WELCOME MESSAGE IN THE NEWS: AT A GLANCE. August 2014 SINGAPORE. In this issue. Dawn Raid Hotline:

Transcription

1 August 2014 In this issue Welcome Message 1 In The News: At A Glance 1 Singapore 1 Around The World 2 Singapore Competition Law Watch 3 Articles & Commentaries: Updates From Around The World 3 Regulatory Updates 3 Anti-Competitive Agreements 4 Feature Article 8 CCS Airline Industry Market Study Dawn Raid Hotline: WELCOME MESSAGE The Drew & Napier Competition Law and Regulatory Practice Group is pleased to bring you the second Quarterly Update for It has been a busy few months for the competition bar in Singapore and things look set to be the same way till the end of the year. This issue highlights some of the notable developments in Singapore and further afield during the second quarter of the year, and comes shortly before the CCS-SAL conference that is set to take place on August Our practice Head, Mr Lim Chong Kin, will be speaking on market regulation at the conference, and the Deputy Head, Mr Scott Clements, will be speaking on abuse of dominance issues. We also have the pleasure of hosting two experts in the field of competition law during our distinguished speaker series over the next two months. On 19 August 2014, Professor Richard Whish will be speaking on developments in European competition law and on 23 September 2014, Professor Michael Jacobs will be speaking on competition law and intellectual property issues. Places are limited, so make sure not to miss out on this opportunity to hear from two of the world authorities on competition law. For more details on the Drew & Napier Competition Law and Regulatory Practice, please click here. IN THE NEWS: AT A GLANCE SINGAPORE CCS airline industry market study This newsletter is intended to provide general information and may not be reproduced or transmitted in any form or by any means without the prior written approval of Drew & Napier LLC. It is not intended to be a comprehensive study of the subjects covered, nor is it intended to provide legal advice. Specific advice should be sought about your specific circumstances. Drew & Napier has made all reasonable efforts to ensure the information is accurate as of 17 August In the first quarter of 2014, the Competition Commission of Singapore ( CCS ) released a summary of its findings from an airline industry market study which it commissioned to examine whether certain joint ventures between airlines operating through Singapore, which had been previously notified and cleared by CCS, have actually resulted in net economic benefits (being the basis on which they received clearance from CCS). Ultimately, CCS concluded that such

2 benefits had arisen, albeit not to the extent that such benefits have arisen in overseas jurisdictions in respect of similar arrangements. More details of CCS s Airline Industry Market Study may be found in our Feature Article section of this Quarterly Update. To access the Feature Article, please click here. CCS issues Proposed Infringement Decision against 11 freight forwarders On 1 April 2014, CCS announced that it had issued a Proposed Infringement Decision ( PID ) against 11 freight forwarding companies and their Singapore subsidiaries/affiliates. The PID alleges that the companies involved had collectively fixed certain fees and surcharges, as well as exchanged price and customer information in relation to the provision of air freight forwarding services for shipments from Japan to Singapore. Parties were afforded the opportunity to make representations to CCS on the PID and the final determination is yet to be issued. For more details, please click here. AROUND THE WORLD Anti-Competitive Agreements ASEAN competition authorities moving towards cross-border cooperation On 6 March 2014, competition enforcers in the ASEAN region spoke on the theme of crossborder competition at the GCR Live 3rd Annual Law Leaders Asia-Pacific Conference held in Singapore. For more details, please click here. Court of Justice reduces fines imposed on Alstom and Areva On 10 April 2014, the European Court of Justice ( ECJ ) reduced the financial penalties imposed on Alstom and Areva, two French energy companies, for their participation in a gas insulated switchgear cartel. The decision held that where there are successive parent companies, the European Commission must ensure financial penalties are fixed separately for each of the undertakings involved according to their individual responsibility and duration of infringement. The ECJ also held that the total liability of the parent company must not exceed the infringing subsidiary's fine. For more details, please click here. Five international banks face antitrust lawsuit in