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10 financial advisory firms fined S$1m by competition body
IN a first-of-its-kind case for the local financial services industry, 10 financial advisory firms have been slapped with fines totalling nearly S$1 million for collectively infringing the competition law.
The firms came together on May 2 and 3, 2013 to force a competitor, iFAST, to withdraw its offer of a 50 per cent commission rebate on life insurance products on its website Fundsupermart.com.
The Competition Commission of Singapore (CCS), which investigated the case and imposed the penalties, said on Thursday that the firms were able to get iFAST to back down because of their commercial relationship with iFAST in its unit trust business, which contributed significantly to iFAST's revenues.
The firms - which include PIAS, IPP and Financial Alliance - were found guilty of violating Section 34 of the Competition Act, which prohibits "any . . . agreements and/or concerted practices which have as their object or effect the prevention, restriction of distortion of competition within Singapore".
Toh Han Li, chief executive of the Competition Commission of Singapore (CCS), noted that this is the first time the financial services industry in Singapore has had such a case, although there have been similar cases in sectors such as transportation service and domestic maid agencies before. He added that this case involved market access - not price fixing, which has been the issue in most of CCS's cases so far.
"Agreements between competitors to collectively pressurise a competitor to withdraw an offering can constitute anti-competitive conduct . . . CCS will enforce the law, where necessary, to ensure that new and innovative players can access markets and compete fairly," Mr Toh said at a press conference.
According to CCS in its report, iFAST was continually pressurised on May 2 and 3, 2013. "IFAST offered to limit the Fundsupermart offer to a one-month period in the early afternoon of May 3, but this was rejected," it said.
Among CCS's incriminating findings was this e-mail that Financial Alliance sent to inform its financial adviser representatives about the collective action against iFAST: "I have taken action to get the whole industry to respond to iFAST on this matter . . . But keep this within our industry, prevent the news catching attention from public and press. We will do everything we could to get them to stop the project immediately."
iFAST withdrew its 50 per cent commission rebate on the afternoon of May 3, 2013.
"The Fundsupermart offer was an innovative one that allowed iFAST to reach a wide client base, save costs and pass on cost savings to policyholders," CCS said. "Had iFAST's offer remained on the market, the Parties (the 10 firms) might have had to make similar or new offers to respond to the competitive threat of commission rebates from the Fundsupermart offer."
The penalties, totalling S$909,302, were based on each of the 10 firms' "relevant turnover for the distribution of the relevant life insurance products in Singapore". PIAS was given the single biggest fine (S$405,115), followed by IPP (S$239,851), and Finance Alliance (S$137,524).
WYNNES, JPARA and Frontier got away with the smallest penalty (S$5,000 each). The other firms fined were Avallis (S$54,788), Cornerstone (S$13,781), Promiseland (S$31,305) and RAY (S$11,939).
The 10 firms have up to two months to appeal against the charge and penalties, both contained in a 100-page document.
Reacting to the infringement decision against Financial Alliance, its managing director Vincent Ee said in a media release: "While our stand is that a commission rebate as an inducement is inappropriate and acts against consumer interest, we also respect that CCS, as the authority on competition, has their perspective on this matter from another angle."
Indicating that Financial Alliance "embraces fair competition", Mr Ee said his company is "assessing the situation and our options" on the infringement decision. "We will decide in due course the next steps to take."