An Antidote for Antitrust

By Nicole Wee

Cartel Conduct: It’s easier to get into trouble with competition regulators than you think it is. Forefront: By TSMP explores prevention and cure.

Matt Damon in The Informant, wearing a wire, sitting in a room full of men in business suits secretly colluding to fix the price of an amino acid for corn. That’s anti-competitive cartel behaviour.

But, in an age where everyone is a click away, you can get into trouble with the Competition Commission for far far less. All it takes to break the law is a consensus, arrangement, or practice involving competitors which aims to prevent competition or has the effect of preventing competition. This may take the form of price-fixing, bid-rigging, carving up markets or sharing sensitive market intelligence. However, this does not have to be achieved through a physical meeting, signed agreement or conference call. Instant messaging is enough.

Conspiratorial Chats

Take the Libor scandal. Traders from competitor banks routinely communicated amongst themselves via instant messaging or chat rooms to submit rates that would manipulate the benchmark rate in their favour. That may have just been how things were done back then, and most people were oblivious to their own wrongdoing. The world now knows better, and regulatory and antitrust rules have become more clearly articulated across jurisdictions.

In 2012, the Libor scandal led to hundreds of millions of dollars in regulatory and antitrust fines. Its effects rage on. Just last month, the U.S. Court of Appeals for the Second Circuit overturned a lower court’s decision, and allowed plaintiffs’ anti-trust law suits for losses suffered from the banks’ rigging of the Libor benchmark to go ahead. The appellate Court ruled that such coordination and cooperation in relation to a benchmark rate was an antitrust violation. Sixteen of the world’s biggest banks will have to continue to pay huge legal fees to defend these claims.

Fast and Furious Emails

Closer to home, 10 financial advisory firms recently got fined between S$5,000 to S$405,000 for participating in conduct aimed at restricting a competitor’s access to the life insurance market.

What exactly did they do wrong? Fundsupermart, owned by iFAST Pte Ltd (iFAST), ran a new promotion on their online sales platform, marketing life insurance products with a 50% commission rebate when purchased online. The Association of Financial Advisers (AFA) called a meeting where it was suggested that member firms should do something about this.

The AFA President subsequently emailed iFAST to protest the online promotion, with member firm representatives in copy. Some member firm representatives (including two who were not even present at the AFA meeting) also briefly replied to this email to express support of the AFA President’s email, and to separately express their displeasure directly to iFAST. All firms continued to be copied on, but did not necessarily reply to, brief email correspondence between the AFA President and iFAST over 2 days.

iFAST eventually withdrew its Fundsupermart promotion a couple of days after its launch. In March this year, all 10 firms (including the two who did not attend the AFA meeting) were found to have infringed the Competition Act, in having participated or combined together in an agreement to exercise pressure on iFAST to withdraw from a market in Singapore.

The total number of meetings? Just 1 (or none for the two non-attendees).

The total number of emails where all 10 competitor advisory firms were included on copy? Around 10 or so.

The duration over which meetings happened and emails were exchanged? Less than 48 hours.

An Antidote

The only antidote that might have changed the legal outcome? Publicly distancing oneself (a.k.a. the A-Plague-Upon-Your-House approach).

Under the Singapore competition framework, even if you play a limited role and have incomplete knowledge, or may not be interested in the plan, or even if you participate under peer pressure, you could still be found to have participated in the anti-competitive conduct.

The only way to avoid liability would be to express firm and unambiguous disapproval and disavowal of the proposed conduct or arrangements. Silence is not golden; silence is consent. This means that you must express outright disagreement with the matters being discussed, ask not to be included in any further discussions (or email chain), and pack your things to leave the room (or the chat room).

This is a simplification, but we came from a cultural background where being respectful is important, and disagreement is often communicated indirectly or through silence, either to avoid offend someone expressly, or to allow that person to “save face”. The antidote runs counter-intuitively to our cultural instincts and ideas of collegiate behaviour. Our socialised reflexes are antithetical to the prescribed cure.

What is the practical implication? We have to go the extra mile, and take special care in educating our businesses and employees, as competition regulators all over the world increase in their zealousness. In a world where even fleeting communications with competitors in trade associations, over drinks, or at negotiating tables can lead to inadvertent or even accidental anti-competitive conduct, and where ignorance is not bliss; we (1) need to know exactly where the line in the sand is, and (2) need to be prepared to directly and actively disavow any suggestion of anti-competitive conduct. We need to adapt to new behavioural rules.

As the old adage goes – good fences make good neighbours, and in this case, good competitors too.


TSMP law corporation