the US for allegedly manipulating the gold benchmark A class action lawsuit was filed in New York against five international banks on 3 March 2014, for an alleged conspiracy to manipulate the prices of gold and gold derivatives contracts. This lawsuit is related to the on-going investigation by enforcement agencies in Germany and the UK of the potential manipulation of the precious metals benchmarks by international banks. For more details, please click here. Kobo obtains stay in Canadian e-books saga On 18 March 2014, Canada s Competition Tribunal granted e-reader company Kobo Inc. s application to suspend a settlement between the Canadian Competition Bureau and four major e- book publishers. For more details, please click here. Shipping cartel sanctioned by Japan Fair Trade Commission On 18 March 2014, the Japan Fair Trade Commission issued cease and desist orders and fines totaling 22.7bn (S$280m) against four companies operating a cartel in the automotive shipping industry. For more details, please click here. Malaysia Competition Commission fines MAS and AirAsia for sharing markets in the air transport services sector On 11 April 2014, the Malaysia Competition Commission fined Malaysian Airline System ( MAS ) and AirAsia RM10m (S$3.8m) each, for the infringement of section 4(2)(b) of the Malaysian Competition Act 2010 by entering into an agreement which had as its object the sharing of markets within the air transport services sector in Malaysia. For more details, please click here. General Court examines boundaries of the European Commission s powers to request information On 14 March 2014, the General Court ruled in respect of appeals by various cement companies, alleging that the European Commission s ( EC ) requests for information (in the context of an ongoing cartel investigation) were too onerous in extent, did not provide enough time to comply with the requests, and should have been supported 2

3 with more evidence of an underlying infringement. In dismissing most of the appeals, the General Court determined that whilst onerous for the companies, the information requests were justified in light of the proposed infringements. Moreover, the General Court held that the EC only requires a reasonable suspicion of an infringement, and it is not required to produce evidence with regard to an infringement when requesting information. For more details, please click here. SINGAPORE COMPETITION LAW WATCH Score Board Number Status Notified Agreements or Conduct Notified Mergers or Anticipated Mergers Infringement Decisions Table 1: Singapore Competition Law Watch Scoreboard (Accurate as at 29 Jul 2014) ARTICLES & COMMENTARIES: UPDATES FROM AROUND THE WORLD REGULATORY UPDATES Concluded Appeals ASEAN competition authorities moving towards cross-border cooperation Pending A panel of ASEAN competition enforcers speaking on the theme of cross-border cooperation at this year s GCR Live 3rd Annual Law Leaders Asia- Pacific Conference reported progress in ASEAN cooperation with respect to competition law enforcement. Toh Han Li, Chief Executive of the Competition Commission of Singapore ( CCS ), remarked that the current regional coordination model in ASEAN bore closer resemblance to that in Latin America, which mainly focuses on developing technical capabilities and guidelines, than that of the European Competition Network. In particular, the panel envisaged ASEAN cooperation moving forward in three main areas, namely: leniency programmes; cross-border mergers; and the aviation industry (in view of the ASEAN Open Skies initiative and the liberalisation of air transport services in the region). In this regard, it was pointed out that most of the merger notifications received by CCS involved cross-border dimensions. Ragunath Kesavan, Commissioner of the Malaysian Competition Commission ( MyCC ) also said that, as a relatively young authority, MyCC s general approach would be to consult the experience and decisions taken by other enforcers, especially by those in Singapore, the EU and the US. While the panelists also highlighted that several ASEAN competition authorities were negotiating and/or signing cooperation agreements with one another, as well as engaging in informal cooperation through meetings and technical assistance, Geronimo Sy of the Philippines Department of Justice noted that it would be more difficult to advance to the next phase of formal and effective cooperation on enforcement or exchanges of information. Although there was general consensus on the discussion of ASEAN cooperation in competition law enforcement, the same could not be said for the issue of ASEAN competition law convergence. Both enforcers and practitioners continued to hold diverging perspectives, with several speakers pointing to the significant differences in legal systems, level of legal infrastructure, as well as economic attitudes towards certain business practices to assert that the European model of convergence may not necessarily be feasible in the ASEAN context, while others maintained the position that ASEAN competition law would fail in the absence of a regional competition law or authority. 3

