SINGAPORE Law and Practice Contributed by: Lim Chong Kin and Corinne Chew, Drew & Napier LLC
would be able to prevent the merged entity from raising prices. For horizontal mergers, the Commission will consider whether the merger situation gives rise to non-co-ordinated effects or co-ordinated effects, or both. Non-Co-Ordinated Effects (or Unilateral Effects) Non-co-ordinated effects (or unilateral effects) may arise where a firm has merged with its clos - est competitor 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 competi - tive pressure arising from the merger. Non-co- ordinated effects may also arise when an exist - ing 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 inno - vator and has the potential to exert significant competitive pressure in the future. In examining potential non-co-ordinated effects, the Commission will consider the profitabil - ity of price increases and whether this will be defeated by competitors repositioning prod - ucts or expanding sales in the market, as well as customers’ ability and willingness to switch to another competitor, or the potential of new
find it profitable 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 increas - ing the probability of collusion or strengthening a tendency for competitors to collude. In considering the likelihood of co-ordinated effects resulting from the merger, the Commis - sion will consider, among other factors, the abil - ity of participating firms to align their behaviour in the market and incentives to maintain such Non-horizontal mergers, such as vertical merg - ers and conglomerate mergers, may also trigger competition concerns in certain circumstances. With respect to vertical mergers, the Commis - sion will consider factors such as the possibility of foreclosure, the increased potential for col - lusion, the creation of barriers to entry and the ability of customers to exercise countervailing power. With respect to conglomerate mergers, the Commission will consider factors such as: • the prospects of the conglomerate merger increasing the feasibility of potential co-ordi - nated and non-co-ordinated effects; • whether the replication of the range of prod - ucts offered by the merged entity itself repre - sents a strategic barrier to entry; and • the ability of customers to exercise counter - vailing power. 4.5 Economic Efficiencies Economic efficiencies may be considered by the Commission at two distinct points in the analyti - cal framework. co-ordinated behaviour. Non-Horizontal Mergers
entrants to the market. Co-Ordinated Effects
Co-ordinated effects may arise due to the merg - er situation increasing the possibility that, post- merger, some or all firms in the same market may
530 CHAMBERS.COM
Powered by FlippingBook