Was Singapore correct to exclude vertical restraints from the section 34 prohibition?

Was Singapore correct to exclude vertical restraints from the section 34 prohibition?

Introduction

The Competition Act in Singapore is a relatively young piece of legislation. Substantive provisions prohibiting anti-competitive acts and conduct, in the form of sections 34 and 47, only came into effect as recent as 1st January 2006. The Competition Act was “largely modelled on the UK's Competition Act 1998 ” , which was in turn modelled after European competition law contained in the Treaty establishing the European Community . Several amendments have however been made to take into account Singapore’s “specific economic characteristics and requirements, in particular, the fact that we are a small open economy”. One significant departure is the exclusion of all vertical agreements from the section 34 prohibition against anti-competitive agreements, unless otherwise specified by the Minister. “Vertical agreement” has been defined as:

[A]ny agreement entered into between 2 or more undertakings each of which operates, for the purposes of the agreement, 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 …

Vertical agreements are not excluded from the section 47 prohibition against abuse of dominant position.

Rationale for Excluding Vertical Agreements

The rationale for excluding vertical agreements can be gleaned from the Second Public Consultation on the Draft Competition Bill . The Ministry of Trade and Industry (“MTI”) took the view that:

[T]here is general consensus amongst economists that the majority of vertical agreements have net pro-competitive effect. As such, it would be more appropriate to retain t...

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... could be used as a cloak for horizontal agreements

• Information sharing, market sharing, collusion

 Recall: replace risk of competition w agreement/ cooperation o Singapore small size per se as a reason, not valid here unlike mergers

Reform

• 1) Just rely on block exemption: per burton 1, colin ng 1 o • 2) more tempered approach. Exemption only to non-hardcore vertical restraints o [ignore this if lack of space, just push for point 1]

• Current exclusion is over broad and over reliant on s47: burton 2

Conclusion

• Exclusion is overbroad. And s47 is insufficient, reliance is unwise.

Issues

• Inter vs. intra brand – discuss under pros & cons

• Vertical agreements between competitors vs. non-competitors (eg. both manufacturers BUT acting at different levels of production for purposes of agreement) – explain in intro o But should we discuss effects?? o Whish p658.