence in considering such concepts. Linux users file EU abuse of dominance complaint against Microsoft On 26 March 2013, Hispalinux filed a complaint to the European Commission (“EC”) alleging that Microsoft had abused its dominant position, in contravention of European antitrust laws. The 8000-member association comprising Spanish Linux users and advocates has alleged that Microsoft’s Unified Extensible Firmware Interface (“UEFI”) Secure Boot mechanism, which controls the start-up of the computer, creates an unfair impediment to other operating systems such as Linux starting directly on the computer. As a result, users would find it difficult to switch to other operating systems, as they would need to obtain an encrypted key from Microsoft to do so. Microsoft introduced the UEFI Secure Boot mechanism as part of its latest Windows 8 operating system. According to Microsoft, the UEFI Secure Boot is designed to improve the security of the Windows operating system by “locking down” the “kernel” (ie the program that constitutes the central core of a computer operating system) to prevent malware from circumventing Windows operating system security requirements. While the EC has yet to issue any public statement directly responding to Hispalinux’s allegations, an EC spokesperson stated, on 30 April 2013, in a response by the EC to a European Parliamentary question, that the EC was “aware of the Microsoft Windows 8 security requirements, including the necessity of using the [UEFI]”. The EC also noted that the UEFI standard is developed and managed by the UEFI forum. The UEFI forum comprises chipset, firmware and hardware manufacturers, including Microsoft, but is generally open to any individual or company to join free of cost.

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In Singapore: An abuse of a dominant position is prohibited under section 47 of the Competition Act. In considering the question of whether conduct is abusive, the Competition Commission of Singapore is likely to be primarily concerned with whether the conduct in question has the effect of excluding actual or potential rivals from being able to compete effectively in a relevant market. First merger filed with COMESA Competition Commission The COMESA Competition Commission (“CCC”), a regional competition authority for Eastern and Southern Africa and based in Malawi, has received its first merger filing, regarding a merger between Philips Electronics N.V. (“Philips ”) and Funai Electric Company Limited (“Funai ”). The notified merger involves the acquisition of Philips’ Lifestyle Entertainment business group by Funai. The Lifestyle Entertainment business group is headquartered in Hong Kong and designs, develops, manufactures and sells a range of consumer electronic products, including home audio products, headphones, speakers, in-car audio systems, portable audio players, portable video players, home media players, digital enhanced cordless telecommunication phones, and accessories. At present, all mergers are notifiable to COMESA under its regulations and notices. The merger notification fee is 0.5% of the combined annual turnover or combined value of assets of the parties in the, whichever is higher, subject to a cap of US$500,000 (S$620,000). Failure to notify a merger under the COMESA regulations results in the merger having no legal effect, with the rights and obligations of the parties becoming unenforceable in the Common Market. In addition, a penalty of up to 10% of either or both of the parties’ annual turnover in the Common Market may be imposed. Commission Notice No. 1/2013 also states that “once a notification is made to the Commission, there is absolutely no need to notify the individual national competition authorities.” However, news reports have highlighted some controversy over the jurisdiction of the CCC. It has been reported that the Competition Authority of Kenya has written to the CCC, asserting

that it has primary control over competition matters in Kenya, and that COMESA competition regulation is to be carried out within a “cooperation framework” with local authorities. The merger notice regarding Philips and Funai was published on 13 March 2013. The public had 21 days to submit their comments and representations to the CCC. It is not clear how the CCC will substantively assess the merger. The CCC draft Merger Assessment Guidelines were published in April 2013 and have not been finalised as of May 2013. In Singapore: Mergers that have resulted or may be expected to result in a substantial lessening of competition in any market in Singapore are prohibited under section 54 of the Competition Act. Notification to the Commission for a decision in respect of a merger or anticipated merger is voluntary. In general, mergers should be notified to the Competition Commission of Singapore (“CCS”) if the merger parties think the merger may result in a substantial lessening of competition within any market in Singapore. Merger parties should note the risk that if a merger is not notified, CCS may investigate a merger or anticipated merger on its own initiative if it has reasonable grounds for believing that section 54 has been infringed or will be infringed. CCS can then accordingly direct remedies or impose financial penalties if it finds an infringement.

