CCCS consults on changes to sanctions guidelines
On July 16, 2021, the Singapore Competition and Consumer Commission (“CCCS“) announced a public consultation on proposed changes to the CCCS guidelines on the appropriate amount of penalty in competition cases (“Sanctions Guidelines“).
The Sanctions Guidelines provide general guidance on how financial sanctions for breaching the prohibitions in Sections 34, 47 and 57 of the Competition Act (Cap. 50B) (“Competition law“) are calculated by CCCS. CCCS operates according to a six-step process, namely:
- Calculation of the basic penalty;
- Adjustment for the duration of the offense;
- Adjustment for aggravating or mitigating factors;
- Adjustment for other relevant factors;
- Adjustment in the event of exceeding the legal maximum penalty; and
- Adjustment for immunity, reductions in leniency and / or postponements of expedited proceedings.
The CCCS is seeking comments on two clarifying mitigating factors changes, which are assessed in step three of the above process and set out in the Sanctions Guidelines. It is highly likely that these changes were introduced following recent infringement decisions, one of which was appealed to the Competition Appeal Board (“TAXI“).
the Consultation will take place from July 16, 2021 to August 5, 2021, with comments to be summarized and published in due course. We strongly recommend that companies and trade associations in particular review the proposals very carefully and consider responding to them.
Amendment 1: When the company had a substantially limited involvement
Section 34 of the Competition Act prohibits any agreement, decision or concerted practice having as its object or effect the prevention, restriction or distortion of competition in Singapore. The CCCS considers it a violation of section 34 to simply attend a meeting where anti-competitive discussions are taking place. Such participation gives an impression of solidarity and can embolden other members of the cartel, and any form of behavior which strengthens an agreement is considered by CCCS to be infringing behavior. In view of this, the CCCS generally did not grant a company that was a passive participant a mitigating discount.
This was criticized by the CAB in its decision of December 4, 2020 in the Chicken Cartel case where it noted that “CCCS affirmed the position of strength in the [Infringement Decision] that minor and passive participation is not a mitigating circumstance ”and therefore reduced the financial penalties of some of the appellants on the grounds that they“ were passive participants, which is a mitigating circumstance ”.
Inspired by the ACR decision, the CCCS now appears to recognize that there are limited instances where a company may be less culpable, while noting that the circumstances in which such a mitigating reduction is available should be narrowly circumscribed. To enable this, a new example will be inserted regarding when (in the context of an infringement of Article 34) the role of the company may constitute a mitigating circumstance in paragraph 2.15 of the Sanctions Guidelines, which sets out a non-exhaustive list of mitigating factors.
More specifically, the proposed amendment provides that in order to benefit from a mitigating discount, the company must provide evidence that his involvement in the offense was substantially limited and demonstrate that, during the period in which it was a party to the infringement, it effectively avoided applying [the anti-competitive agreement] by adopting competitive behavior in the market.
In making this proposal, the CCCS added that it would require the company to provide proof that its conduct had clearly and substantially departed from the anti-competitive agreement or consensus to the point of disrupting its very operation. For example, in the case of a price increase agreement, the CCCS clarified that a decision by the company not to increase its price at all may constitute a authentic act to apply competitive behavior in the market. On the other hand, a situation in which a company decides to increase its prices to a lower amount after agreeing to a higher level with the rest of the group will not constitute a authentic behave competitively because the firm may simply seek to profit from knowledge of the anti-competitive arrangement at the expense of other violating firms. While this is useful, the difficulty associated with it is that if a company, not intending to act in collusion with others, nevertheless increases its prices due to the increase in raw material costs, it can be considered to have participated in the alleged cartel and does not benefit from any mitigating discount. Arguably more guidance should be provided here.
We emphasize that the use of the conjunction “and” would mean that in order to qualify for a mitigating discount, the company must also demonstrate that it has avoided applying the agreement. and adopted a competitive behavior. Merely proving that a company had a substantially limited involvement in the infringement would not suffice for a mitigating discount.
Amendment 2: When the company was not a leader, instigator or proactive participant
The CCCS has noted in previous cases that companies say in investigations that they should receive discounts for their allegedly lesser roles in a cartel. Although the sanctions guidelines take into consideration a company’s role in an offense, the key aspect that is examined for mitigation is whether the company acted under severe duress or pressure. From a business point of view, this is obviously too narrow.
Therefore, it is fortunate that the CCCS has proposed to amend its sanctions guidelines by expressly allowing the company to provide evidence that his involvement in the offense was substantially limited. Although the proposal is positive, it could arguably be clearer. Also, as pointed out above, it is not clear how CCCS would assess the situation if the company is able to provide evidence that its involvement in the infringement was substantially limited, but if the company could not. prove that it has not increased its prices at all. For reference, we note that while the language used by the CCCS appears to be inspired by the European Commission’s 1998 guidelines on the method of setting fines (“EC 1998 Penalty Guidelines“), the 1998 EC Sanctions Guidelines distinguished” an exclusively passive or ‘follow my leader’ role in the infringement “and” non-application in practice of the offending agreements or practices. “Apparently, the CCCS does not intend to make such a distinction.
CCCS said in its consultation that it had to strike a balance “between providing enough clarity and being too prescriptive.” We agree; Still, to help businesses, it would help to have at least more illustrations.
Note that while the CCCS opens a door for companies to provide proof of their limited involvement in a breach, the CCCS offers a clarification that apparently makes it more difficult to establish limited involvement. In this regard, CCCS proposes to introduce a new paragraph 2.16 as follows:
For the avoidance of doubt, the fact that a company did not play a leading or instigating role in the infringement or that it was not a proactive participant in the infringement will not, in itself, be , considered as a mitigating circumstance. In addition, the fact that one company participated in an infringement for a shorter duration than others will not be considered a mitigating circumstance since this will already be reflected in the duration of the infringement in step 2.
The Sanctions Guidelines are a non-exhaustive statement of the CCCS approach to financial sanctions, as the CCCS seeks to distinguish between being overly prescriptive and providing sufficient clarity. Nonetheless, the Sanctions Guidelines indicate the general policy approach of the CCCS to establish a high threshold for companies to successfully obtain a mitigating discount based on its role in the offense. It is essential at this stage, where a consultation has been launched, that companies examine the potential impact on them and propose adjustments if necessary.