4 ANTI-COMPETITIVE AGREEMENTS CCS issues Proposed Infringement Decision against 11 freight forwarders The Competition Commission of Singapore ( CCS ) announced on 1 April 2014, that it has issued a Proposed Infringement Decision ( PID ) against 11 freight forwarding companies and their Singapore subsidiaries/affiliates for an alleged infringement of section 34 of the Singapore Competition Act (Cap. 50B) ( Competition Act ). Section 34 of the Competition 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. The 11 parties subject to the PID are: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Deutsche Post A.G.; DHL Global Forwarding Japan K.K.; DHL Global Forwarding Management (Asia Pacific) Pte. Ltd. and its subsidiary, DHL Global Forwarding (Singapore) Pte. Ltd; Hankyu Hanshin Express Co., Ltd. and its subsidiary, Hankyu Hanshin Express (Singapore) Pte. Ltd; K Line Logistics, Ltd. and its subsidiary, K Line Logistics (Singapore) Pte. Ltd; Kintetsu World Express, Inc. and its subsidiary, KWE-Kintetsu World Express (S) Pte. Ltd; MOL Logistics (Japan) Co., Ltd. and its subsidiary, MOL Logistics (Singapore) Pte. Ltd; Nippon Express Co., Ltd. and its subsidiary, Nippon Express (Singapore) Pte. Ltd; Nishi-Nippon Railroad Co., Ltd. and its subsidiary, NNR Global Logistics (S) Pte. Ltd; Nissin Corporation and its subsidiary, Nissin Transport (S) Pte. Ltd; Vantec Corporation and its former subsidiary, Vantec World Transport (S) Pte. Ltd; Yamato Holdings Co., Ltd. and its subsidiaries, Yamato Global Logistics Japan Co., Ltd. and Yamato Asia Pte. Ltd; and Yusen Logistics Co., Ltd. and its subsidiary, Yusen Logistics (Singapore) Pte. Ltd. According to CCS, the parties had allegedly engaged in collectively fixing certain fees and surcharges, and exchanging price and customer information in relation to the provision of air freight forwarding services for shipments from Japan to Singapore. This is the second successive PID issued by CCS with an international dimension and arising from a leniency application. The parties were given 35 working days from the receipt of the PID to respond and provide any other information to CCS by way of representations. CCS has yet to issue its final determination in respect of the matter. Court of Justice reduces fines imposed on Alstom and Areva On 10 April 2014, the European Court of Justice ( ECJ ) allowed the appeals of two French energy companies the Alstom group of companies ( Alstom ) and Areva T&D Holding SA, and Areva T&D AG (collectively, Areva ) relating to the financial penalties imposed by the European Commission ( EC ) and subsequently reduced by the General Court ( GC ). The fines were initially imposed for the parties involvement in a cartel relating to gas insulated switchgear ( GIS ), in which 20 companies were fined m (S$1.28bn) on 24 January The cartel involved co-ordination on a worldwide scale relating to the award of GIS projects, price fixing by means of complex price arrangements for GIS projects which were not allocated, the termination of licence agreements with non-cartel members and the exchange of sensitive market information. By way of background, the business units of Alstom operating in the electricity transmission and distribution sector, namely T&D, participated in the cartel until it was transferred to Areva. T&D continued to take part in the cartel whilst under the control of Areva, and as such both parent companies were implicated in the conspiracy, though for different periods. The ECJ held that in the circumstances, if the EC intended to make the subsidiary involved jointly and severally liable with each of the parent companies in turn, the EC should have taken better account of the gravity of the infringement for which each of the undertakings concerned is individually responsible (as well as the duration of the infringement) in setting the financial penalties. The ECJ determined that where the liability of Areva and Alstom, as parent companies, is 4