MERGER REGULATIONS ACCC grants final conditional approval to Qantas-Emirates joint venture After granting interim approval on 17 January 2013, the Australian Competition and Consumer Commission (“ACCC”) granted final conditional approval to the proposed airline joint venture between Qantas and Emirates on 27 March 2013. In assessing the joint venture, the ACCC determined that it would result in public benefit and improve operating efficiency. The joint venture has been allowed to operate for an initial period of 10 years until 31 March 2018, and will involve the two carriers cooperating on, amongst other things, passenger

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and freight services, maintenance engineering and joint procurement of good and services. ACCC Chairman, Rod Sims, reportedly observed that “the alliance is likely to provide Qantas and Emirates customers with increased access to a large number of existing frequencies and destinations under a single airline code, improved connectivity and scheduling, and access to each alliance partner’s frequent flyer programmes.” However, the ACCC also raised anti-competitive concerns over four routes between Australia and New Zealand (Sydney-Auckland, Melbourne-Auckland, Brisbane-Auckland and Sydney-Christchurch) where Emirates and Qantas currently hold significant market shares, and noted that from January to June 2012, the two carriers carried 65% of all passengers on those routes. To address these concerns, the ACCC has imposed conditions requiring the airlines to at least maintain their pre-merger capacity on these routes, subject to an assessment of whether capacity increases are necessary. Qantas and Emirates have also decided not to cooperate in the sourcing of third parties providers of catering and aircraft cleaning services, to avoid further competition concerns arising. In Singapore: The Competition Commission of Singapore (“CCS”) has similarly issued a conditional approval of the Emirates-Qantas joint venture on 28 March 2013. The parties have been allowed to cooperate for an initial period of ten years on various aspects of their passenger and freight operations on the condition that they provide a combined total of 8,246 seats weekly on each of the Singapore-Melbourne and Singapore-Brisbane routes. CCS may also require the parties to increase seat capacities if their load factors and route profitability crosses certain benchmark thresholds for any twelve month period on a rolling basis. The parties have agreed to appoint an Independent Auditor at their own cost to report to CCS on compliance with the conditions. Anheuser-Busch Inbev reaches in-principle agreement with Department of Justice on Grupo Modelo merger Anheuser-Busch InBev (“ABI”) and the US Department of Justice (“DoJ”) have reached an

agreement in principle on a resolution to the DoJ’s legal challenge to ABI’s proposed acquisition of the 50% of Grupo Modelo it does not own. The DoJ commenced a civil action in the US District Court for the District of Columbia challenging the proposed acquisition as “antithetical to the nation’s antitrust laws”, threatening competition in the US beer industry, which serves tens of millions of customers at all levels of income. Following the agreement in principle, the parties jointly requested from the court an extension of proceedings to allow the parties to finalise the details of a proposed consent judgment, which will be subject to the final approval of the court. The US beer market is highly concentrated, with ABI accounting for 36% of sales and MillerCoors following with 26%. Grupo Modelo is the third largest player with 7% of sales. In its complaint, the DoJ highlighted that eliminating competition from Grupo Modelo would affect competition more than its market share suggests, because Grupo Modelo holds a substantial market share in certain local areas, and because of the interdependent pricing dynamic between the two largest players. According to the DoJ, ABI and MillerCoors “often find it more profitable to follow each other’s prices than to compete aggressively for market share by cutting price”. The DoJ said that ABI acts as a price leader in the US beer market, initiating annual price increases on the expectation that MillerCoors will follow. In contrast, Grupo Modelo consistently declined to match ABI’s and MillerCoors’ price increases, instead pursuing a pricing strategy aimed at gaining market share at the expense of the two largest players. The DoJ cited internal ABI documents that showed that competition from Grupo Modelo constrained ABI’s ability to raise prices. The DoJ also noted the aggressive competition between ABI and Grupo Modelo in markets with high Latin-American populations. ABI had initially proposed to sell Grupo Modelo’s 50% stake in Crown Imports (the US importer of Grupo Modelo beer) to Constellation Brands, which already owns the other 50% in Crown Imports. However, the DoJ alleged that this sale was only to avoid liability under antitrust law, by “creating a façade of competition between ABI and its competitor”, when in reality Constellation Brands

