Singapore competition watchdog clears S Korean shipbuilders' merger

THE Competition and Consumer Commission of Singapore (CCCS) has cleared the proposed merger between Korea Shipbuilding & Offshore Engineering (KSOE) and Daewoo Shipbuilding & Marine Engineering (DSME).

Following its assessment, the commission concluded that the transaction, if carried into effect, will not lead to a substantial lessening of competition in Singapore, it said in a press statement on Tuesday evening.

As the two South Korean shipbuilders overlap in the global supply of commercial vessels, the competition watchdog's assessment focused on the largest vessel classes within each of the four vessel types.

CCCS found that the barriers to entry and expansion are generally high in the relevant markets, given the significant capital outlay and resources required.

Although the shipbuilders' customers are large shipping companies that purchase commercial vessels from multiple suppliers, there is insufficient evidence that customers have buyer power to constrain the merged entity from exercising its market power.

The two parties are also close competitors in the relevant markets.

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However, there will be viable alternative suppliers even after their proposed merger, CCCS found. This finding is supported by market feedback and the commission's quantitative assessment on the closeness of rivalry between shipbuilders.

These alternative suppliers have sufficient excess capacities to satisfy a significant portion of any demand that switches away from the merged entity, in the event the merged entity raises prices.

KSOE and DSME's historical bidding data also suggests that there are other close competitors that constrain the two firms' bid prices, CCCS added.

KSOE's Singapore branch operates as a sales office. The company produces a range of commercial vessels, including oil tankers, containerships, liquefied natural gas carriers and liquefied petroleum gas carriers.

Meanwhile, DSME produces a range of commercial vessels and also builds offshore facilities for use in the oil and gas sector. Its Singapore office focuses on marketing activities supporting its businesses.

CCCS conducted two public consultations and contacted 157 stakeholders, including competitors and customers. It also engaged government agencies to gather the necessary information.