Competition and Consumer Commission’s findings on NTUC Kopitiam acquisition disappointing

I am disappointed with the the Competition and Consumer Commission of Singapore’s (the Watchdog) finding that NTUC Enterprise’s proposed acquisition of food centre operator Kopitiam would not lead to a substantial lessening of competition. Giving the green light to this acquisition would see NTUC Enterprise buying all of Kopitiam Investment and its subsidiaries, which span 80 outlets island wide. With this in mind, this acquisition would make NTUC Enterprise the largest and dominant operator of food courts in Singapore. How can the Watchdog then conclude that this would not be anti competitive?

The whole premise of the Watchdog is to ensure that consumers get the best deal possible. In other words, prevent monopolies that could lead to reduced choices in the market. Robust competition ensures that prices are kept affordable and that businesses do not get complacent or arrogant. In permitting this acquisition by NTUC Enterprise, the Watchdog is in effect helping to create such a monopoly that it is tasked with preventing in the first place. Will permitting this acquisition affect its reputation as an effective Watchdog? Would its credibility and legitimacy as an independent and objective watchdog be tarnished?

The Watchdog has said in its findings that “in assessing the sale of cooked food to consumers in hawker centres, coffee shops and food courts within a 500m radius of the parties’ premises,  it found that NTUC sold such food only in a very limited number of stalls in these locations. Why is the bench mark 500m? That is hardly far! As it is, don’t we already have too many stalls for too few people? How did the Watchdog conclude that this would still be “sufficient competition”? What studies and data did they use and apply?

Secondly, the Watchdog has concluded that even post merger there would still be at least five other established competing operators. In my opinion, this misses the point. The question should be whether or not the merger would lead to a reduction of competition and not whether or not there are still competitors remaining? In other words, will the merger make it more difficult for the remaining five to effectively compete?

The Watchdog also concluded that the merged entity from the proposed acquisition would not have the ability or incentive to shut out competitors and to mandate purchases through central kitchens and supply chain networks. I wonder what is the basis of such a conclusion. The number of consumers remain the same and one competitor has been taken down. Surely that would increase NTUC’s bargaining power by decreasing its competitors’ abilities to compete?

Just by size alone, it would be able to stifle competition. Thing about it. The larger the enterprise, the more able it is to be able to get cheaper raw materials and the like. The larger an entity is, the more it can force its pricing on the consumer. Isn’t that common sense?

On a plain reading of what’s been reported on the news, I don’t find the findings of the Watchdog compelling or persuasive in the least.

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