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$26.9 million penalty imposed upon fresh chicken distributors for price-fixing and non-compete agreements

by Neyla Zannia
12/09/2018
in Consumer Watch, Current Affairs
Reading Time: 3 mins read
0

Chicken in poultry farm from Shutterstock.com

The Competition and Consumer Commission of Singapore (CCCS)  has issued an Infringement Decision (“ID”) against 13 fresh chicken distributors and imposed financial penalties totalling $26.9 million for engaging in anti-competitive agreements to coordinate the amount and timing of price increases, and agreeing not to compete for each other’s customers in the market for the supply of fresh chicken products in Singapore.

It said that fresh chicken distributors import live chickens from farms in Malaysia and slaughter them in Singapore. Thereafter, the distributors sell the fresh chicken products to customers such as supermarkets, restaurants, hotels, wet market stalls and hawker stalls.

“These products include whole fresh chickens, chicken parts and processed chickens,” it noted.

According to the commission, chicken is the most consumed meat in Singapore – more than 30 kg of chicken is consumed per person annually. This is significantly higher than the 1 kg to 20 kg consumed per person annually for other types of meats such as fish, pork, beef and mutton.

In 2016, approximately 49 million live chickens were slaughtered in Singapore. The total turnover of the parties, who collectively supply more than 90% of fresh chicken products in Singapore, amounts to approximately half a billion dollars annually.

In March 2014, CCCS said that it commenced its investigations into the fresh chicken distribution industry after it received information from a secret complainant.

Its investigations revealed that, from at least September 2007 to August 2014, the Parties had engaged in discussions on prices and had also expressly coordinated the amount and timing of price increases of certain fresh chicken products sold in Singapore. During these discussions, the Parties had also agreed to not compete for each other’s customers (i.e., market sharing).

The parties’ collusion restricted competition in the market and likely contributed to price increases of certain fresh chicken products in Singapore. By agreeing not to compete for each other’s customers, the Parties restricted the choices available to customers. The coordinated price increases further reduced customer choice as it limited options for customers to switch to more competitive distributors.

CCCS then said that in view of the high combined market shares of the parties, and as chicken is the most commonly consumed meat in Singapore, the parties’ anti-competitive conduct impacted a large number of customers including supermarkets, restaurants, hotels, wet market stalls and hawker stalls, and ultimately, end-consumers of these fresh chicken products.

On 8 March 2016, CCCS issued a Proposed Infringement Decision (PID) against the parties. During the course of written and oral representations by the Parties to the PID, further information was provided to CCCS of the Parties’ participation in price discussions and co-ordination of price increases.

On 27 September 2016, CCCS notified the Parties that further investigations would be conducted. Subsequently, CCCS received applications by some of the parties for lenient treatment under CCCS’s leniency programme.

Later on 21 December 2017, CCCS issued a supplementary PID against the Parties and received further written and oral representations. CCCS carefully considered all the representations in reaching its findings.

In levying the financial penalties, CCCS stressed that it takes into account the relevant turnovers of the Parties, the nature, duration and seriousness of the infringement, aggravating and mitigating factors (such as whether a party had co-operated with CCCS), as well as representations made by the parties.

Particularly for this case, it noted that the large size of the industry, the high market shares of the Parties, the seriousness and the long duration (of about seven years) of the cartel conduct contributed to CCCS imposing the highest total financial penalty in a single case to date.

CCCS said that it has imposed the following financial penalties on the Parties (penalties for entities within the same group are shown as a combined figure):

Aside from financial penalties, CCCS noted that it has directed the Parties to provide a written undertaking that they will refrain from using The Poultry Merchants’ Association, Singapore, of which all the Parties are members, or any other industry association as a platform or front, for anti-competitive activities.

Mr. Toh Han Li, Chief Executive, CCCS said, “Price-fixing and market sharing are considered some of the most harmful types of anti-competitive conduct. Such conduct is particularly harmful when the products affected are widely consumed in Singapore, such as in this case. CCCS will continue to take strong enforcement action to ensure that cartels do not negatively impact Singapore markets and harm businesses and consumers.”

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