5 derived from the liability of a subsidiary which belonged to them in succession, the total amount which Alstom and Areva must be required to pay cannot be greater than the amount which T&D must pay. For the above reasons, the ECJ reduced Alstom s joint and several liability with T&D to 27.79m (S$47.47m) and Areva s joint and several liability with T&D to 20.4m (S$34.78m). The Competition Act (Cap. 50B) applies to undertakings. This refers to any person, being an individual, a body corporate, an unincorporated body of persons or any other entity, capable of carrying on commercial or economic activities relating to goods or services. A parent and its subsidiaries can be considered collectively as a single undertaking in certain circumstances, taking into account the precise relationship between them. The Competition Commission of Singapore ( CCS ) may consider the respective responsibility of both parent and subsidiary for an infringement and therefore for consequent liability to pay a penalty. Where CCS decides to impose a penalty on both the parent and subsidiary, it may be imposed jointly and severally. Five international banks face antitrust lawsuit in the US for allegedly manipulating the gold benchmark On 3 March 2014, a class action lawsuit filed in a New York District Court was brought against five international banks, Bank of Nova Scotia, Barclays Bank, Deutsche Bank, HSBC, and Société Générale, all members of the London Gold Market Fixing Ltd ( Gold Fix ), for allegedly conspiring with one another to manipulate the prices of gold and gold derivatives contracts. Gold fixing is a price-setting mechanism which provides market users with the opportunity to buy and sell gold at a single recognised quoted price. Not only does the Gold Fix help set a standard price for settling contracts among members of the London bullion market, it also strongly influences the benchmark for pricing the majority of gold futures and options traded on the Chicago Mercantile Exchange Group (COMEX) contract market. Currently, the price of gold is fixed twice daily. The complainants allege that the banks collusively manipulated the London gold benchmark in order to profit themselves individually and collectively, and are seeking more than US$5m (S$6.27 m) in damages. Moreover, the complainants are also alleging that the banks have altered their conduct since reports of the gold price manipulation have surfaced, eg Deutsche Bank publicly announced its withdrawal from the Gold Fix in January 2014, and the members have been investigating changes in the way the Gold Fix operates. This lawsuit is related to the on-going investigation of the potential manipulation of the precious metals benchmarks by enforcement agencies in Europe. Germany's financial regulator, BaFin, has been investigating Deutsche Bank for the potential manipulation of gold and silver prices, ie Deutsche Bank has met with and responded to BaFin's inquiries for documents. Similarly, the Financial Conduct Authority in the UK has been scrutinising the setting of prices in the gold market. Separately, several of the banks were fined in 2013 by the European Commission for participating in a cartel in the financial derivatives industry relating to the interest rate derivatives denominated in the euro currency and Japanese yen through the manipulation of the London Interbank Offered Rate (LIBOR). Private actions in relation to competition law infringements arise only where the Competition Commission of Singapore has made an infringement finding in relation to the matter, and after all appeals (and appeal periods) have been exhausted. Class action lawsuits are not possible in Singapore the only recognised form of group litigation is a representative action. Kobo obtains stay in Canadian e- books saga On 18 March 2014, Canada s Competition Tribunal ( Tribunal ) granted e-reader company Kobo Inc. s ( Kobo ) application to stay the implementation of a Consent Agreement entered between the Canadian Competition Bureau ( Bureau ) and four major e-book publishers (namely, Hachette Book Group; HarperCollins; Macmillan; and Simon & Schuster) ( Consent Agreement ), pending a decision on the merits of Kobo s application to rescind or vary the same. Under the Consent Agreement, which was reached on 6 February 2014 following an 18- month long investigation into the Canadian e- 5

