17 January, 2020
Under Singapore competition laws, not all mergers give rise to competition issues. A "merger" from a competition law angle would encompass the acquisition of a majority stake of one entity in another, or the transfer or pooling of assets, or the creation of a joint venture with all the features of an autonomous economic entity.
Many mergers are either pro-competitive (because they positively enhance levels of rivalry), or are competitively neutral. In order to determine whether a merger is anti-competitive, the Competition and Consumer Commission of Singapore ("CCCS") will undertake an assessment as to whether the merger leads to a substantial lessening of competition, e.g. resulting in an increase in prices above the prevailing level, lower quality, and/or less choices of products and services for consumers. If so, such a merger will infringe Section 54 of the Competition Act.
Mergers in the aviation sector have always been under scrutiny, as highlighted by the following recent examples:
Feedback Sought on Singapore Airlines and Malaysia Airlines Cooperation
On 30 October 2019, Singapore Airlines and Malaysia Airlines notified the CCCS of a proposed commercial cooperation between the parties covering scheduling, pricing, sales and marketing, and certain other areas. The proposed commercial cooperation would extend to (i) SilkAir (Singapore) Private Limited and Scoot Tigerair Pte Ltd (being wholly owned subsidiaries of Singapore Airlines) and (ii) FlyFirefly Sdn Bhd (being the sister company of Malaysia Airlines).
The parties submitted that they provide overlapping direct and indirect routes between Singapore and Malaysia but the competitive analysis should focus on overlapping direct routes:-
(i) between Singapore and Kuala Lumpur; and
(ii) between Singapore and Kuching.
The parties also submitted that there is unlikely to be any adverse effect on competition due to continued intense competition from low cost carriers, alternative modes of transportation and low barriers to entry by potential competitors.
The parties submitted that the proposed commercial cooperation would result in significant efficiencies, and consumer and economic benefits from enhanced service offerings, expansion of their virtual networks, improved connectivity between the countries which benefits their aviation and tourism industries, potential scheduling benefits and time savings, and more competitive fares from the reduction of double marginalisation and better fare combinability.
CCCS is conducting the public consultation from 27 November to 18 December 2019.
Emirates' Application to Vary Voluntary Commitment Approved
On 14 November 2019, the CCCS approved an application by Emirates to remove its capacity commitments for the Singapore-Brisbane route ("Undertaking") that were originally provided in 2013 for the approval of its alliance with Qantas Airways Ltd ("Alliance").
In April 2019, Emirates applied to remove its minimum base seat capacity commitment in respect of the Singapore-Brisbane route so it can withdraw from the route citing capacity under-utilisation, falling revenues and rising costs in relation to the route.
CCCS did not receive any feedback during the public consultation for the application by Emirates to vary the Undertaking. Based on the information provided by the parties and third parties, CCCS assessed that:
(a) there remain competitive constraints on the parties after the removal of Emirates' seat capacity commitment for the Singapore-Brisbane route;
(b) seat capacity remains adequate to meet demand for passengers whose journey terminates at Singapore or Brisbane; and
(c) the Alliance will continue to have net economic benefit on air passenger services and will remain excluded from section 34 of the Competition Act even with the varied capacity commitments.
CCCS approved Emirates' application to remove its base seat capacity for the Singapore-Brisbane route. Qantas maintains its commitment to provide at least 3,290 seats per week for the duration of the Alliance, and both Emirates and Qantas maintain their commitment to provide a total base seat capacity of 8,246 seats per week for the Singapore-Melbourne route.
For further information, please contact:
Sandra Seah, Partner, Bird & Bird
sandra.seah@twobirds.com
