EXEMPTED BUSINESS (Motion)

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** **EXEMPTED BUSINESS

(Motion): Resolved,

That the proceedings on the business set down on the Order Paper for today be exempted at this day's sitting from the provisions of Standing Order No. 1. - [Mr Wong Kan Seng].

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COMPETITION BILL: Debate resumed.

Mr Ang Mong Seng (Hong Kah): (In Mandarin) : Mr Speaker, Sir, with Singapore's economy developing and maturing, with our market moving towards the trend of internationalisation, and in order that we would be in line with international best practices, the

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enactment of a fair competition law is absolutely necessary so as to protect the interests of our consumers. In fact, some ASEAN countries such as Indonesia and Thailand have already enacted their fair competition laws.

This Bill will help our Government to effectively and fairly regulate the supply and demand of goods and services in the market, and make sure that goods and services are provided at reasonable prices. This will help the new enterprises, inspire innovation and creativity, so that our market will be more flexible and competitive. With this new Bill to regulate and control the market, more foreign companies will be attracted to invest here, thereby creating more job opportunities to resolve our unemployment problem and, in the process, bring about economic prosperity.

I believe that this new Bill will receive strong support from the consumers too. They are looking forward to various benefits that will be brought about by these new measures, such as cheaper goods and better service. This would not only benefit our local citizens but will also attract more tourists and, thereby, promoting growth in the tourism industry. Such healthy competition will bring a lot of benefits to our people, for example, the intense competition among the oil companies is a good example. Recently, despite the escalation of oil prices, the petrol companies in Singapore are giving their customers 5-10% discounts. This will help to regulate the petrol prices and, at the same time, benefit the motorists. This is an example of benefits brought about by healthy competition.

Protection of the interests of ordinary citizens is of paramount importance, particularly on basic daily necessities, such as drinking water, energy supply, housing, transportation and communica-

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tions. Ordinary citizens are often exploited by unscrupulous merchants when they are not adequately informed to strike up a good bargain for themselves. For example, during the recent spell of Avian flu, eggs, which would normally cost only 15 cents each were being sold at 60 cents each, when there was a shortage of supply. The ordinary citizens are already suffering when they have no eggs to eat. Yet, the merchants are raising the price. This is like what we call, "rubbing salt into their wound", and this is a consequence of unfair competition.

The enactment of this law is an excellent policy of the Government. MTI has conducted seminars to invite suggestions by members of the public and the professionals so as to finetune and improve on the Bill. I think this kind of consultative approach is excellent.

Mr Speaker, I would like to make two suggestions on this Bill:

Firstly, I suggest that the Government enlarge the scope of regulation and control under this Bill and not to exempt certain industry sectors from the control of this Bill. As it stands, industry sectors such as telecommunications, media and energy, do not come under the control of the proposed Competition Commission of Singapore. This will result in "one policy, two systems", creating confusion to the people. These industry sectors, such as energy and communications, are daily necessities to our people. If we do not have good control over the price and service, it would result in a lot of confusion and friction that would, in turn, give rise to opportunities for the industry sectors to engage in unfair competition. I would suggest that telecommunications, media and energy companies should also come under the control of the Competition Commission.

Secondly, members of the Competition Commission should also avoid sitting in

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the Board of Directors of commercial companies to ensure independence and unbiased decisions when making rulings. Although the Bill does provide for members to declare their interest as company directors and to refrain from participating in voting on any resolution which may have a conflict of interest, I feel that this is not enough. In order to avoid vicious suspicion and misunderstanding, it should be more advisable for members of the Commission to avoid taking up directorship in commercial companies.

I support the Bill.

Dr John Chen Seow Phun (Hong Kah): Mr Speaker, Sir, I think the Competition Act is long overdue. Other developed countries had this law much earlier than us. It is therefore important that we learn from others and do it right as soon as possible in order to maximise its benefits to our economy and society.

To me, the purpose of the competition law must not just be to prevent anti-competitive behaviour as it is the main focus of this Bill. This approach is too narrow. The purpose must be to promote competition in all areas of the economy, to lower the barrier of entry for new businesses and to ensure fair play. This will then lead to benefits at three levels - the consumers, the companies and the nation as a whole.

To the consumers, it will mean more choices and better quality of goods and services at lower prices. To the companies, free and fair competition will result in better efficiency and innovation to the country. There will be all round productive gain that will increase our national competitiveness and provide better employment opportunities for our citizens.