6 books industry, the four publishers agreed to remove or amend the most-favoured-nation clauses (which provide for the retailer to be charged the lowest price offered by the publisher to any other retailer) and the agency agreement terms (under which the retailer is paid a commission for the sale of the publisher s e- books) under their distribution agreements with e- book retailers. The Bureau had alleged that these arrangements prevented Canadian e-book retailers from offering discounts and as such, had the effect of restricting retail price competition in the sector. Despite the Bureau s claims that the Consent Agreement would increase competition amongst e-book retailers and benefit Canadian consumers in the form of lower prices, Kobo argued that the settlement would, on the contrary, reduce competition amongst retailers. In particular, Kobo pointed to the exit of Sony from the e-book retail market in the US, as well as the losses suffered by Barnes & Nobles e-book division and the closure of its own US office, to contend that similar settlements between e-book publishers and competition authorities in the US have lowered the number of viable competitors in the e-book retail market by enabling certain retailers to price below their cost of acquisition or at rates unsustainable by other competitors. This position is supported by Indigo Books & Music Inc. ( Indigo ), Canada s largest book retailer. In its request for leave to intervene in the proceedings, Indigo argued that the implementation of the Consent Agreement would impair Kobo s ability to compete effectively in the Canadian market, and further contended that the result would be to grant Amazon.com, Inc. ( Amazon ) a monopoly in the already highlyconcentrated Canadian e-books market, by removing or diminishing Amazon s only effective competitor in Canada. In granting the stay, the Tribunal observed that Kobo s application highlighted concerns which were in the public s interest to address. Nonetheless, the substantive outcome of Kobo s challenge is still to be determined. The Competition Commission of Singapore ( CCS ) does not currently have a formal settlement procedure specified in its guidelines. However, CCS has indicated that it may be considering the implementation of such in the future. Shipping cartel sanctioned by Japan Fair Trade Commission On 18 March 2014, the Japan Fair Trade Commission ( JFTC ) issued cease and desist orders and fines totalling 22.7bn (S$280m) against four shipping companies namely, Nippon Yusen Kabushiki Kaisha ( NYK ); Kawasaki Kisen Kaisha, Ltd. ( K Line ); Wallenius Wilhelmsen Logistics, AS ( WWL ); and Nissan Motor Car Carrier Co. Ltd. ( NMCC ), for operating a cartel in the automotive shipping industry. A fifth participant, Mitsui OSK Lines, Ltd. ( Mitsui ), benefited from the JFTC s leniency program and received immunity from the sanctions. The JFTC found that the cartel operated across four global shipping routes the North American route; the European route; the Middle and Near Eastern route; and the Oceania route between at least mid-january 2008 until 6 September 2012, when the JFTC conducted dawn raids on a number of the companies, in coordination with investigations by the European Commission and the US Department of Justice s Antitrust Division in their respective jurisdictions. All five parties were found to have engaged in price fixing and bid rigging in respect of international ocean shipping services for automobiles, by agreeing to prevent freight rates from falling and to refrain from competing against one another on various shipping routes. NYK, K Line and Mitsui were found to have participated in the cartel across all four shipping routes; WWL was involved in respect of the North American and European routes; and NMCC only took part on the European route. In addition to the fines, the four companies received cease and desist orders requiring them to immediately terminate their anti-competitive agreements and refrain from engaging in similar conduct in future. The orders also oblige each company to inform its employees, and customers and the other cartel participants of the measures adopted in this respect, as well as to educate employees on competition law compliance. As a result of the investigation, the JFTC has also made a request to the Ministry of Land, Infrastructure, Transport and Tourism ( MLIT ) to abolish the statutory antitrust exemption for agreements between shipping companies on 6

7 freight rates and ship arrangements. Currently, these agreements may, upon notification to the MLIT, be exempted from the application of the provisions of the Japanese Anti-Monopoly Act. Currently, the Competition (Block Exemption for Liner Shipping Agreements) Order 2006, exempts a category of liner shipping agreements from the application of section 34 of the Singapore Competition Act (Cap. 50B), which prohibits agreements between undertakings which have as their object or effect the prevention, restriction or distortion of competition within Singapore. The Block Exemption Order is in force until 31 December 2015 and its continued application is subject to an on-going study being conducted by the Competition Commission of Singapore. Malaysia Competition Commission fines MAS and AirAsia for sharing markets in the air transport services sector On 11 April 2014, the Malaysia Competition