Competition and Antitrust Law in Singapore: Bid Rigging, Cartels and CCCS Investigations

Competition-law foundations

What is competition or antitrust law?

“Competition law” is the term more commonly used in Singapore. “Antitrust law” is frequently used in the United States and in international business discussions. Both expressions broadly refer to laws intended to preserve genuine competition and prevent businesses from manipulating markets.

Singapore’s Competition Act contains three central prohibitions:

• anti-competitive agreements and concerted practices under Section 34;
• abuse of a dominant position under Section 47; and
• mergers that substantially lessen competition under Section 54.

This article focuses principally on Section 34 and cartel conduct such as bid rigging, price fixing, market sharing and production restrictions.

What does Section 34 of the Competition Act prohibit?

Section 34 prohibits agreements between businesses, decisions by associations of businesses and concerted practices that have the object or effect of preventing, restricting or distorting competition within Singapore.

The prohibition is deliberately broad. It is not limited to formal contracts.

An infringement may arise from:

• a written or oral agreement;
• an informal understanding;
• coordinated behaviour;
• exchanges of commercially sensitive information;
• repeated discussions between competitors;
• WhatsApp or other chat messages;
• emails concerning tenders or prices; or
• conduct showing that competitors have replaced independent decision-making with cooperation.

CCCS explains that a concerted practice can exist even without a formal agreement where businesses knowingly substitute the risks of competition with cooperation.

What is a cartel?

A cartel is an arrangement between competitors to reduce or eliminate competition between them.

Common forms of cartel conduct include:

• bid rigging;
• price fixing;
• customer or market allocation;
• output or production restrictions; and
• coordinated responses to tenders.

CCCS regards cartel agreements as the most serious category of Section 34 infringement because they remove competitive pressure, reduce incentives to innovate and may cause customers to pay more.

What is bid rigging?

Bid rigging occurs when businesses that are expected to compete for a tender secretly coordinate their bids.

The tendering party is led to believe that it is receiving independent and competitive offers. In reality, the tenderers may already have agreed who should win.

Common forms of bid rigging include:

Cover bidding

One competitor agrees to submit an intentionally higher or less attractive bid so that another business is more likely to win.

Bid suppression

A potential competitor agrees not to submit a bid or withdraws a bid to assist the intended winner.

Bid rotation

Competitors take turns being the designated winner of different tenders.

Market allocation

Competitors divide projects, customers, territories or business sectors between themselves.

Sharing tender prices

One bidder provides its proposed price or tender details to another bidder before submissions close.

The Flex Connect and Tarkus case involved a designated winner providing bid prices and other tender information to the assisting company. The assisting company would then submit a higher bid, creating a false appearance of competition.

Is discussing prices with a competitor illegal?

Businesses should exercise extreme caution before discussing present or future prices with competitors.

Potentially sensitive subjects include:

• proposed tender prices;
• minimum pricing;
• discounts;
• margins;
• surcharges;
• cost assumptions;
• future price increases;
• customers to be targeted;
• territories to be served;
• whether to tender;
• tender timing; and
• the commercial terms a business intends to offer.

Even a casual conversation may become problematic where it influences the parties’ subsequent market conduct.

A business should not assume that a conversation is safe merely because:

• nothing was signed;
• the discussion was informal;
• it occurred socially;
• the parties communicated through personal devices;
• the agreement was never fully implemented; or
• the business did not ultimately win the tender.

The central question is whether competitors coordinated conduct that should have been decided independently.

Why is bid rigging harmful?

Bid rigging prevents a customer from receiving the benefit of genuine competition.

A customer conducting a tender usually expects each participant to submit its best independent offer. When bidders cooperate, the customer may face:

• artificially higher prices;
• reduced quality;
• fewer meaningful choices;
• poorer contractual terms;
• reduced innovation; and
• a false impression that the tender was competitive.

In his interview, Justin Chan explained that bid rigging prevents customers from receiving the best value for their money. If a small number of market participants can dictate price, businesses and consumers may be left without a genuine alternative.

CCCS similarly stated that the conduct in the Flex Connect and Tarkus matter eliminated competitive pressure and created the risk that customers would overpay.

CCCS investigations and penalties

What penalties can CCCS impose?

CCCS may investigate suspected anti-competitive activity, issue infringement decisions, direct businesses to stop or modify their conduct and impose financial penalties.

In the interior fit-out case, CCCS imposed:

When assessing penalties, CCCS may consider matters such as:

• the relevant turnover of the business;
• the seriousness of the infringement;
• the duration of the conduct;
• aggravating factors;
• mitigating factors;
• previous infringements;
• cooperation with the investigation; and
• whether the business qualifies for leniency.

The financial penalty may therefore be substantial even where the conduct concerns only one division or segment of a larger business.

Can CCCS conduct a dawn raid?

