When is an anti-competitive agreement commonly used in Singapore?
The term anti-competitive agreement generally refers to an arrangement between businesses that the Competition Act prohibits, rather than a type of agreement businesses would knowingly and lawfully use, and this FAQ addresses the legal framework governing such prohibited agreements, including how businesses can properly structure legitimate commercial arrangements to avoid falling within this prohibition.
Agreements that risk being characterised as anti-competitive commonly arise in the context of arrangements between competitors, such as understandings on pricing, market allocation, or coordinating responses to a tender, as well as in certain vertical arrangements between businesses at different levels of a supply chain, such as resale price maintenance clauses restricting a distributor’s ability to set its own resale prices.
Businesses sometimes inadvertently risk creating an anti-competitive agreement through informal understandings reached at industry association meetings or informal exchanges of commercially sensitive information with competitors, even without a formal written contract, since the prohibition can capture concerted practices as well as formal agreements.
Because the line between legitimate commercial cooperation and a prohibited anti-competitive agreement can sometimes be genuinely unclear, particularly for certain vertical arrangements or information sharing practices, businesses should seek legal advice before entering into any arrangement with a competitor, or any vertical arrangement with unusual restrictive terms, to properly assess the competition law risk involved.
Which parties should sign the agreement and who should have authority to bind them?
Where businesses enter into a commercial agreement that could potentially raise competition law questions, such as certain vertical distribution or supply arrangements, the agreement should be properly signed by an authorised representative of each business, in the same way as for any other significant commercial contract, to ensure it is validly binding.
Given the potential seriousness of competition law consequences, businesses should ensure that whoever has authority to negotiate and sign agreements with competitors or on sensitive commercial terms understands the basic boundaries of competition law, since inadvertently binding the company to an anti-competitive arrangement can expose the business to very significant penalties regardless of the seniority of the individual who signed it.
Where an agreement involves multiple related companies within a corporate group, businesses should be aware that competition law generally treats companies within a genuine single economic group differently from arrangements between genuinely independent competitors, though this depends on the specific corporate and ownership structure involved.
Because competition law exposure can arise from the substance of an arrangement regardless of its formal signing structure, businesses should focus on ensuring the underlying commercial terms are compliant, and should provide competition law training to relevant staff with authority to negotiate and sign agreements involving competitors or restrictive commercial terms.
What essential commercial terms should be included?
Legitimate commercial agreements between businesses, including those between competitors for genuinely pro-competitive purposes such as certain joint research and development or standard-setting arrangements, should clearly define the specific scope of cooperation involved, avoiding provisions that extend into pricing, output or market allocation matters not genuinely necessary for the legitimate collaborative purpose.
Vertical agreements, such as distribution or supply arrangements, should be carefully drafted to avoid provisions such as fixed resale prices that could constitute a hardcore restriction, while permitted provisions such as recommended resale prices or maximum resale prices generally carry lower competition law risk, though businesses should still seek advice given the specific legal distinctions involved.
Where an agreement includes exclusivity or non-compete provisions, these should be properly limited in scope, duration and geographic reach to what is genuinely necessary for the legitimate commercial purpose of the arrangement, since overly broad restrictions can raise competition law concerns, particularly where either party holds significant market power.
Because seemingly standard commercial terms can sometimes raise unexpected competition law issues depending on the specific market context and the parties’ relative market positions, businesses should have significant commercial agreements, particularly those involving competitors or containing exclusivity provisions, reviewed by a lawyer with competition law experience before finalising the terms.
How should payment, performance standards and timelines be addressed?
Payment and pricing terms in commercial agreements should be independently determined by each business based on its own commercial assessment, and businesses should avoid any direct or indirect coordination with competitors on pricing, whether through a formal agreement or informal understanding, since price coordination represents one of the most serious categories of competition law infringement.
Where a vertical agreement includes performance standards, such as minimum purchase quantities or exclusive supply arrangements, these should be structured to reflect genuine commercial objectives rather than serving as a mechanism to restrict competition, and businesses with significant market power should be particularly cautious about performance terms that could effectively foreclose competitors from the market.
Timelines and review periods for ongoing commercial relationships should be regularly assessed to ensure the arrangement continues to reflect legitimate commercial objectives, since an arrangement that may have been unobjectionable at the outset could raise competition concerns if market conditions change, such as if one party’s market position becomes significantly stronger over time.
Because payment, performance and timeline provisions in commercial agreements are generally assessed based on their actual competitive effect rather than their formal labelling, businesses should periodically review significant ongoing commercial arrangements, particularly with competitors or involving exclusivity, to ensure they remain compliant as circumstances evolve.
How can liability, indemnities and limitations of liability be drafted?
Standard liability and indemnity provisions in commercial agreements are generally not directly affected by competition law considerations, and businesses can negotiate these terms based on ordinary commercial principles, provided the underlying commercial arrangement itself does not raise separate competition law concerns.
Businesses should be cautious about indemnity or liability provisions that could effectively require one party to guarantee the pricing or market outcomes of another, since such provisions could in some circumstances be seen as evidence of a broader anti-competitive understanding between the parties beyond the ordinary allocation of commercial risk.