To achieve all these, I do not think the approach taken by the Competition Bill is good enough, which is to prohibit three

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activities, namely, anti-competitive agreements, abuse of dominant position and mergers and acquisitions that substantially lessen competition. Further, the Bill does not extend its powers to certain industry sectors as well as Government policies and practices that stand in the way of effective competition.

Sir, I strongly feel that such a narrow approach to this law will not serve us well. Australia started this law leaving all government activities aside. Soon, they discovered that there was a need for the Competition Commission to work with all government agencies, be it state or federal, to review all government policies and practices and lay down the principles of effective competition for all government bodies to adhere to.

What our competition law should do is to lay the overall framework for competition in Singapore, encompassing all industries and all players. The proposed Competition Commission should oversee all matters concerning competition, except those relating to national security. Any complaint regarding ineffective competition should be fully investigated by the Commission. If a complaint is related to a regulated industry sector or to a certain Government policy or practice, the Commission should work with the relevant Government body to resolve the issue.

Sir, I suggest this because each statutory board or Government department has its own objectives and functions, be it safety, infrastructural development or fiscal. They are not single-minded as far as promoting competition is concerned. Take, for instance, LTA. Its main objective is to ensure efficient transportation of people and goods. For years, Singaporeans have been paying higher prices for purchase of cars, not just because of high taxes, but also because of high profit margins earned by the authorised agents due to ineffective

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competition. As promoting such competition was not really the priority of LTA, it has taken LTA many years to allow parallel imports to compete. Just when it was thought that parallel importers would give authorised agents a run for their money, manufacturers and their agents found a way to exploit a Government rule to beat the competition. Since the signing of the Free Trade Agreement with the US, our Customs adopted the Customs Valuation Code (CVC) to assess the Open Market Value (OMV) of a car. Manufacturers are now using transfer pricing to give hefty discounts of their factory list price to their agents. These discounted prices lower the OMV of cars imported by authorised agents. On the other hand, in determining the OMV for parallel import cars, Customs add an uplift to the purchase price paid by parallel importers, notwithstanding that the purchase price is already higher than the OMV for cars from the authorised agents.

As a result, cars purchased from the authorised agents pay a much lower Additional Registration Fee (ARF). The ARF is 130% of the OMV. So, needless to say, what we are seeing today is there is hardly any competition from parallel importers. Has anyone ever asked why there should be two substantially different OMVs and, therefore, ARFs, for essentially identical cars?

Another very old policy of LTA is the surcharge of $10,000 imposed on imported used cars not more than three years old. With today's technology, such cars would not have problem meeting LTA's technical and environmental specifications, but the surcharge of $10,000 has made import of such cars non-viable. Without the surcharge, I am sure there would be keen competition in car sales that would benefit car owners. Sir, in my view, the Competition

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Commission should have the preview upon industry or consumer's feedback to look into such Government policies or practices, whether they are from Customs or LTA.

In conclusion, Sir, the competition law must not be one of just preventing abuses. It must also serve to promote competition as its ultimate objective and the best way to promote competition is to lower the barriers of entry for competition. These barriers, be they from Government policies or anti-competitive behaviour of private companies, inhibit new entrants into the industry, depriving the consumers of choice, as well as a generally lowering of price through competition. The Commission should be empowered to investigate and act against practices which put up artificially high barriers of entry into the industry such as unfair pricing of certain core services or complex procedures to discourage new entrants. Companies which are strongly vertically integrated should be closely watched for these misdeeds. On top of that, there must be a pro-active and coordinated review of all Government policies and practices that affect competition. Only then could we have a meaningful and useful law that would maximise the benefits of competition for Singapore and Singaporeans.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Thank you, Mr Speaker, Sir, for allowing me to participate in this debate.

Sir, it is wonderful that Singapore is finally introducing a Bill to make provision about competition and the abuse of a dominant position with the intended effect of creating a level playing field for all participants. I have been looking forward to the introduction of this Bill since the day it was mentioned many years back because I believe that competition would bring about cheaper prices and better services by the providers. However, as I

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flipped through the pages of this new Competition Bill, my fears have been confirmed. I am dismayed to learn that this Bill does not cover our political sphere. This Bill does not have any written provisions to check the monopolistic powers, anti-competitive behaviour and the abuse of a dominant position by a political party, in particular, the governing party of Singapore, against its competitors in the political market.

