27 February 2018

From 22 January 2018 to 12 February 2018, the Competition Commission of Singapore (“CCS”) consulted the public for feedback on a proposed guidance note for the competition assessment of airline alliance agreements (“Airline Guidance Note”). CCS is of the view that while airline alliances may bring about enhancements in operational efficiencies, they may also give rise to adverse effects on competition in the affected markets.

Objective of the Airline Guidance Note

Designed as a short introductory guide, the Airline Guidance Note aims to assist airlines with self-assessments as to whether the alliance agreements that they intend to enter into should be notified to CCS for guidance or decision in respect of section 34 of the Competition Act (“Act”), and the subsequent notification and submissions on such alliance agreements to CCS.

Section 34 of the Act prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within Singapore unless they are excluded or exempt in accordance with the provisions of Part III of the Act.

Focus of the Airline Guidance Note

In summary, the Airline Guidance Note focuses on:

  • Procedural matters
    • Pre-notification discussions and/or state-of-play meetings to assist in the notification process;
    • Option to offer commitments to address potential competition concerns; and
    • Availability of a streamlined process for expedited assessment of airline alliance agreements based on a basket of factors.
  • Substantive matters
    • Appropriate counterfactuals; 
    • Screening factors affecting the need for notification; 
    • Market definitions in the airline sector; 
    • Differentiated products within the relevant market; 
    • Consideration of potential entries; and
    • Assessments of net economic benefits.

CCS takes the starting point for market definition relating to the provision of scheduled air passenger services for airline alliances to be the origin-destination city pair route. However, CCS also considers if differentiated products fall within the same relevant market based on the facts of each individual case. Daren Shiau, Co-Head of the Allen & Gledhill Competition & Antitrust practice, observes: “While CCS will continue to use market shares as an important starting point for the assessment of differentiated products, the Airline Guidance Note clarifies that CCS may consider additional factors in doing so.” Factors include the following additional three modes of analyses in determining the closeness of rivalry between differentiated products:

  • Price correlation analysis 
  • Diversion ratio analysis
  • Stationarity analysis

Reference materials

The following materials are available on the CCS website www.ccs.gov.sg:

 

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