Where businesses become aware that a specific agreement or arrangement may have infringed competition law, they should seek legal advice on the potential liability exposure this creates, including the possibility of significant regulatory penalties and private claims from third parties who may have suffered loss as a result of the anti-competitive conduct.
Because the consequences of a competition law infringement can be severe and are not something standard contractual limitation of liability clauses can effectively address, given that regulatory penalties are imposed independently of the contract terms between the parties, businesses should focus their primary effort on avoiding anti-competitive arrangements in the first place, with legal advice sought before entering into any agreement carrying a genuine competition law risk.
What termination rights and consequences should be included?
Legitimate commercial agreements should include standard termination provisions addressing matters such as breach, insolvency and, where relevant, expiry of a fixed term, drafted in the same way as for any other commercial contract, provided the underlying arrangement itself does not raise separate competition law concerns.
Where a business identifies that an existing agreement may have anti-competitive elements, it should seek legal advice on how best to address this, which may include renegotiating or terminating the problematic provisions, since continuing to give effect to an anti-competitive agreement can expose the business to ongoing liability for as long as the arrangement continues.
Businesses should be aware that voluntarily terminating or amending a problematic arrangement does not necessarily eliminate liability for the period during which the anti-competitive conduct already occurred, though taking prompt corrective action once an issue is identified is generally viewed more favourably than continuing known anti-competitive conduct.
Because identifying and addressing a potentially problematic agreement promptly is significantly better than allowing it to continue, businesses that discover an existing arrangement may raise competition law concerns should seek legal advice immediately on the appropriate corrective steps, including whether termination, renegotiation, or in serious cases, engagement with CCCS’s leniency programme may be appropriate.
How should confidentiality, personal data and intellectual property be handled?
Businesses should be particularly cautious about the exchange of commercially sensitive information with competitors, including through mechanisms that might appear to be standard confidentiality arrangements, since the exchange of information such as pricing, costs, or strategic plans between competitors can itself constitute a form of anti-competitive concerted practice, separate from any formal agreement on conduct.
Where businesses genuinely need to exchange commercially sensitive information for a legitimate purpose, such as in the context of a genuine joint venture or a due diligence process ahead of a permitted transaction, appropriate safeguards such as clean team arrangements, limiting information exchange to what is genuinely necessary, and ensuring recipients cannot use the information to inform independent competitive decisions, should be considered with legal advice.
Intellectual property licensing arrangements generally do not raise competition law concerns in the ordinary course, though certain restrictive terms within such licences, particularly those extending beyond what is necessary to protect the licensed intellectual property itself, could in some circumstances raise separate competition law questions.
Because information exchange between competitors is an area where seemingly innocuous conduct, such as informal conversations at industry events, can sometimes create genuine competition law risk, businesses should provide clear guidance to staff on what types of information exchange with competitors are inappropriate, and should seek legal advice before establishing any formal information sharing arrangement with a competitor.
What happens if a party breaches the agreement?
Where a party breaches a legitimate commercial agreement, the ordinary contractual remedies, such as damages or termination, would generally apply in accordance with the agreement’s own terms, in the same way as for a breach of any other type of commercial contract.
Where the underlying agreement itself is found to be an anti-competitive agreement prohibited under the Competition Act, the agreement, or the offending provisions, may be found void and unenforceable as a matter of Singapore law, meaning a party could potentially be unable to rely on certain contractual provisions, such as an exclusivity clause, if these are found to infringe the Act.
Both parties to an anti-competitive agreement can potentially face liability from CCCS, regardless of which party is considered to have breached any private contractual obligations between them, since the Competition Act prohibition applies to the parties who entered into the anti-competitive arrangement rather than depending on which party may be in breach of their private contractual bargain.
Because the consequences of an anti-competitive agreement operate at both the contract law level, potentially rendering problematic provisions unenforceable, and the regulatory level, exposing the parties to CCCS penalties, businesses should seek legal advice promptly if they become aware that an agreement they are party to may raise competition law concerns, rather than relying solely on the agreement’s own private dispute resolution provisions.
Should disputes be resolved through Singapore courts, arbitration or mediation?
Disputes between parties to a legitimate commercial agreement, such as disagreements over performance or payment, are generally resolved through whatever dispute resolution mechanism the parties have agreed in their contract, whether that is negotiation, mediation, arbitration or the Singapore courts, in the same way as for other commercial disputes.
Where a dispute or investigation concerns whether an agreement itself constitutes a prohibited anti-competitive agreement under the Competition Act, this is a matter for CCCS to investigate and decide in the first instance, rather than something that can be resolved through private arbitration or mediation between the parties, given CCCS’s statutory role in enforcing the Act.
Where a business or individual has suffered loss as a result of another party’s anti-competitive conduct and wishes to bring a private claim for damages, this would generally be pursued through the Singapore courts, applying the relevant provisions of the Competition Act that allow for private enforcement, separate from any CCCS regulatory action.
Because competition law infringement questions are ultimately matters for CCCS and the courts to determine, rather than something parties can resolve through their own private dispute resolution mechanism, businesses facing a potential competition law issue should seek legal advice on the appropriate avenue for addressing the specific concern, whether that involves engaging with CCCS directly or pursuing a private claim.