[Mr Deputy Speaker (Mr Chew Heng Ching) in the Chair]

5.19 pm

It is a well-known and recognised fact that the PAP, as the governing monopoly in Singapore, uses every resource within its dominant power to make anti-competitive practices, like the redrawing of the electoral boundaries and regrouping of weak constituencies into new and bigger GRCs, the threats to upgrading and the giving and cashing out of the New Singapore Shares one day before polling; and, more importantly, the announcement of the heavily amended electoral boundaries one day before the dissolution of Parliament.

Dr Vivian Balakrishnan: rose ---

Mr Deputy Speaker: Order.

Mr Steve Chia Kiah Hong: Mr Deputy Speaker, Sir, my speech is relevant because I am saying that the Competition Bill should include all sectors, including Government services, agencies and Government service providers - parties that are seeking the mandate of the market for public support.

Sir, these are highly anti-competitive practices by a dominant player in the market for public support. If this anti-competitive behaviour is not checked and corrected in time, I fear the greater erosion of our democratic principles of

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equity and fairness, for which this society is built. The results of such unchecked abuse of monopolistic powers will be greater public apathy, higher disinterest in the affairs of our society and a stronger climate of fear among the populace, like what was reported in the media last week at the feedback conference attended by our youths.

Sir, I believe that the establishment of an independent Competition Commission, with the powers to receive, review and check reports of any abuse of the dominant position of a Government political party is the first step in the right direction and would go a long way to uphold our core principal values of democracy, equity and fair play. This would definitely benefit the population, which is rightly a consumer in sore need of public protection, from the abuse of a dominant player.

Sir, I believe that expanding the role of the Competition Act to cover the political arena would help to create a more level-playing field for all interested stakeholders in the future of our country. I support this Competition Bill for now as I take it as the first step towards greater accountability and checks on all dominant players, both in the economic, social and political market.

If this Government refuses to allow the growth of genuine competition in its own political turf, then there is no moral basis for this Government to introduce this Competition Bill to affect other business providers. This Bill needs to be expanded to cover political and all other social service providers. I hope and expect the next amendment to this Act sometime later to seriously take in the said views and right the wrongs expressed herewith.

Mr Sin Boon Ann (Tampines): Sir, I did not know that the Non-Constituency Member has taken politics to be a

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business. I thought the essence of politics is to allow people the right of choice. In the nature of democracy in any election, people do have a choice. And, if people so decide that this party continues to dominate the political scene, it is a demonstration of the free will and choice of the people. And that is the reason why we are in this House, term after term, election after election. Why do you question the people's choice? Perhaps it is with the same obstinacy of failing to understand that he raises these arguments.

Sir, the contest of ideas between those who advocate free markets and those who argue for command economies was symbolically settled at the close of the last century with the collapse of the Berlin Wall - once the symbol and the bastion of communism - and with it, its attendant association with central planning and allocation of resources. Without a doubt, the free market has prevailed and, save for one country, in this world today, no country can openly deny that they have no aspirations in promoting an open and openly competitive economy; even if they still outwardly exist in form as communist regimes.

Indeed, the free market as an ideology has prevailed. It, however, does not mean that there are no excesses associated with it. It would be folly to assume that competitive forces, the drivers of efficiency and productivity do not require regulatory oversight to prevent abuse and unfair practices. Predatory pricing, cartelling and outright muscling out of smaller competitors exemplify the sort of practices that are borne out of the excesses of the market place and for which regulations setting the rules must be introduced. For this reason, I support the timely introduction of the Competition Bill.

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Although the new legislation is a welcome instrument, there are, however, a number of concerns that I wish to raise before this House.

First, I note that the Competition Commission of Singapore would be constituted as a statutory board, just like any other statutory body in Singapore. The Commission would be constituted in part by the Market Analysis Division, which is presently housed in the Ministry of Trade and Industry. It is an extension of a department of Government. This should not typically be a problem, except that there are inherent issues of perceived conflict of interest that should be dealt with.

In the eyes of the public, the Government in forming the Commission plays the part of a gamekeeper. Yet, at the same time, the Government is also in business. It may on occasions be seen to be a poacher. This is evident in the extensive and deep engagements that our GLCs have within the Singapore economy. I am fairly certain that in the nature of things, the Commission would be asked to determine questions involving some agreements or business practices of our GLCs. When it happens, the Commission would no doubt be hard put to ensure that justice is not only done, but must be seen to be done.