Commission ( MyCC ) issued a decision against Malaysian Airline System Berhad ( MAS ), AirAsia Berhad ( AirAsia ) and AirAsia X Sdn. Bhd. ( AAX ) (collectively, the Parties ) for an infringement of section 4(2)(b) of the Malaysian Competition Act 2010 ( Act ) by entering into a Comprehensive Collaboration Framework ( Collaboration Agreement ) which had as its object the sharing of markets within the air transport services sector in Malaysia. The terms of the Collaboration Agreement mandated MAS to focus on being a full-service premium carrier, AirAsia on being a regional lowcost carrier, and AAX on a medium-to-long haul low-cost carrier. Each airline would focus on their market area and avoid the areas specifically allocated to their competitor. Subsequently, MAS withdrew Firefly, its wholly-owned subsidiary initially set up to compete with AirAsia, from four Malaysia city-pair routes, leaving AirAsia to be the sole low cost carrier in the market. MyCC found that the Collaboration Agreement had the object of preventing, restricting or distorting competition by sharing and allocating the markets between them. In this regard, the Parties could operate freely within separate market segments and effectively restrict competition either between themselves or through their subsidiaries. More significantly, the Parties had the ability to impose higher prices to maximise profitability without any constraints imposed by competitors. This would have left consumers to face the increased likelihood of higher airfares and fewer choices. In conjunction, MyCC found that the establishment of a joint collaboration committee, consisting of top management officials of MAS, AirAsia and AAX, to administer and manage all issues and matters pertaining to the Collaboration Agreement, was clearly anti-competitive. In response to arguments that the Collaboration Agreement and alleged infringement occurred before the Act came into force, MyCC clarified that it was not precluded from taking into consideration any infringing conduct or circumstances arising before the Act came into force on 1 January 2012 when investigating conduct that continued after that date. MyCC noted that some airline alliances were procompetitive before commenting that section 5 of the Act could have been invoked as a valid defence for an infringement under section 4(2) of the Act, if the Parties could prove that the Collaboration Agreement's net economic benefit outweighed the anti-competitive effect. However, the Parties were ultimately unsuccessful in discharging this burden. The financial penalties imposed on MAS and AirAsia in respect of the infringement amount to RM10m (S$3.8m) each. MyCC adjusted the quantum downwards to take into account two mitigating factors. The Parties: (a) co-operated fully with MyCC in the provision of requested data and information; and (b) voluntarily took steps to remove the reference to routes and market focus in the Collaboration Agreement through a Supplemental Agreement entered into on 2 May Moreover, no aggravating factors were considered in the computation of the penalties. The total financial penalty of RM20m (S$7.6m) is the largest fine MyCC has issued to date. The Competition Commission of Singapore ( CCS ) has investigated a number of matters, and taken action against such, where conduct commenced prior to the Singapore Competition Act (Cap.50B) taking effect on 1 January 2006, where infringing conduct continued after that date. 7

8 CCS has previously examined 10 airline alliance/joint venture arrangements, and one is still under review. In each case, the arrangement was notified for a decision to CCS, on the basis that the benefits of the arrangement would outweigh any corresponding effect on competition. CCS has approved all such applications it has received to date, albeit conditions have been imposed in a few cases. General Court examines boundaries of the European Commission s Powers to request information On 14 March 2014, the General Court ( GC ) dismissed the appeals of various cement companies, who were seeking to challenge the European Commission s ( EC ) use of powers to request information, in the context of an ongoing cartel investigation against them. The companies in question Buzzi Unicem, Cemex, Heidelberg Cement, Holcim, Italmobiliare, and Cementos Portland Valderrivas appealed on various grounds, including that the EC s requests were too onerous, and that the requests did not clearly articulate the subject and purpose of the investigation. In relation to whether the EC ought to have provided further information regarding the subject matter of the investigation, the GC observed that at the investigation stage, the EC does not need to provide