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would remain entirely dependent on the merged ABI as a sole supplier. Under the latest proposed resolution with the DoJ, ABI will also sell Grupo Modelo’s main brewery to Constellation Brands and grant Constellation Brands perpetual license rights to Grupo Modelo’s brands. The brewery currently supplies 60% of Crown Imports’ US demand, and is expected to supply 100% of Crown Imports’ demand in three years. This remedy will ensure an independent supply of Grupo Modelo beer to Crown Imports and grant Constellation Brands full control of the production, supply, marketing and distribution of Grupo Modelo beer in the US. In Singapore: Mergers that result in a substantial lessening of competition in any market in Singapore are prohibited under section 54 of the Competition Act. In assessing mergers, the Competition Commission of Singapore’s (“CCS”) will assess, among other things, the market structure and the likelihood of coordinated and non-coordinated effects. Under section 60A of the Competition Act, CCS may accept commitments from the parties that CCS considers will remedy, mitigate or prevent the substantial lessening of competition that may arise from the merger. The elimination of a small competitor that has a particularly strong competitive effect in the market (or potential competitive effect), will be taken into consideration by CCS. The elimination of such “maverick” firms and the resulting effect on the market is a common consideration in merger assessments worldwide. DoJ challenges Bazaarvoice-PowerReviews merger

On 10 January 2013, the US Department of Justice (“DoJ ”) filed a civil antitrust suit against Bazaarvoice Inc. (“Bazaarvoice ”) in relation to its US$168.2m (S$208.5m) acquisition of rival firm PowerReviews Inc. (“PowerReviews ”) earlier in June 2012 (the “Transaction ”). Both companies are involved in the review and rating of products. Notably, the Transaction had not been notified to the DoJ and the Federal Trade Commission prior to its completion, and was investigated soon afterward by the DoJ.

In its complaint filed with the US District Court for the Northern District of California, the DoJ alleged that the Transaction had resulted in a substantial lessening of competition in the product rating and reviews platforms market. Also highlighted in the DoJ’s complaint were statements of Bazaarvoice executives touting the Transaction’s dampening effect on competition and that the Transaction would “block … entry by competitors” and “ensure [Bazaarvoice’s] retail business [was] protected from direct competition and premature price erosion”. The DoJ observed that, while prior to the Tranasction, Bazaarvoice was the dominant supplier of product ratings and reviews platforms in the US, Bazaarvoice routinely responded to competitive pressure from PowerReviews. Consequently, many retailers and manufacturers received substantial price discounts flowing from the price competition. The DoJ was of the view that the Transaction meant that significant head-to-head competition between Bazaarvoice and PowerReviews was extinguished, and many customers lost substantial negotiating leverage that have allowed prices for product rating and review platforms to be kept at competitive levels. The DoJ further considered that the entry or expansion by other firms would be unlikely to alleviate the competitive harm caused by the Transaction, given Bazaarvoice’s formidable syndication network which represents a large barrier to entry. Bazaarvoice has resisted allegations that the Transaction has any anti-competitive consequences, and has asserted that the DoJ’s complaint is based on an overly narrow market definition of the product market. In its press release statement, Bazaarvoice took the view that there was no single market for “product ratings and review platforms”, but that ratings and reviews were but one of many tools that brands and retailers could use to engage with their customers as part of an overall social commerce strategy to increase awareness of their products. In Singapore: Whilst the merger regime in Singapore is voluntary, parties are encouraged to self-assess their mergers and to file a notification to the Competition Commission of Singapore (“CCS”)

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where necessary. The CCS has the discretion to investigate merger filings if it considers that the merger may have had the effect of substantially lessening competition within any market in Singapore, and it may commence investigations against companies that do not file notifications. Whilst CCS has opened a number of such investigations, to date it has not taken enforcement action against a merger in such circumstances. US Airways/American Airlines merger under scrutiny On 14 February 2013, US Airways Group, Inc. (“US Airways ”) and American Airlines, Inc. (“American Airlines ”) announced their proposed merger to create a new company under the name, American Airlines. American Airlines and US Airways are currently the fourth and fifth largest carriers respectively in the United States. The proposed merger would see the new merged company capturing almost a quarter of the available seat miles (“ASM”) in the United States market, making it the largest airline in the United States. The new American Airlines would also strengthen the world ASM share of Oneworld Alliance by almost 10%. American Airlines filed for bankruptcy in November 2011, and was approached shortly thereafter by US Airways to negotiate a possible merger between the two airlines. The airlines have now agreed for US Airways shareholders to own 28% of the shareholding in the new merged company, whereas American Airlines’ creditors would hold the remaining 72% of the shareholding. Senior executives of both companies have defended the transaction before the United States House of Representatives, claiming that based on conservative estimates, revenues and cost synergies from the transaction would outweigh dis-synergies by over US$1bn (S$1.3bn), by 2015. American Airlines would also emerge from bankruptcy as a result of the transaction. Notably, the companies have identified that, of the over 900 domestic routes flown by the two carriers, there are only 12 overlapping non-stop airport-to-airport routes or 17 non-stop city-to-city routes.

