Competition watchdog flags potential risks in growing e-commerce space

Anti-competitive practices and price collusion loom.

A study conducted by DotEcon per the commission of Competition Commission of Singapore (CCS) raised a number of key competition-related issues that are likely to be prevalent in Singapore’s burgeoning e-commerce space. It highlighted issues such as anti-competitive practices, price collusion, and entry and expansion barriers.

The study posited that businesses might have to grapple with anti-competitive and anti-innovative conduct. An established online marketplace, for example, may stifle the growth of a newcomer by requiring retailers to list products exclusively on its website, or to always offer the lowest price on its marketplace in comparison to new online marketplaces.

The study also noted that the market may “tip” towards a few established e-commerce platforms. New entrants might find it difficult to make headways in a space that rewards already-successful online platforms.

The availability of product prices online might also facilitate collusion. For instance, companies may use sophisticated systems to monitor competitors’ online prices to ensure that they do not undercut rivals. This could lead to customers paying higher prices and diluting the benefits of scoping for competitive prices online.

Further, online vertical agreements, such as price parity clauses, have the potential to be harmful to competition. Businesses may enjoy benefits such as brand protection and enhanced platform value that come with these agreements, but the possibility of dampened price competition looms.

For instance, Singapore’s Competition Act exempts vertical agreements from the section 34 prohibition of the Act. The study asserts that this may be problematic in relation to e-commerce, especially if the upstream platform provides a service to a downstream seller while at the same time competing with the downstream seller.

With Singapore’s e-commerce activity growth set to skyrocket to $4.4b by the end of this year alone, the need to mitigate these potential risks rises. Fortunately, the study declared that CCS’s current assessment frameworks and competition laws were “well-suited” to coping with these issues. For now, there is reportedly little need for an interventionist approach that might only create market distortion.

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