MERGER REGIME IN SINGAPORE - MERGER PROCEDURES Competition Law Team Rajah & Tann 12 June 2007 1 Rajah & Tann is establishing a forte in competition and trade law, adding another capability to a multi-faceted team. Asia Pacific Legal 500 2005/6 Edition Leading Competition & Anti-Trust Lawyer Kala Anandarajah Euromoney Expert Guides on the World s Leading Competition & Anti-Trust Lawyers 2004/5, 2006/7 AsiaLaw Leading Lawyers 2006/2007 2 Email: competitionlaw@rajahtann.com 1
Overview 3 The Competition Commission of Singapore ( CCS ) CCS is empowered to: Review mergers notified to the CCS by the merging parties Take a decision as to whether a merger has or is likely to lead to a substantial lessening of competition in Singapore Investigate completed mergers Impose measures / directions to prevent or remedy any anticompetitive effect of a merger Impose fines 4 Email: competitionlaw@rajahtann.com 2
What Is The Merger Regime? Section 54 Competition Act: Mergers that have resulted, or may be expected to result, in a substantial lessening of competition ( SLC ) within any market in Singapore for goods or services are prohibited Merger Regime will be in force on 1 July 2007 Applies to all kind of transactions / investments: Amalgamation, Creation of full function joint-venture, Acquisition of part of a business, etc 5 Concept Of SLC SLC Test: will the merger ultimately lead to less competition and allow an increase in prices in the relevant market : unilateral effects coordinated effects Indicative alternative thresholds that the merger is likely to lead to a SLC provided by the CCS: Post-merger, the merged entity will have a market share of at least 40%, or Post-merger, the merged entity will have a market share of more than 20% and the post-merger combined market share of the three largest firms (CR3) is 70% or more. 6 Email: competitionlaw@rajahtann.com 3
Key Features Of Proposed Merger Regime Self - Assessment Voluntary Notification Phase I Merger Assessment Phase II Merger Assessment 7 Notification Of A Merger To The CCS 8 Email: competitionlaw@rajahtann.com 4
Notification Process Notification can be made by: One or more of the merger parties Merger parties include the merged entity CCS encourages joint notification by all the merger parties Notification is made by submitting Form M1 and, eventually, Form M2 to the CCS Merger review only starts when the application is complete, ie Application in the prescribed form and accompanied by the relevant supporting documents Fee is paid 9 Information To Be Provided Information in relation to the Application: The notifying party; Anticipated or completed merger; Filing made or to be made to local or foreign authorities, with all relevant decisions and /or directions thereof etc Information on the merger: Nature of the merger; Value of the transaction; Economic and financial structure of the merger; Strategic and economic rationale of the merger etc Information on the groups to which the merger parties belong: List of undertakings belonging to the same group to which merger parties belong specifying nature and means of control for each undertaking; Includes all undertakings controlling or controlled by merger parties, directly or indirectly. 10 Email: competitionlaw@rajahtann.com 5
Form M1 11 Information To Be Provided Information on markets: Reportable markets only, ie markets where 2 or more of the merger parties are present; Upstream and downstream markets where one or more of the merger parties are present Estimated markets size in value and volumes Estimated market shares of the parties Estimated market shares of the three largest competitors etc NB: this information has to be gathered and reviewed by the parties when conducting their self-assessment of the merger (SLC test). 12 Email: competitionlaw@rajahtann.com 6
Supporting Documents This includes: Final or most recent version of all documents bringing about the merger Copies of all: analyses, reports, studies, surveys, and any comparable documents prepared for the board of directors or the shareholders meeting, for the purpose of assessing or analyzing the merger, ie: market shares, competitive conditions, competitors (actual and potential), rationale of the merger, potential for sales growth or expansion into other product or geographic markets, general market conditions Copies of all business plans for each merger party for the current year and the preceding 5 years. 13 Supporting Documents Information provided to CCS must be accurate Obligation of the merger parties to inform the CCS of any material change in the information provided Consequence of incomplete, false or misleading information: CCS may review a favourable decision Offence: fine up to S$10,000 and / or imprisonment up to 12 months 14 Email: competitionlaw@rajahtann.com 7
Confidential Treatment Of Information CCS may published all information on the CCS public register or share with third parties Parties can request CCS for confidential treatment of specific information Public versions of forms and supporting documents have to be filed together with the confidential version of the same 15 Confidential Treatment Of Information Right of CCS to refuse confidential treatment Applicants to re-submit public version of the relevant Form or document including the relevant information, within a prescribed time If the Applicants do not accede to the CCS request, then, the CCS may determine the Application by not giving a decision Right of CCS to change its mind, ie the CCS has the ability to review its agreement to treat information as confidential. 16 Email: competitionlaw@rajahtann.com 8