The deal is expected to be completed in the third quarter of 2013. In the meantime, it will require approval by the United States Bankruptcy Court for the Southern District of New York, regulatory approvals including that of the United States Department of Justice, US Airways’ shareholder approvals as well as other closing conditions. The deal is also not without its critics, with many calling for a full scale antitrust investigation, and some, such as the American Antitrust Institute, are publically opposed to the deal. The US Airways/American Airlines proposed merger, if approved by regulators, would be the fourth major airline merger cleared in the United States in the past few years, following the Delta/Northwest merger in 2008, United/Continental merger in 2010 and Southwest/AirTran merger in 2011. Nestlé withdraws pricing policy exemption application

In February 2013, the Malaysian Competition Commission (“MyCC”) announced that Nestlé Sdn Bhd (“Nestlé ”) has withdrawn its application for an individual exemption for its pricing policy. Earlier (in May 2012), Nestlé had submitted an application requesting that its “Brand Equity Protection Policy” (“BEPP”) be exempted from Malaysia’s competition laws. A major concern for MyCC was that the BEPP could prevent retailers from independently pricing Nestlé products and could therefore constitute a Resale Price Maintenance (“RPM”), which is an infringement of section 4(1) of the Malaysian Competition Act 2010. Nestlé has reportedly agreed to comply with MyCC’s request to dismantle its BEPP. Under section 6 of Malaysia’s Competition Act 2010, MyCC is entitled to grant an exemption to particular agreements if they create significant identifiable technological, efficiency or social benefits which could not have been otherwise provided without having the effect of restricting competition. The accrued benefits must also be proportional to the detrimental anti-competitive effect of the agreements, and the agreements must not allow the enterprise to eliminate competition completely in a substantial part of the goods or services.

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However, it has also been reported that Nestlé intends to re-file its exemption application with Malaysia’s Domestic Trade, Cooperatives and Consumerism Ministry on the premise that MyCC “may not be the appropriate forum to address the [BEPP] issues”. In Singapore: Vertical agreements are exempted from consideration under section 34 of the Competition Act (the “Act”). Accordingly, RPM arrangements are not likely to fall foul of this prohibition in the usual course (though it may depend on the structure of the RPM arrangement). This exemption to the section 34 prohibition appears at paragraph 8 of the Third Schedule to the Act, and supplements the Competition Commission of Singapore’s ability to assess individual notifications that can be made by parties (seeking an exemption similar to those explained under the Malaysian regime above).

FEATURE ARTICLE

COMESA COMPETITION

COMMISSION COMMENCES

OPERATIONS On 14 January 2013, the Common Market for Eastern and Southern Africa (“COMESA”) Competition Regulations came into effect, establishing the COMESA Competition Commission (“CCC”) and the Board of Commissioners. COMESA is comprised of 19 member states: Republic of Burundi, Union of the Comoros, Democratic Republic of the Congo, Republic of Djibouti, Arab Republic of Egypt, State of Eritrea, Federal Democratic Republic of Ethiopia, Republic of Kenya, Libya, Republic of Madagascar, Republic of Malawi, Republic of Mauritius, Republic of Rwanda, Republic of Seychelles, Republic of The Sudan, Kingdom of Swaziland, Republic of Uganda, Republic of Zambia and Republic of Zimbabwe. However, only six member states within the COMESA (Egypt, Kenya, Malawi, Mauritius, Zambia and Zimbabwe) have enacted competition laws, whereas only three member

states have local competition authorities (Competition Authority of Kenya, Zambia Competition and Consumer Protection Commission and Competition and Tariff Commission of Zimbabwe). The CCC is responsible for investigating possible breaches of the COMESA Competition Regulations and reporting its findings, together with recommendations for action, to the Board of Commissioners. The Board of Commissioners then decides whether there are any breaches of the COMESA Competition Regulations, and determines as well as imposes the remedy. As a regional competition authority, the CCC aims to promote competition within the COMESA region by preventing restrictive business practices with the intention to enhance the welfare of consumers in the COMESA region. From the date of commencement of the COMESA Competition Regulations, the CCC was also open to receiving applications and notifications in relation to Parts 3, 4 and 5 of the COMESA Competition Regulations, relating to anti-competitive business practices and conduct, merger control and consumer protection respectively. Anti-competitive business practices and conduct

