update SINGAPORE--Time is running out for IT vendors and resellers to ensure they are in full compliance with the country's new competition laws that will take effect come January 2006, caution tech lawyers.
While the IT industry has grown accustomed to antitrust legal suits that have sprouted across the globe, such as the ongoing tussle between chip rivals AMD and Intel, Singapore is just about to begin its status as a nation with a working competition act.
According to Bryan Tan, director of Singapore law firm Keystone Law, the island-state is one of the last countries in Asia to enact general competition legislation, which already exists in countries like Taiwan, South Korea, India, Japan and soon, China.
Malaysia and Hong Kong currently do not have general competition laws, although both nations have legislations that provide for specific industries such as telecommunications and media.
Singapore's Competition Act was passed in October 2004 and came into effect January 2005. "But the provisions prohibiting restrictive agreements, and acts which are an abuse of a dominant position, will only come into effect Jan. 01, 2006," Tan told ZDNet Asia.
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Further, he added, mergers and acquisitions, which may result in a substantial lessening of competition, will be prohibited under provisions that will be effective not earlier than Jan. 01, 2007.
The Competition Act does not cover any industry that has its own regulator such as media, and telecommunications which is governed by the country's Telecommunications Act, and comes under the purview of the Infocomm Development Authority.
There are two main prohibitions--under Sections 34 and 47--in the Competition Act that IT vendors would want to take note of, said Ken Chia, a Singapore-based Baker & McKenzie lawyer who specializes in IT, telecommunications and competition laws. These legislations address practices that are deemed anticompetitive and an abuse of dominant market position, he said.
Under the new laws, Chia explained, IT vendors that share information, form cartels to gang up against other competitors or rig bids in a government tender for IT services, will be penalized.
"Before (the Act was established), there was nothing to stop them from doing (these deeds)," he said, in a phone interview with ZDNet Asia.
Under Section 47, companies above a certain size are regarded as dominant players and any abuse of this position will be prohibited, Chia said.
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According to guidelines stated in the Act, he said, a vendor with a market share of 60 percent can be deemed as a player in a "dominant" position. However, it could prove challenging for the authorities to define a vendor's market share, he noted.
For example, can a vendor with 60 percent share of a product market in the United States, but only 10 percent share in a similar market segment in Singapore, still be deemed a dominant player?
Complaints will be addressed by the Competition Commission of Singapore (CCS), Chia said, which will then evaluate the market and determine if there has been any abuse. A new statutory body under Singapore's Ministry of Trade and Industry, the CCS was established in January 2005 to administer and enforce the Competition Act.
Tan said: "The IT industry has complex relationships between vendors, distributors, integrators, outsourcers, different parties in the value chain, and so on.
"So price-fixing, output (production) rigging, market sharing, fixed trading, setting of technical standards/designs and sharing of information, are things which immediately pop up. There is no exhaustive list, of course." He advised IT vendors to check all their existing business relationships.
Hewlett-Packard Asia-Pacific said it "will be reviewing the laws" to evaluate if its existing reseller agreements are in compliance, according to a spokesperson based in Singapore. "(The company) will change the agreements accordingly to ensure compliance", she added.
Old habits must go
Chia noted that what might once be regarded as common industry practice, such as product bundling or offering resellers loyalty discount, could be deemed liable once the laws come into effect next year.
"What organizations need to realize is that some of the old bad habits they have, they will have to get rid of," he warned.
But he added that the major IT shops "should know better anyway", especially those that have been operating in regimes which have had competition laws for a while now, such as the United States and Europe.
"The big players have gone away with most of these (anticompetitive) practices, or are looking to correct them, especially if these vendors are big U.S. companies," he said. He noted that vendors such as Microsoft, have "cleaned up" some of these issues as a result of antitrust lawsuits in the United States and Europe.
Indeed, the software giant says it is benefiting from its long history in dealing with antitrust issues.
Richard Sauer, associate general counsel of legal and corporate affairs, Microsoft Asia-Pacific: "The DOJ cases in the United States dealt with some concerns that we have
"So, our resellers and OEM partners such as Hewlett-Packard and Dell Computer, for example, are free to bundle other browsers or other media players. We no longer require computer manufacturers to exclusively carry just our products."
Microsoft has some 200,000 partners and resellers in the Asia-Pacific region, excluding Japan, China, Hong Kong and Taiwan. Its Singapore office has been closely following the development of Singapore's Competition Act, and has submitted comments and feedback during the drafting stages, Sauer said.
"So we're definitely aware of it and are not too concerned," he said. "Currently, we think we are in full compliance, and we will certainly review (our status) over and over again to ensure we remain so."
IT vendors can follow suit by first reading up on the Competition Act, and they should do so quickly.
Chia said: "Get familiar with the law. Get educated. Go to the Commission's Web site for guidelines on compliance.
"Any party involved in an anticompetitive agreement will be fined. So, as long as you're part of it, you're caught (in the new laws)," he said.
While the CCS has given a six-month buffer for companies to comply, this allowance is only applicable to agreements signed after Jul. 30, 2005, he noted.
Tan advised IT vendors to launch compliance programs to ensure they are in line with the new laws. "While it may be impossible to spot every possible breach, at least these should be minimized. Time is running out," he cautioned.
IT vendors should not only be looking for their own compliance but also be aware of what their competitors have been doing, he said.
"If such competitors have been unfairly competing, then the Competition Act can serve as a useful tool to level the playing field--complaints can be made and private rights of action are available."
Establishing the Competition Act is a crucial step for Singapore as it brings the country's practices in line with international practices, Tan said. South Korea, for instance, is currently examining the antitrust behavior of major IT companies, and such action followed similar ones in the West.
"If Singapore allows monopolies to do here what they cannot do in other countries, then we are doing our consumers a disservice," he said. "Further, the belief is that vibrant and competitive industries prepare their own companies for competition in the world."
According to Samantha Mobley, Baker & McKenzie's head of competition practice and European Commission, there is an increasing number of competition regimes worldwide. Mobley is based in the law firm's London office.
Before the Second World War, only the United States had a Competition Act and this was hardly enforced, Mobley said, during an antitrust seminar held here last month. By 1996, 70 cities which contributed 86 percent of the world's trade value, had competition acts.
Several of competition regulators are also part of regional or global bodies such as the European Competition Network and International Competition Network.
Consisting of more than 70 regulators worldwide, the International Competition Network is a global body that focuses solely on competition law enforcement and seeks to improve "worldwide cooperation". Its Asian members include competition commissions from countries such as India, Indonesia, Singapore, Taiwan and Thailand.
According to Mobley, a country's competition laws can prohibit activities which adversely affect competition in that country, regardless of where such conduct occurs or the nationality of the companies involved.
Under the European Act, for example, if five organizations in China conspired to fix the price of a product that is sold in Europe, they can be charged for conducting anticompetitive activities, even if they are operating out of China.
Judiciary courts in some countries are "willing to entertain damage actions" against foreign companies, Mobley added.