Yes.

CCCS has extensive statutory investigation powers. Depending on the circumstances, its officers may enter premises, require information and documents, and seize or copy relevant evidence.

In the Flex Connect and Tarkus investigation, CCCS conducted a raid at the businesses’ premises and seized digital evidence, including images of hard drives and copies of WhatsApp chats.

A competition-law inspection may involve:

• officers arriving without advance notice;
• access to offices, storage spaces and workstations;
• examination of physical files;
• imaging of laptops or hard drives;
• collection of mobile phones;
• retrieval of emails and chat histories;
• keyword searches across electronic records; and
• interviews with directors and employees.

In his interview, Justin described being contacted urgently when CCCS officers were already present at a client’s premises, examining cupboards, laptops and mobile phones.

What should a company do during a CCCS dawn raid?

A company should remain calm and avoid obstructing the investigation.

Immediate steps should include:

• Contacting competition-law counsel.
• Identifying the officer in charge and the legal basis of the inspection.
• Reviewing the scope of any warrant or statutory authority.
• Appointing an internal response team.
• Keeping a record of the documents and devices reviewed or taken.
• Preserving all potentially relevant evidence.
• Preventing employees from deleting messages or documents.
• Separating potentially privileged legal communications for review.
• Ensuring employees answer accurately without speculation.
• Maintaining business continuity where reasonably possible.

Employees must not hide documents, delete messages, provide false information or obstruct officers.

A poorly handled inspection may create additional exposure beyond the underlying competition issue.

Are communications with lawyers protected?

Legal professional privilege may protect qualifying confidential communications between a client and lawyer made for the purpose of obtaining or giving legal advice, as well as certain communications created for litigation.

However, not every document copied to a lawyer is automatically privileged.

During an investigation, businesses should promptly identify documents over which privilege may properly be asserted. Privilege claims should be made carefully and supported by an accurate description of the nature of the communication.

Businesses should not make indiscriminate privilege claims merely to delay an investigation.

What is the CCCS Leniency Programme?

The CCCS Leniency Programme encourages cartel participants to disclose the cartel and cooperate with the regulator.

Because cartels are secretive and difficult to detect, a participant may have a strong incentive to approach CCCS before another member does.

CCCS states that where the relevant requirements are met:

• the first qualifying business to report a cartel before an investigation begins may obtain immunity from financial penalties; and
• where an investigation has already commenced, a qualifying applicant may receive a reduction of up to 100% of the financial penalty.

A business may also seek a leniency marker before it has gathered all supporting evidence, allowing it time to collect the required material while preserving its position in the queue.

In the Flex Connect matter, CCCS applied a leniency discount because Flex Connect made a leniency application during the initial investigation.

Is leniency the same as whistleblowing?

No.

A leniency applicant is ordinarily a business or participant that has itself been involved in cartel conduct and seeks immunity or a reduction in penalties by cooperating with CCCS.

A whistleblower or informant may be someone who has information about cartel conduct but is not seeking leniency as a participating business.

CCCS may receive information concerning:

• the businesses involved;
• the origin of the cartel;
• the market or industry affected;
• communications evidencing the arrangement; and
• how the cartel operated.

CCCS states that an informant’s identity and identifying information may be kept strictly confidential. In appropriate cases, a monetary reward may also be available for information leading to an infringement decision. Business owners involved in the cartel are not eligible for that reward and should instead consider the Leniency Programme.

When should a business consider a leniency application?

A business should seek urgent legal advice where it discovers evidence suggesting that employees or directors may have:

• exchanged tender prices with competitors;
• submitted cover bids;
• agreed which business should win;
• allocated customers or projects;
• discussed future prices;
• agreed not to compete for particular work;
• coordinated production or capacity;
• concealed communications with competitors; or
• participated in recurring competitor meetings involving sensitive information.

Timing is critical.

The value of a leniency application may depend heavily on whether another cartel participant has already approached CCCS.

An internal investigation should therefore be conducted quickly but carefully, with appropriate attention to legal privilege, document preservation and the risks of alerting other participants.

Can an employee apply for leniency without the company?

CCCS’s programme may apply to businesses or individuals involved in cartel activity, depending on the relevant circumstances and eligibility requirements.

An individual who discovers problematic conduct should obtain independent legal advice before taking action, particularly where his or her interests may differ from those of the employer.

A company’s lawyer may act for the organisation and not necessarily for each employee personally.

Can customers sue businesses involved in bid rigging?

The Competition Act provides a right of private action for a person who suffers loss or damage directly as a result of an infringement of the Section 34, Section 47 or Section 54 prohibitions.

A customer affected by bid rigging may therefore consider whether it suffered loss because it paid more than it would have paid in a genuinely competitive tender.