Broadly, Article 16 of the COMESA Competition Regulations prohibits agreements between undertakings, decisions by associations of undertakings as well as concerted practices which may affect trade between COMESA member states and have as their object or effect the prevention, restriction or distortion of competition within the COMESA region. Certain exemptions apply to agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which do not: (a) impose on the undertakings concerned

restrictions which are not indispensable to the attainment of these objectives; and

(b) afford such undertakings the possibility of

eliminating competition in respect of a substantial market for the goods or services in question.

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Enterprises may apply to the CCC for authorisation or exemption of any existing or contemplated agreements which even if they are anti-competitive, have public benefits that outweigh their anti-competitive detriment. For instance, the CCC has noted that these may include, broadly, the following: (a) joint research and development ventures; (b) specialisation agreements; and (c) franchising agreements. The abuse of a dominant position by one or more undertakings within the COMESA region is also prohibited under the Article 18 of the COMESA Competition Regulations. A list of prohibited practices is set out in Article 19 of the COMESA Competition Regulations. This includes agreements to fix prices, collusive tendering and bid-rigging, market or customer allocation agreements, concerted refusals to supply goods or services to a potential purchaser or to purchase goods or services from a potential supplier, as well as collective denials of access to an arrangement or association which is crucial to competition. However, this prohibition is not applicable where the undertakings concerned are dealing with each other in the context of a common entity wherein they are under common control or where they are otherwise not able to act independently of each other. In April 2013, the CCC released three sets of draft guidelines in relation to anti-competitive business practices and conduct for public comments: Draft Public Interest Guideline 2013; Draft Guideline on the Application of Article 16 and 19; and Draft Guideline on the Application of Article 18. Merger control

On the merger front, the commencement of the COMESA Competition Regulations and operationalisation of the CCC means that, for merger transactions involving two or more COMESA member states, a single consolidated filing can now be prepared and submitted to CCC. There is no further necessity to file such merger transactions with the individual national competition authorities, though these national competition authorities would still retain the ability

to request that the CCC to permit them to investigate a matter on a national basis under certain circumstances. The COMESA Competition Regulations currently apply to horizontal, vertical as well as conglomerate mergers, regardless of the size of the undertakings involved. Such mergers must be notified to the CCC no later than 30 days of the parties’ decision to merge. The failure to notify would mean that the transaction would not be legally enforceable in the COMESA region. In addition, the CCC may impose a penalty on the parties of up to 10% of either or both of the merging parties’ annual turnover in the COMESA region as reflected in their accounts for the preceding financial year. Merger notifications to the CCC attract a fee calculated at 0.5% of whichever is lower of the combined annual turnover or combined value of assets in the COMESA region, or US$500,000 (S$620,000), whichever is higher. Under the COMESA Competition Regulations, the CCC has a 120-day period within which to make a decision on the notification, though the CCC may seek an extension of time from the Board of Commissioners. Following the inception of the COMESA Competition Regulations, the CCC received its first merger notification on 13 March 2013, involving the proposed acquisition by Funai Electric Company Limited of Koninklijke Philips Electronics N.V.’s Lifestyle Entertainment business group. The CCC is currently also holding a public consultation on its Draft Merger Assessment Guideline 2013 and Draft Market Definition Guideline 2013. Consumer protection

The COMESA Competition Regulations contain provisions which seek to protect consumers in the COMESA region against false or misleading presentation of goods and services, unconscionable conduct, poor safety standards and unsafe goods.

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The CCC is also empowered to declare product safety and product information standards, as well as to impose a compulsory product recall requirement on suppliers.

DO YOU KNOW? 3RD ASEAN COMPETITION

CONFERENCE – 4TH AND 5TH JULY

2013 SINGAPORE The Competition Commission of Singapore will be hosting the 3rd ASEAN Competition Conference on 4 and 5 July 2013. The conference will focus on “Moving Towards Regional Integration of Competition Policy and Law” and will look into the benefits, possible approaches and challenges in fostering regional integration of competition policy and law. The conference will also include a closed-door meeting between ASEAN government officials to map out the direction of regional cooperation and integration between the various ASEAN competition authorities post 2015.