The Government may at times require a consolidation of strategic services and manufacturing operations to better position Singapore competitively in the world market. If such consolidations are challenged, the Commission would find itself in a rather invidious position of having to decide between the interest of the other businesses and the interest, even if indirect, of the Government.

Indeed, the framework of the present legislation on competition does not do much to allay any misgiving that one may have from an initial review of the Bill.

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Clauses 35 and 48 provide that the prohibitions in relation to anti-competitive agreements or abuse of dominant position do not apply to matters specified in the Third Schedule. Generally, the Schedule allows the Minister the ability to exclude any agreement from the application of clause 34 which relates to anti-competitive agreements and also to exclude, in what I find is rather bizarre, some corporate behaviour from the application of clause 47 which relates to the abuse of dominant position. If Members were to refer to clause 47, examples of such abuse include predatory behaviour towards competitors; limiting production, markets or technical development to the prejudice of consumers; and applying dissimilar conditions to equivalent transactions with the other trading partners, thereby placing them at a competitive disadvantage.

I find it strange that this legislation on creating a more competitive environment should now deem it fit for the Minister to sanction what the rule has described as unacceptable and unfair behaviour.

The Bill, if it is to inspire greater confidence in the competitive environment, Sir, could be strengthened further by removing or greatly minimising the ability of the Government to interfere in its decision making process. Rather than reconstituting a department of the Ministry to undertake the work, it could have perhaps set up a Tribunal of Experts as opposed to a commission to undertake the review process. A tribunal would presumably have a greater leeway in settling the procedures by which it is to decide. More importantly, Sir, it could and should be parked in the judicial arm of Government, thus avoiding any suspicion of conflict of interest which the present approach seems to be saddled with.

I do accept that a legislation of this nature should allow the Government some discretion to intervene in the name of

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national interest. However, while the necessity of such intervention is not denied, it does not mean that for the benefit of certainty in our laws, the Minister's discretion on such matters should not be fettered. Presently, there is some restraint in the Third Schedule in limiting such carve-outs to exceptional and compelling reasons. However, one would argue that such references are too vague and broad and do not give the full assurance that it may not be abused. It may be better to stick to more elaborate descriptions as to the grounds on which the Minister may exercise his power to carve out exceptions to clauses 34 and 47.

Secondly, as a corollary of the point above, I note that the Bill allows a person to appeal to the High Court or the Court of Appeal on questions of law in respect of a decision of the Commission. The issue of questions of law will lie in the interpretation of provisions of the Bill. This would include phrases like "prevention, restriction or distortion of competition", or "abuse of a dominant position in any market". Indeed, as is the experience in the other countries, much guidance on competition law will have to be given by case law.

This raises a fundamental question as to whether the courts are indeed best qualified to undertake such determinations. Judges are essentially lawyers who are trained in the analysis and application of the law. They are neither economists nor financial experts who would readily comprehend the intricacies of the market place operations. Questions on the meaning of a word within the Bill on competition would require a thorough analysis on not only the plain import of the word, but also the impact that the decision would have against the wider economy and society. Are judges, therefore, technically trained to undertake such technical analysis and review?

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Of course, it may be said that to overcome this limitation, judges may have the services of an amicus curiae or Friend of the Court in coming to a decision. This does not, however, leave one with the ideal position of having the best qualified person for the job.

To take an extreme example, this would be akin to having a lawyer undertake a surgical operation while being guided by a surgeon at the same time.

Thirdly, the Competition Bill is rather unusual in having extra-territorial reach. Clause 33 provides inter alia that the Act shall apply even if any of the proscribed activity takes place outside of Singapore. Sir, I can understand that for the policy to be effective, the law must extend to activities beyond our borders. However, as the Minister would appreciate, such intent raises more issues than answers. For instance, how does one begin to take enforcement actions against parties who may not have a business presence in Singapore?

Typically, in the nature of commerce, one does not have to have a business domiciled in Singapore to do business. Coca-Cola and Nike, which are international brand names, do not need to be present to set up shop here as they deal through their distributors. It is conceivable that the Coca-Colas and the Nikes of the world may engage in restrictive trade practices or to be seen abusing their dominant market position to the detriment of consumers here in Singapore. Does it mean therefore that the Government will ban the promotion and sale of Coca-Cola and Nike products in response?

