SINGAPORE Law and Practice Contributed by: Lim Chong Kin and Corinne Chew, Drew & Napier LLC
Non-Co-Ordinated Effects (or Unilateral Effects) Non-co-ordinated effects (or unilateral effects) may arise where a firm has merged with its closest compet - itor and could find it profitable to raise prices (or reduce output, quality or innovation) because of the loss of competition between the merged entities. Rival firms in the market may also find it profitable to increase their prices independently, because of the loss of competitive pressure arising from the merger. Non- co-ordinated effects may also arise when an existing firm merges with a potential or emerging competitor, thereby preserving the market power of the incumbent firm that would otherwise have been threatened, or in markets where innovation is an important feature of competition and where one or more of the merging parties is a key innovator and has the potential to exert significant competitive pressure in the future. In examining potential non-co-ordinated effects, the Commission will consider the profitability of price increases and whether this will be defeated by com - petitors repositioning products or expanding sales in the market, as well as customers’ ability and willing - ness to switch to another competitor, or the potential of new entrants to the market. Co-Ordinated Effects Co-ordinated effects may arise due to the merger situation increasing the possibility that, post-merger, some or all firms in the same market may find it profit - able to co-ordinate their behaviour by raising prices or by reducing quality, output or innovation. This may occur where a merger reduces competitive constraints from actual or potential competition in a market, thus increasing the probability of collusion or strengthening a tendency for competitors to collude. In determining the likelihood of co-ordinated effects resulting from the merger, the Commission will con - sider the ability of participating firms to align their behaviour in the market and incentives to maintain such co-ordinated behaviour, among other factors. Non-Horizontal Mergers Non-horizontal mergers, such as vertical mergers and conglomerate mergers, may also trigger competition concerns in certain circumstances. With respect to vertical mergers, the Commission will consider factors
such as the possibility of foreclosure, the increased potential for collusion, the creation of barriers to entry and the ability of customers to exercise countervail - ing power. With respect to conglomerate mergers, the Commission will consider factors such as: • the prospects of the conglomerate merger increas - ing the feasibility of potential co-ordinated and non-co-ordinated effects; • whether the replication of the range of products offered by the merged entity itself represents a strategic barrier to entry; and • the ability of customers to exercise countervailing power. 4.5 Economic Efficiencies Economic efficiencies may be considered by the Commission at two distinct points in the analytical framework. Firstly, efficiencies may be assessed when consider - ing whether the merger is likely to lead to an SLC in the first place. For example, a merger may not result in an SLC where the efficiency gains from the merger of two of the smaller firms in a market allow the merged entity to exert greater competitive pressure on larger competitors. Secondly, efficiencies may also be taken into account where they outweigh the adverse effects resulting from the SLC caused by the merger, such that there are net economic efficiencies in markets in Singapore. In general, efficiencies must be demonstrable (ie, clear and quantifiable), merger-specific (ie, likely to arise from the merger), timely (ie, the benefits will material - ise within a reasonable period of time) and sufficient in extent (with reference to the magnitude of the effi - ciencies). The Commission will compare the economic efficien - cies with the adverse effects of the SLC (ie, compar - ing the magnitude of efficiencies against those of the anti-competitive effects from the merger). The merger is likely to be cleared if the Commission considers that the efficiencies outweigh the potential negative effects of the merger. If the Commission considers that the potential negative effects outweigh the eco -
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