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The Drew & Napier Competition Law Team

For more information on the Competition Law Practice Group, please click here .

Cavinder Bull, SC •••• Director (Disputes)

Cavinder handles complex litigation spanning a wide area of corporate and commercial matters. One of his areas of particular focus is competition law where he has represented various clients in investigations by competition law regulators both in Singapore and overseas. Cavinder has successfully defended companies being investigated for abusing a dominant position in Singapore, and filed the first appeal to the Competition Appeal Board in respect of a CCS infringement decision.

Cavinder previously practiced antitrust law in New York, working on cases like the Microsoft antitrust litigation and obtaining US Department of Justice’s approval for the merger between Grand Metropolitan and Guinness, one of the world’s largest mergers then. Cavinder graduated from Oxford University with First Class Honours in Law. He clerked for the Chief Justice of Singapore as a Justices’ Law Clerk. Cavinder also has a Masters in Law from Harvard Law School which he attended on a Lee Kuan Yew Scholarship. Cavinder is consistently recognised as one of the leading litigators in Singapore. He was recently awarded the title of "Lawyer of the Year" for 2011 in Antitrust Law by Best Lawyers. For the 4th consecutive year, he was endorsed in The Practical Law Company Which Lawyer? Cross Border Handbook 2011/2012. The Guide to the World’s Leading Competition & Antitrust Lawyers/Economists 2010 (9th Edition) and 2012 (10th Edition) nominated him as a Leading Antitrust Lawyer in Singapore. Chambers Asia 2013 states that Cavinder is a “rising star, going from strength to strength”, while Asia Pacific Legal 500 2012/2013 recognises Cavinder as a “first-rate lawyer”.

Tel: +65 6531 2416 •••• Fax: +65 6533 3591 •••• Email: cavinder.bull@drewnapier.com

Lim Chong Kin •••• Director (Corporate Transaction & Advisory)

Chong Kin practices corporate law with a strong emphasis in the specialist area of competition law. Chong Kin also plays a key role in the development of sectoral competition regulation in the telecommunications, media and postal industries in Singapore. He regularly advises large international clients on competition law, and was instrumental in the first merger notification filing to CCS in 2007. The International Who’s Who of Competition Lawyers 2008-2013 and the International Who’s Who of Regulatory Communications Lawyers 2008-2013 all recognise Chong Kin for his strength in regulatory and competition advisory work. Practical Law Company’s Which Lawyer Survey 2011/2012 describes Chong Kin as a highly recommended lawyer in Competition/Antitrust. The Guide to the World’s Leading Competition & Antitrust Lawyers/Economists 2010 (9th Edition) and 2012 (10th Edition) nominates Lim Chong Kin as a leading antitrust lawyer in Singapore. Asia Pacific Legal 500: 2013 recognises him as a competition and regulatory expert. Chambers Asia 2013 also recognises Chong Kin's achievements, describing him as "an outstanding lawyer who is savvy, intelligent and quick, and possesses excellent business judgement". Chong Kin is listed in Best Lawyers for Antitrust Law in Singapore.

Tel: +65 6531 4110 •••• Fax: +65 6535 4864 •••• Email: chongkin.lim@drewnapier.com

Ng Ee-Kia, Joy, Head (Competition & Regulatory Econom ics)

Ee-Kia was previously the Director of Economics in the Policy and Economic Analysis Division in CCS. She was responsible for developing policy frameworks and guidelines in relation to the Competition Act as well as conducting economic analysis in competition cases. Ee-Kia had worked on a wide range of regulatory and competition issues in the telecommunications industry while she was with the telecommunications regulators in Singapore and Hong Kong. In addition to her economics training, Ee-Kia has a Postgraduate College Diploma in EC Competition Law & Economics for competition law respectively as well as a Master of Laws. Ee-Kia has been recognised as one of the leading competition economists in Singapore by The International Who’s Who of Competition Lawyers & Economists 2010 – 2013 and the Guide to the World’s Leading Competition & Antitrust Lawyers/Economists 2010 (9th Edition) and 2012 (10th Edition). Ee-Kia is recently featured in Global Competition Review’s 2013 edition of Women in Antitrust which profiles 100 successful women in the field of competition law.

Tel: +65 6531 2274 •••• Fax: +65 6535 4864 •••• Email: eekia.ng@drewnapier.com

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