Furthermore, the extra-territorial reach of the Bill does not effectively deal with trade wars at the international level. We all know that in a globalised economy, there is an increasing tension within respective countries from affected interest

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groups who clamour for more protection. Outsourcing of services is one clear example of how trade issues on a global scale are increasingly coming to a head in some countries. Can a pact by a group of IT companies in response to labour union pressures to stop outsourcing IT services to Singapore be seen as a matter which comes within the ambit of our competition law? Would the restriction of sale of certain goods overseas to meet local demand by a company in one country be seen as a breach of our laws if as a result of which such goods in Singapore cost much more? No doubt, these are issues which the Commission will have to decide, and even if the Commission were to decide, would have to determine how best to enforce.

Fourthly, I note that the Bill also contemplates retrospective application. While it is fair that the Bill should apply retrospectively to any of the proscribed activities, it may perhaps be seen to be unduly harsh or unfair to the parties concerned, as such arrangements were perfectly legal and legitimate at the time when they were concluded, and this was a concern raised earlier by my colleague in this House. Retrospective application of laws should be avoided where possible as it gives rise to much uncertainty within the legal landscape. Certainly, this Bill is no joy to the businesses and people who are affected as the Government has now placed a cloud of uncertainty on many of the common place agreements, not least of which are the joint venture agreements, pooling of resources agreements and mergers that essentially were meant to help local businesses take on regional competition. No doubt, lawyers like myself now will be having a field day busy reviewing many of these agreements. I am sure that for many, they will find an excuse to review contractual positions which are unfavourable at this moment in time. My concerns are that in applying this Act retrospectively, the Government may have unwittingly opened

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the Pandora's box and let the genies out for which they may have a hard time trying to put them back in. I would therefore urge the Government to tread carefully on its decision to apply this Act retrospectively.

Subject to the above comments, Sir, I support the Bill.

Dr Vivian Balakrishnan: Mr Deputy Speaker, Sir, with the exception of one totally irrelevant speech from a Member who has totally disappeared, I would like to thank all the many Members of this House who have shared the benefits of their wisdom and experience and their thoughts on this piece of legislation.

This is a significant step in our legislative and regulatory framework for businesses. It is one which we are taking boldly but carefully. And I was most pleased to hear Mr Inderjit give us seven out of 10. He says that by his standards, it is very good. I think seven out of 10 also illustrates the point that we are going forward but we want to make sure we evolve this and get the sequence and the pace right.

Let me now touch on the various themes that Members of this House have brought up. I was struck by Mr Iswaran's point that competition does not equal competitiveness. It is worth reflecting on this because the purpose of this piece of legislation is to ensure that we have an efficient functioning market in Singapore and, ultimately, a competitive economy with competitive firms. Merely creating the forms of competition is not sufficient. And, in fact, although this is called the Competition Act, we must remember that this is a means to an end.

The next point which I want to put to the House is that I said earlier in my speech that we are a small but open economy, and that has certain implications for us. Firstly, it means that

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we cannot just copy everything wholesale. Although I have said that we have modelled our legislation on the UK Act, we have had to make significant changes and modifications. Another implication of a small and open economy is this need for extra-territorial provisions. Our intent cannot be and it will be impossible to regulate the practices of big multi-national companies, big overseas firms who happen to have a small presence in Singapore. But, nevertheless, we do need to send a message that we do not want dominant firms, whether they be local or overseas firms, to engage in predatory and unfair behaviour within Singapore shores. As to the action we can take, obviously, we will have to confine our actions to the presence within Singapore.

Another point which Mr Iswaran brought up, and I think it is worth reiterating, is that regulatory cost should be kept to a minimum. Every well-intentioned piece of legislation, every well-intentioned new rule, new entity, new regulator will lead to increased cost. So I urge this House to be mindful, as we have been mindful at MTI, to make sure we balance the cost versus the benefits.

One example of this, I will discuss later, is when we talk of the need for sectoral exclusions, because we want to avoid unnecessary duplications, unnecessary cost and unnecessary confusion to the firms and businesses which have to operate under such an environment.

Mr Leong Horn Kee, Mr Iswaran, Mr Ang Mong Seng, Mr Inderjit Singh, Mr Sin Boon Ann and, in fact, practically all of them have focused a lot of attention on the exclusions. The first point which I want to put to Members with respect to exclusions is that exclusions from this Competition Act are not meant to protect the companies or the sectors so excluded. I think it is worth reiterating it. Excluding companies and undertakings from the

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Competition Act is not meant to protect them from competition.

