27 September 2018
On 5 September 2018, the Competition and Consumer Commission of Singapore (“CCCS”) issued a guidance note to provide airlines with more clarity on the competition assessment of airline alliance agreements (“Airline Guidance Note”). In many cases, airline alliance agreements are notified to CCCS for a decision on whether the agreement has infringed section 34 of the Competition Act (“Act”) which prohibits anti-competitive agreements in Singapore and in particular, whether the agreement benefits from the net economic benefit (“NEB”) exclusion under the Act. The Airline Guidance Note is published in view of the increasing number of airline alliance agreements notified to CCCS for decision.
In issuing the Airline Guidance Note, CCCS had considered the feedback received from public consultations held from 22 January 2018 to 12 February 2018, which included a roundtable discussion on 30 January 2018 with competition law and economics practitioners, industry stakeholders, as well as relevant government agencies including the Ministry of Transport and the Civil Aviation Authority of Singapore. The Allen & Gledhill Competition & Antitrust team was involved in the roundtable discussion.
Scope of the Airline Guidance Note
Designed as a short introductory guide and supported by CCCS’ published guidelines, the Airline Guidance Note sets out in detail CCCS’ assessment of agreements under section 34 of the Act and the procedures and processes in relation to filing a notification for guidance or decision. Specifically, the Airline Guidance Note provides details on issues including:
- when should airlines file a notification in relation to their alliance agreements;
- the availability of a pre-notification discussion to assist the filing of a notification;
- basic information which CCCS would require, e.g. the overlapping routes, market share information, example of proposed changes in flight schedules, market entries and exits, etc.;
- CCCS’ processes, i.e. issuing a media release for a public consultation on the notification, information requests to the airlines and third-parties including Government agencies, competitors and customers;
- option to request state-of-play meetings during the assessment;
- option to offer commitments to address any specific competition concerns arising from the agreement and the types of acceptable commitments;
- option to request for a streamlined process for the assessment of airline alliance agreements that fall within the streamlined process framework; and
- some of the common issues faced by parties and CCCS in the assessment, e.g. in relation to factors considered by CCCS under the NEB test specific to airlines joint venture agreements.
The Airline Guidance Note also highlights substantive issues commonly encountered during CCCS’ review, such as screening factors affecting the need for notification, market definition, differentiated products within the relevant market, the appropriate counterfactual, the assessment of net economic benefits, the consideration of potential new entry, and the deliberation of strategic air hub benefits and benefits to consumers.
New streamlined review process
CCCS is considering the adoption of a streamlined process for assessments relevant to the aviation sector, in response to feedback from the aviation sector on its specific needs. Under the streamlined process, CCCS intends to issue a decision or guidance within seven months or 150 working days. The process will encompass a two-phase approach, with a Phase 1 review expected to be completed within 30 working days for simple cases, and an additional Phase 2 review of 120 working days for complicated cases.
The total timeline of 150 working days is the maximum duration CCCS will take to assess the airline alliance agreement, and Phase 1 allows for quick clearance if it is not problematic. The airline alliance agreement may also be cleared with commitments between Phase 1 and Phase 2.
To reach a decision on whether the streamlined process may be appropriate to any given application, CCCS will consider a number of factors in making the assessment.
CCCS may from time to time ask the airlines to provide additional information. In situations where the airlines are unable to provide the information within the stipulated timeframe, this may necessitate a “clock-stoppage” mechanism as part of the streamlined process, thereby extending the indicative timeframe for completion of the streamlined process. In cases where there is a need to accommodate the commitments procedure, including the need to consult with third parties on any proposed commitments, it may also be necessary for CCCS to “stop the clock”.
During the course of its assessment under the streamlined process, CCCS will keep under review whether the streamlined process remains appropriate.
The following materials are available on the CCCS website www.cccs.gov.sg: