CCCS issues guidance on Covid-19 business collaboration: Applicable to collaborations between 1 February 2020 to 31 July 2021: Allen & Gledhill

22 July 2020

On 20 July 2020, the Competition and Consumer Commission of Singapore (“CCCS”) announced the issuance of a Guidance Note to provide businesses with more clarity on collaborations between competitors in relation to the supply of essential goods or services in Singapore. CCCS recognises that such collaborations may be necessary and may need to be put in place quickly to sustain or improve the supply of essential goods or services in Singapore affected by disruptions to logistics and supply chains caused by Covid-19 and global lockdowns. The Guidance Note sets out CCCS’s approach to such collaborations between competitors in response to this exceptional period.

An example of a collaboration that can fall under the Guidance Note would be where businesses agree to share production lines or inputs to increase total production of testing kits or its components for the purposes of addressing the Covid-19 pandemic.

The Guidance Note will apply to such collaborations put in place from 1 February 2020, and which will expire by 31 July 2021. For collaborations that only end after the Guidance Note expires, CCCS will evaluate them using the criteria applicable under normal circumstances.

What is allowed under the Guidance Note

CCCS will, for a temporary period, assume that collaborations that sustain or improve the supply of essential goods or services in Singapore, that do not involve price-fixing, bid-rigging, market sharing or output limitation, and that fulfil the following criteria are likely to generate net economic benefits (“NEB”) and therefore are unlikely to infringe the Competition Act (“Act”).

Improving production or distribution, promotes technical or economic progress: The efficiency brought about by the collaboration must be objective and quantifiable. A direct causal link between the agreement and the efficiency must be present.
Agreement or restriction must be indispensable: The collaboration and any restrictions imposed must be necessary to help increase supply or bring about more efficiencies than in their absence, and there are no better alternatives available to do so.
Does not eliminate competition in respect of a substantial part of the good/service: The collaboration is limited in nature to a particular good or market and limited in time to deal with the effects of Covid-19. Competition should remain in the market as far as possible.

For collaborations that improve or sustain the supply of essential goods or services in Singapore but involve price-fixing, bid-rigging, market sharing or output limitation, it will not be sufficient that the agreement is limited in scope and time. For such collaborations, the Guidance Note provides that factors to consider include the extent of reduction in competition arising from the agreement and the competitive constraints in the market.

CCCS also set out some examples of collaborations that improve or sustain the supply of essential goods or services in Singapore, and which therefore fall under the Guidance Note if they do not involve price-fixing, bid-rigging, market sharing or output limitation. E.g. joint production, joint distribution and marketing, joint purchase and information sharing.

List of essential goods and services

CCCS will refer to the list of goods and services annexed to the Guidance Note in assessing whether a collaboration relates to essential goods or services. In broad categories, the list includes (1) health and social services, (2) food, (3) energy, (4) water, waste, environment, (5) transportation and storage, (6) information and communications, (7) defence and security, (8) construction, facilities management and critical public infrastructure, (9) manufacturing and distribution, (10) banking and finance and (11) legal services.

What is excluded from Guidance Note

The following agreements/collaborations will be excluded from the Guidance Note:

Agreements, including collaborations between competitors, that satisfy the NEB criteria under the Act applicable in normal circumstances because such agreements are already excluded from section 34 of Act.
Agreements entered into with the Singapore Government or any statutory body, or conduct carried out on their behalf as such agreements are already excluded under section 33(4) of the Act.

Businesses are encouraged to perform their own assessment first to determine whether their collaboration falls within the framework set out in the Guidance Note. Businesses are cautioned against taking advantage of the Covid-19 pandemic as a cover to engage in anti-competitive activities that do not generate NEB. CCCS retains the discretion to commence investigations in such cases.

Comment

CCCS’s Guidance Note is a welcome and timely development to provide businesses with some certainty to legitimately tackle issues arising from Covid-19 related disruptions to logistics and supply chains. This development is in line with the ASEAN Experts Group on Competition’s recent joint statement calling on all business sectors to continue to comply with competition law despite the current economic downturn.

In a previous Competition Law Alert titled “Facing Covid-19: Coping with the coronavirus outbreak without breaching antitrust laws (Part 1)” (sent on 30 March 2020), we had anticipated and discussed such collaborations, including information exchanges and joint purchasing or sales agreements.

Reference materials

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

Further information

Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains knowhow and materials on legal and regulatory aspects of the Covid-19 crisis

In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at covid19taskforce@allenandgledhill.com.