Wrong FY figures used, so company's penalty for price-fixing is cut

Singapore

FOR the first time, a financial penalty imposed by the Competition Commission of Singapore (CCS) has been reduced on appeal, following a mistake in the interpretation of its rules.

Japanese firm Nachi-Fujikoshi Corporation and three other Japanese ball-bearing manufacturers were fined in May 2014 for engaging in cartel activities to fix prices.

The competition watchdog had then imposed a penalty of close to S$7.6 million.

Following an appeal, the Competition Appeal Board (CAB) found in January that the amount should have been 37 per cent lower, or close to S$4.8 million, as CCS had used the incorrect turnover figures.

Under CCS' guidelines, the penalty calculation is based on the infringing party's turnover in the relevant markets in the "last business year" or "the one preceding the date on which the decision of the CCS is taken".

The CAB said the watchdog should have based the company's penalty on turnover from the most recent financial year before the final infringement decision - not the financial year before the proposed infringement decision.

Law firm WongPartnership, which represented Nachi, said in a statement that the infringement decision was issued in May 2014, so the firm's most recent business year would have been FY2013.

The CCS had applied turnover figures from the firm's FY2012 instead, the law firm said.

When approached, CCS explained that Nachi's turnover for the financial year ending Sept 30, 2013 had not been provided to CCS before Dec 16, 2013 - the day the proposed infringement decision was issued.

In Jan 2014, Nachi made written representations to CCS; two months later, it furnished its turnover figures for FY2013, but did not state that these turnover figures should have been used for calculating the penalty.

The issue was raised only at the point of appeal, after it received the final infringement decision and penalty amount from CCS in May 2014.

CCS said: "Notably, Nachi had asked for a much larger reduction in penalties, relying on three grounds of appeal. The CAB found in CCS' favour on two out of the three grounds:

CAB said that CCS had properly exercised its discretion in determining the starting percentage to be used in calibrating the financial penalties, given the seriousness of price-fixing. CAB also found CCS to have been correct as well in factoring in the impact of this infringement on the relevant market in Singapore, in light of Nachi's market share, said the competition watchdog.

It added that the CAB's decision on this issue is significant because re-export sales make up a large part of Singapore's total export sales; in 2015, it was about 51 per cent.

Said CCS: "With Singapore being a small, open and export-oriented economy, CCS regards the CAB's decision on this issue as recognising the need to prevent and deter anti-competitive behaviour that has an impact on competition between businesses within Singapore, to ensure our markets for exports remain competitive."

After a round of public consultations between Sept 25 and Nov 27 last year, the watchdog in June sought public feedback on proposed changes to its guidelines on financial penalties and enforcement for breaches of competition regulations. CCS said the proposed review would bring its practices in line with that of the European Union and the United Kingdom.

The proposals follow submissions by WongPartnership and the International Bar Association's Antitrust Committee last November.

Ameera Ashraf, head of the law firm's competition and regulatory practice, noted that the proposed tweaks to the calculation of penalties will provide "far more certainty to parties under investigation".