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Merger Control Infringement Decision - Consumer Commission of Singapore

On 25 May 2018, the Competition and Consumer Commission of Singapore ("CCCS") provisionally concluded that the proposed merger between Wilhelmsen Maritime Services AS (“WMS”) and Drew Marine Technical Solutions (“DMTS”) was likely to result in a substantial lessening of competition in the market for the supply of marine water treatment chemicals (including ancillary materials and services) in Singapore and so could infringe Section 54 of the Competition Act (Cap. 50B).[1] Ultimately the parties abandoned the deal and withdrew the filing.

WMS and DMTS are established, global players active in the supply of maritime products and services worldwide to the full spectrum of marine vessel types. Their activities overlap in the supply of marine chemicals,[2] marine gases[3] and marine welding equipment.

During the in-depth 9 month investigation,[4] the CCCS raised concerns about the parties' allegedly substantial combined market share in the supply of marine water treatment chemicals. This strong market position was bolstered by other factors including (i) the limited size and scope of rivals (apparently the next largest player was less than one-twentieth of their combined share) and (ii) the quality of the parties' global supply network(s), allowing them to supply their products across a wide range of ports globally in an efficient manner, which together with their superior technical and ancillary value-added services, assured customers of their reliability and credibility. In addition, the CCCS determined that they are each other’s closest competitor, as illustrated by the recent capture of significant market share from WMS by DMTS in the supply of marine water treatment chemicals in Singapore. This conclusion was further underpinned by the parties’ perceptions of each other as set out in their internal strategic documents, customer purchasing data and internal weekly sales reports.[5]

In light of these factors, the CCCS considered that post-transaction, competitive pressure from existing players would be insufficient to counteract their competitive offering, and any potential new market entry would not be sufficiently timely or strong enough to offset the potential negative effects. Consequently, the CCCS found that the Proposed Transaction could lead to a substantial lessening of competition in the relevant market in Singapore.

This is only the second time that the CCCS has sought to prohibit outright a proposed merger in its more than decade-long existence. There are some important counselling points to take:

  1. Voluntary filing regimes are not to be taken lightly: This is yet another timely reminder that Singapore's voluntary merger regime has real enforcement teeth and the regulator does not shy away from complex, nuanced legal analysis to understand the real impact on local competitive conditions. Parties must incorporate the need for merger control filings into their overall deal planning as early as possible in order to identify potential risk areas and develop a robust, coordinated strategy to deal with it as smoothly as possible to avoid negative surprises later.
  2. Market share is not the end of the story: While the significant combined market share undoubtedly influenced the CCCS' thinking, it was not the sole focus of its legal and economic analysis. The CCCS also appears to have considered more nuanced concepts such as closeness of competition, the degree of supply-chain integration and alternative competitive constraints posed by possible new entrants and/or customers' developing their own internal supplies. While ultimately none of these alternative strands were sufficient to overcome the potential anticompetitive effects, it is an important reminder of the need to develop a holistic merger control analysis highlighting the overall pro-competitive benefits when considering a new transaction.
  3. Internal documents can prove important: In line with international trends, we see that the parties' internal documents can form a significant part in shoring up the CCCS' theory of harm. In reaching its conclusion that the parties were closest competitors, the CCCS relied on their perceptions of each other as set out in their internal strategic documents and internal weekly sales reports. As the merger review process becomes ever more data-intensive with increasingly burdensome and broad requests for internal documents, in-house counsel must try to intervene as early in the deal planning process to understand the potential risks involved.
  4. The specific industry concerned can attract increased scrutiny: Finally, it is important to note that not all deals are created equally and some sectors may attract greater scrutiny due to the inherent political or strategic sensitivities involved. In this case, the CCCS was concerned by the fact that "[g]iven the sensitivity of marine equipment, a consistent and reliable supply of marine water treatment chemicals is particularly critical." While ultimately the merger review process is based on the cold, hard economics involved, these broader, softer "political" factors should also be taken into account when assessing the overall merger control risks at the outset as they can influence the degree of scrutiny involved and the overall timing for the review process.
Melissa Healy, Merger Control, Competition Law Blog
Melissa is a specialist in competition law currently at Baker McKenzie’s Singapore office; and formerly at Baker McKenzie’s Brussels-based European Competition team. Her practice includes advising clients on the full spectrum of competition law issues including: multi-jurisdictional merger control assessments, advising on conclusion of R&D, technology licensing and distribution agreements, horizontal cooperation and JV arrangements, cartels, competition law investigations and litigation before the European Courts; notably acting on the appeal of one of the EU Commission’s first pay-for-delay patent settlement agreement investigations.

 

[1]     Case CCS 400/004/17, CCCS press release dated 25 May 2018 available here.

[2]     Marine cleaning chemicals, marine water treatment chemicals and marine fuel oil treatment chemicals.

[3]     Marine welding gases and marine refrigerant gases.

[4]     The transaction was first notified on 10 August 2017.

[5]     CCCS press release dated 25 May 2018, paras. 4-5.

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