Pre-Notification Discussions ( PNDs ) Merger parties may enter into Pre-Notification Discussions ( PNDs ) with the CCS from 1 June 2007 PNDs can relate to a merger that is still confidential PNDs aim at helping merger parties to prepare their application: Discussion on the information needed Identification of reportable markets (?) Identification of potential competition concerns Procedure: Written request to the CCS Meeting scheduled Merger parties have to file a draft notification + supporting documents no less than 5 working days before the meeting for PNDs. 17 Merger Review 18 Email: competitionlaw@rajahtann.com 9
Merger Review Two-phase Merger review: Phase I: up to 30 working days; and Phase II: up to 120 (additional) working days Indicative time-frame Countdown starts the day the relevant Form and supporting documentation are accepted by the CCS Ability for the merger parties or / and the CCS to stop the clock 19 Merger Review Phase I Start of Phase I (30 working days): Mergers that do not raise competition concerns Starts with publication of a summary of the application on the CCS public register Interested third parties to submit comments within 10 working days from the publication Review: Is the transaction a merger? Is the transaction excluded (Fourth Schedule)? Review of the impact of the merger on competition in market(s) in Singapore 20 Email: competitionlaw@rajahtann.com 10
Merger Review Phase I Powers of CCS during Phase I: Request additional information Impose interim measures: To prevent actions that would prejudice CCS ability to review the merger To prevent actions that would prejudice CCS ability to impose remedy Eg: prohibition from implementing an anticipated merger, from divesting assets etc Accept commitments by the merger parties that will remedy identified competition concerns Decision: Favourable decision (with or without commitments) Decision to proceed to a Phase II review 21 Merger Review Phase II Start of phase II (120 working days): Mergers that seem to raise competition concerns Starts with: notification by the CCS of its decision to proceed to Phase II and the reasons thereof, and CCS receiving a complete Form M2 (deadline fixed by the CCS) and applicable fees. Review: More detailed and extensive examination of the merger In-depth review of reportable markets structure of supply, structure of demand, market entry etc 22 Email: competitionlaw@rajahtann.com 11
Merger Review Phase II Powers of CCS during Phase II: Request additional information Impose interim measures Accept commitments by the merger parties that will remedy identified competition concerns Decision: Make a favourable decision whether or not subject to legally binding commitments by the merger parties Make an unfavourable decision and issue all appropriate directions to remedy the competition concerns identified, including unwind the merger or impose divestiture 23 Impact For Business Is the operation a merger? Define the type of investment contemplated: acquisition, amalgamation, creation of a full function JV, etc? Define the rights and powers on / in the merged entity: voting rights, specific rights (veto, casting vote, power at board level, etc), legal or contractual rights, etc When the operation is a merger, find out whether there are obvious competition issues: are the parties competitors, what are their market share, the market share of target, what will be the key changes to the structure of the market. 24 Email: competitionlaw@rajahtann.com 12
Impact For Legals Draft the Merger documentation taking into account: the possible delay related to the merger review process, the possibility that commitments may have to be offered for the Merger to get through, the possibility that an unfavorable decision may be made Notification of the proposed (or completed) Merger to the CCS take into account the time to draft the notification, ie to provide detailed and accurate information on undertakings concerned, on the group to which it eventually belongs to, on the markets in which undertakings are active and any other reportable market. think of a joint notification Anticipate possible competition issues: if likely occurrence of a SLC => define divestiture or commitments that would be acceptable 25 Investigation Powers Of The CCS 26 Email: competitionlaw@rajahtann.com 13
In Which Cases CCS may investigate a merger where there are reasonable grounds for suspecting that: A merger has infringed Section 54, or An anticipated merger will infringe Section 54 if carried into effect May follow: Information published in the media, Complaint etc 27 Powers Of CCS Require the production of specified documents or information NB: amended Act allows CCS to require any person to produce a specified document or to provide specified information and to compel such person to comply Enter premises without a warrant Enter and search premises with a warrant Invite comments from interested third parties on the merger through a notice on the CCS website =>Failure to comply or cooperate: criminal offences 28 Email: competitionlaw@rajahtann.com 14
Powers Of CCS (Cont d) Impose interim measures during the investigation Impose remedies by: Accepting commitments that remedy competition concerns (?), or Issuing directions: Prohibiting / modifying / unwinding the merger Requiring the merger parties to enter into such legallyenforceable agreements specified by the CCS Requiring the merger parties to dispose of such operations, assets or shares of such undertaking Providing a performance bond, guarantee or other form of security on such terms and conditions as the CCS may determine Impose financial penalties: up to 10% of the annual turnover of each merger party for each year of infringement for max. 3 years 29 THANK YOU For more information, please contact: The Competition & Trade Law Team DID: 62321111 / 2 Fax: 65570901 Email: competitionlaw@rajahtann.com Website: www.rajahtann.com 30 Email: competitionlaw@rajahtann.com 15