all of the elements for an infringement to be established. Rather, the EC must only meet the legal requirements for the use of its powers to request information (ie that it has a reasonable suspicion) that there has been an infringement. The GC also dismissed the appeals with regard to the information requests being too onerous. Whilst it acknowledged that the requests would place a heavy burden on the parties in question, the burden was proportionate to the investigatory needs of the EC. However, the GC did uphold a related appeal of Schwenk Zement, finding that the two weeks it was provided to respond to the EC s requests was unreasonable given the amount of information requested. The Competition Commission of Singapore ( CCS ) has broad powers to request information from any person, where CCS considers such information relevant to an investigation. In turn, CCS may investigate a matter where it has reasonable grounds for suspecting that a substantive provision of the Competition Act (Cap. 50B) has been infringed. The precise scope of these powers has not been judicially tested. Where justified with good reasons, CCS has previously provided reasonable extensions of time to parties in relation to the collation and submission of requested documents and information. FEATURE ARTICLE CCS AIRLINE INDUSTRY MARKET STUDY In the first quarter of 2014, the Competition Commission of Singapore ( CCS ) released a summary of its findings from an airline industry market study. CCS first commissioned the study in 2012 to examine, whether certain joint ventures ( JVs ) between airlines operating through Singapore, which had been previously notified and cleared by CCS, have resulted in net economic benefits. To date, CCS has granted a positive decision to 10 airline cooperation arrangements that have been notified to CCS for a decision on whether the arrangements infringe section 34 of the Competition Act (Cap. 50B) by having as their object or effect the prevention, restriction or distortion of competition within Singapore ( Section 34 Prohibition ). Two of these arrangements, between Japan Airlines and American Airlines ( JAL/AA JV ), and between All Nippon Airways, Continental and United Airlines ( ANA/CO/UA JV ), were scrutinised in detail in the study. In its decisions approving the JAL/AA JV and the ANA/CO/UA JV, CCS had previously determined that both JVs had, by their very nature, the object of appreciably preventing, restricting or distorting competition in the relevant markets. However, CCS was also satisfied that both JVs led to net economic benefits and were therefore excluded from the Section 34 Prohibition. Specifically, CCS stated that the JAL/AA JV could potentially lead to optimized scheduling options for customers, reduction in fares, and increases in capacity, while the ANA/CO/UA JV [o]n balance will, in general, improve the production and distribution of 8

9 air passenger transport in Singapore through the efficiencies the Parties submit (which included lower fares and increase in schedule choices). between Etihad Airways PJSC and Jet Airways (India) Limited. In this study, a cost-benefit analysis ( CBA ) was adopted to estimate the net economic benefit that actually accrued from the JVs, based on four to six quarters of post-jv data. In the course of the study, CCS advised that a total welfare approach to the CBA should be adopted welfare gains accruing to other parties apart from Singaporeans (eg increased revenue collected by airports, benefits to businesses from increased trade and business travel), should also be considered as part of the assessment of welfare gains. In relation to the JAL/AA JV, the study found a 14% increase in passenger numbers in the market overall. While there was no change in individual fare on JAL/AA routes post-jv, the average JAL/AA fare on a JV route decreased because of the increase in passenger numbers coming largely from passengers travelling in cheaper fare classes or on cheaper routes. Further, while improvements in flight frequency and capacity was observed, the study determined that, on balance, these effects should be attributed to other factors (eg the opening of Tokyo Haneda airport to new international flights) and not from the JAL/AA JV. In relation to the ANA/CO/UA JV, the study found a 5% increase in passenger numbers in the market overall. It also found an increase in individual business class fares as well as an increase in average fares because more passengers started to fly business class. There was no evidence of other cost saving or route changing benefits that were attributable to the ANA/CO/UA JV. On the whole, the study concluded that whilst the JVs appear to have delivered net economic benefits (in the form of increased passenger numbers), the benefits were not as large as those found in the literature for other markets, which generally reflected a post-jv fare reduction of 13%-25% and an increase in passenger numbers of 52%-88%. However, the study acknowledged that it may be premature to draw firm conclusions about the lifetime impact of the two case study JVs, given only four to six quarters of post-jv data was available for study. CCS is currently assessing one airline notification relating to a proposed cooperation arrangement 9