Potential issues include:

• whether the claimant suffered direct loss;
• the difference between the contract price and the competitive market price;
• whether the infringement caused the alleged overpayment;
• whether the customer received any offsetting benefit;
• which businesses are legally responsible;
• the effect of the CCCS infringement decision; and
• applicable procedural and limitation requirements.

Quantifying the loss may require economic, accounting or industry evidence.

A statutory competition claim should be distinguished from other possible causes of action, such as misrepresentation, conspiracy, breach of contract or unlawful means conspiracy. The available claim will depend on the facts, pleadings and evidence.

Can a company be liable for an employee’s messages?

Potentially, yes.

Businesses act through directors, employees and agents. Competition exposure may arise from communications sent by sales staff, estimators, procurement teams, project managers or senior management.

A company may face serious difficulty where employees use:

• personal WhatsApp accounts;
• private email addresses;
• disappearing-message applications;
• informal competitor chat groups; or
• undocumented meetings.

Using a personal device does not necessarily prevent the communication from being obtained during an investigation.

Businesses should adopt competition-law policies that regulate both formal and informal communications.

Are trade association meetings risky?

Trade associations can perform legitimate and useful functions, including industry education, safety initiatives and engagement with government agencies.

However, meetings involving competitors create risk if discussions move into commercially sensitive territory.

Topics that should generally be avoided include:

• future prices;
• customer allocation;
• tenders;
• intended discounts;
• production levels;
• collective refusals to deal;
• confidential costs;
• margins; and
• future commercial strategy.

Associations should use clear agendas, keep accurate minutes and interrupt inappropriate discussions immediately.

A participant who is confronted with anti-competitive discussions should clearly object, ensure the objection is recorded and leave the discussion where necessary. Remaining silent may not provide adequate protection if the participant continues to receive or use sensitive information.

Lawful collaboration and compliance

Does every competitor collaboration breach competition law?

No.

Businesses may collaborate legitimately in many circumstances, including:

• genuine joint ventures;
• subcontracting arrangements;
• consortium bids;
• research and development;
• common purchasing;
• distribution agreements; and
• industry standards.

However, the commercial arrangement should have a legitimate purpose and should not impose restrictions that go beyond what is reasonably necessary.

For example, two contractors may sometimes need to form a genuine consortium because neither can independently perform a large project. That is different from two contractors who are independently capable of tendering but secretly agree which one should win.

The substance of the arrangement matters more than its label.

What are the warning signs of bid rigging?

Tendering organisations should investigate where they observe:

• identical errors or unusual wording in competing bids;
• bids submitted from the same device or address;
• a regular pattern of businesses taking turns to win;
• unexplained withdrawal of a competitive bid;
• large and predictable price gaps;
• losing bidders later becoming subcontractors;
• competitors using the same pricing assumptions;
• bidders appearing to know one another’s prices;
• last-minute bids that appear deliberately uncompetitive; or
• repeated tender outcomes involving a small closed group.

No single sign necessarily proves collusion. A pattern of indicators may justify further investigation.

How can businesses reduce competition-law risk?

An effective competition compliance programme should include:

Clear internal rules

Employees should understand that they must not discuss prices, tenders, customers, territories or commercial strategy with competitors.

Tender protocols

Tender documents, pricing models and bid strategies should be access-controlled and independently prepared.

Training

Directors, sales staff, project managers, procurement personnel and employees attending industry events should receive practical training.

Communication controls

The company should address the use of WhatsApp, personal email, disappearing messages and informal competitor groups.

Escalation procedures

Employees should know who to contact if a competitor proposes an inappropriate arrangement.

Document retention

Records should be preserved in accordance with a lawful and consistently applied policy.

Periodic audits

Higher-risk industries and teams should be reviewed for suspicious patterns or unexplained competitor communications.

Dawn-raid planning

Reception staff, IT personnel and senior managers should know what to do if CCCS officers arrive.

What should you do if a competitor suggests coordinating a tender?

Do not agree.

The business representative should:

• refuse clearly;
• avoid receiving further confidential information;
• leave the conversation if it continues;
• create a contemporaneous written record;
• report the incident internally;
• preserve relevant communications; and
• obtain legal advice.

CCCS has advised businesses approached to participate in anti-competitive arrangements to refuse immediately and publicly distance themselves from the discussion.

Why competition compliance matters beyond the financial penalty

The consequences of a competition infringement may extend well beyond the CCCS penalty.

A business may face:

• civil claims from affected customers;
• legal and expert costs;
• disruption from investigations;
• seizure and review of electronic records;
• management distraction;
• loss of customer confidence;
• reputational damage;
• exclusion from commercial opportunities;
• scrutiny from auditors and investors; and
• internal disciplinary consequences.

As Justin explained during the interview, a business may have only one reputation to lose.

Rebuilding trust after a bid-rigging finding can require significant time, transparency and goodwill.