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Antitrust Chief Warns Singapore State-Linked Companies

Competition Commission of Singapore CEO Toh Han Li
Competition Commission of Singapore (CCS) Chief Executive Officer Toh Han Li. Source: CCS via Bloomberg

Singapore’s antitrust chief, who sanctioned foreign companies for the first time this year, said he will take action against government-linked firms that were “born dominant” if they engage in anti-competitive behavior.

“The message should get through,” Toh Han Li, chief executive of the Competition Commission Singapore, said in his first media interview since his appointment in October 2013. “Unfortunately we have to take action” if the companies want to preserve their dominant positions in an anti-competitive way.

The watchdog reviewed a proposed S$110 million ($88 million) acquisition in November involving two state-linked companies that would have created a single ferry and cruise terminal operator. Government-owned Sistic, the city’s largest ticketing agent, was fined in 2012 in the nine-year-old regulator’s only abuse of dominance case.

Dominant state-linked companies “may crowd out other competitors or potential competitors,” said Deborah Healey, an antitrust law professor at The University of New South Wales. “It is good that the regulator is focusing on government-linked companies.”

Singapore has been rated among the eight most competitive nations since 2002 by the World Economic Forum. It agreed that year, when it signed a free trade agreement with the U.S., to set up the antitrust agency. Switzerland was the most competitive economy in 2013, followed by Singapore, with the U.S. ranked fifth.

Strong Signal

“Adopting a ’softer’ approach to government-linked firms would send a strong negative signal to private investors,” said Carol Osborne, a Singapore-based economist at HoustonKemp Economists. “Ensuring a level playing field for all competitors, regardless of ownership, is particularly important in economies such as Singapore.”

State-owned investment company Temasek Holdings Pte said in 2011 that companies in its portfolio account for as much as 10 percent of Singapore’s economy. Temasek, which managed about S$223 billion as of the end of March, is the biggest shareholder in about a third of the city’s 30 largest stocks and has progressively reduced its stakes in some of them.

“Temasek must let them operate independently, and I think it does,” Toh, 47, said. “The risk is you have many shareholdings and the temptation to interfere is very great.”

Temasek’s portfolio companies are independently managed and make their own decisions, the firm says on its website. Stephen Forshaw, a Temasek spokesman, declined to comment.

While markets may not be as competitive because of dominant companies, it doesn’t necessarily mean that the government should divest its stakes and leave, said Burton Ong, who teaches antitrust law at the National University of Singapore.

Regional Actions

Singapore’s open economy makes it susceptible to international cartels, said Toh, a former district judge. The commission is assessing 24 leniency applications in eight cases after fining four Japanese ball-bearing makers a record S$9.3 million in May. The watchdog also expects to rule on an alleged price-fixing case against 11 freight forwarders by the end of the year, he said.

Toh declined to comment further on investigations by the watchdog, which can fine companies as much as 10 percent of their sales for three years. The commission isn’t looking at criminalizing anti-competitive conduct for now, he said.

Antitrust regulators in Asia including China and India are stepping up scrutiny of anti-competitive practices.

India on Aug. 25 fined 14 carmakers $420 million for stifling competition in the market for spare parts. Foreign carmakers including Stuttgart, Germany-based Daimler AG’s Mercedes-Benz unit, and Volkswagen AG’s Audi brand cut prices of spare parts in China after an antitrust probe into the auto industry.

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