10 The Drew & Napier Competition Law Team For more information on the Competition Law Practice Group, please click here. Cavinder Bull, SC Director (Dispute Resolution) Cavinder handles complex litigation spanning a wide area of corporate and commercial matters. Cavinder has successfully defended companies being investigated for abusing a dominant position in Singapore, and filed the first appeal to the Competition Appeal Board in respect of a CCS infringement decision. Cavinder previously practised antitrust law in New York, working on cases like the Microsoft antitrust litigation and obtaining US Department of Justice s approval for the merger between Grand Metropolitan and Guinness, one of the world s largest mergers then. Cavinder graduated from Oxford University with First Class Honours in Law. He clerked for the Chief Justice of Singapore as a Justices Law Clerk. Cavinder also has a Masters in Law from Harvard Law School which he attended on a Lee Kuan Yew Scholarship. Cavinder is consistently recognised as one of the leading litigators in Singapore. Chambers Global 2013 lists Cavinder as a leading individual, Clients are quick to praise his impressively hands-on approach and superb, first-class advocacy. Tel: Fax: cavinder.bull@drewnapier.com Lim Chong Kin Director (Competition & Regulatory) Chong Kin played a key role in the development of competition regulation in the telecommunications, media and postal industries in Singapore, before moving on to undertake general competition work when the Competition Act was enacted in His diverse client portfolio spans the Competition Commission of Singapore, the sectoral competition regulators, and private sector companies. He undertakes a whole range of competition law matters including cartel investigations, merger filing, decisions and guidance, complex market studies, drafting competition legislation and enforcement work. Chong Kin has been widely acknowledged as the leading competition law expert in Singapore by major ranking publications. Chambers Asia- Pacific 2014 ranks Chong Kin as a Band 1 Competition/Antitrust lawyer. Asia Pacific Legal 500: 2014 recognises him as a competition and regulatory specialist. AsiaLaw Profiles 2014 recognises Chong Kin for his expertise in Competition Law. The International Who s Who of Competition Lawyers , Regulatory Communications Lawyers and Telecoms 2014 all recognise Chong Kin for his strength in regulatory and competition advisory work. Tel: Fax: chongkin.lim@drewnapier.com Scott Clements Deputy Head, Competition & Regulatory Scott is the Deputy Head of Drew & Napier s Competition and Regulatory Practice Group. Scott has extensive experience in all areas of competition law, including anticompetitive agreements, abuse of dominance, and mergers and acquisitions. Scott recently assisted SISTIC.com Pte Ltd in its appeal before the Competition Appeal Board in relation to the first and only abuse of dominance infringement finding made to date by CCS, and secured a 20% reduction in the financial penalty imposed. Scott was previously a senior investigator with the New Zealand Commerce Commission and was involved in leading investigations and analysing competition law and economic issues, including leading a number of high profile investigations into mergers and acquisitions. Scott was also involved in numerous investigations involving electricity matters. Scott was a key member of the team commissioned by the ASEAN Secretariat to conduct a review of competition law and policy in the ASEAN region and to propose best practices for the implementation of competition law in ASEAN. Tel: Fax: scott.clements@drewnapier.com Copyright in this publication is owned by Drew & Napier LLC. This publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. Drew & Napier LLC accepts no liability for, and does not guarantee the accuracy of information or opinion contained in this publication. This publication covers a wide range of topics and is not intended to be a comprehensive study of the subjects covered nor is it intended to provide legal advice. It should not be treated as a substitute for specific advice on specific situations. 10