Let me go through it in a little bit more detail. Clause 33(4) of the Competition Bill provides that the competition law will not apply to any activity or agreement entered into or conduct on the part of the Government or statutory bodies created by Parliament or any person acting on behalf of the Government or statutory bodies in relation to that activity, agreement or conduct. Why do we do so? Because, unlike Mr Steve Chia's irrelevant rambling, we are trying to regulate the conduct of market players in an economy. This is not meant to fetter the discretion or indeed the obligation of the Government to make policy and to perform public functions. Hence, policies and actions taken by the Government and its statutory bodies do not and should not come under the ambit of the proposed competition law. If there are problems with the policies and the actions of the Government or its statutory bodies, the correct venue and the ultimate tribunal for this is this House, and ultimately the electorate. So, do not resort to petty tools like saying "I can use the Competition Act to regulate political and public policy objectives and actions."

Having said that, however, I have also said earlier in my speech that this Bill will apply to commercial and economic activities carried out by private sector entities in all sectors regardless of whether it is owned by a foreign entity, a local entity, Government or statutory body. So all these anxieties about Temasek-linked companies or indeed private limited companies owned by the statutory bodies are misplaced. The anxieties are misplaced because we intend that all these companies will come under the ambit of this law.

The next point is the list of exclusions set out in the Third and Fourth Schedules.

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Before I enumerate the sectors, let me first describe the process by which we arrived at this list. There was a lot of consultation between Ministries and regulatory agencies and with businesses. And we decided that some exclusions are needed on the basis of public interest considerations - national security, certain aspects of defence, strategic interests. The areas which have sectoral exclusions right now, let me read that out to Members - piped potable water, waste water management, scheduled bus services, rail services, cargo terminal operations, armed security services, media clearing houses activities, gas, electricity, telecommunications, ordinary letter and postcard services. If Members stop to think about this list, does it not sound very familiar? It sounds very familiar because these did not start as private sector competitive markets. These started as monopoly services provided for public good by the Government. Now, the first change that occurred to these sectors was not the Competition Act but the fact that the Government, as a matter of policy, decided that, where possible, we would introduce competition into these sectors. And the evolution of competition in these sectors occurred through liberalising these sectors and creating sector specific regulators. For instance, if we talk about telecommunications, IDA is the regulator. For media, there is MDA. For energy, there is EMA and so on and so forth. The point is that these are highly specialised sectors with very unique and different starting points, and we were actually converting monopolies and forcing them to open up and create a competitive element.

Sir, if you are starting from that point, I think you will agree with me that there is a need for, first, much more active intervention and regulations. Secondly, there are deep and significant technical, public policy and strategic interests involved in these decisions. Hence, it

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would be dangerous to try to open up these sectors without sector specific regulators who know the rules of the game, who know the technical issues and who can then best manage both the competitive and the technical issues as and when they clash, as sometimes they will. So the point is we are not afraid of competition. We do want competition and we do want competition in these so-called excluded sectors. But we want to ensure that it evolves in a correct, safe and appropriate way. So please do not run away with this misconception that this Competition Act, by excluding these sectors, is meant to protect these sectors. That is absolutely not the case.

Next, I want to move on to the related issue of sectoral regulators. Many Members have brought up the issue of whether there is a danger of uneven standards, different procedures, different fines even, as Mr Iswaran brought up. Well, I would say that in an ideal state,

we would certainly want to evolve to a common standard. And I think if you accept the fact that the general direction is clear and this is a piece of legislation which is evolving and really needs to be practised and refined as it goes along, then you would agree with me not to rush this congruence, although the long-term direction must be congruence and coordination.

But there is an important sub-point related to that. If you wanted to create more confusion for the market, then you would tell, for instance, the generation companies that they are subject to both EMA and the Competition Commission. So we have deliberately decided at this point in time, to keep it quite separate so that you know who is your regulator, you know what are the fines you are exposed to, you know what are the strategic issues that the Government or the regulator is concerned about, and you have some certainty to get on with

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reforming your sector and delivering your services in the most cost-effective way.

The next sub-point on this issue of exclusion I want to emphasise is that these exclusions are not permanent. As I said earlier, this is work-in-progress. In fact, if you read carefully the way we have crafted the legislation, the Competition Bill acts as a kind of a default vehicle so that if at any point in time we decide, for instance, that there is no need for regulation in telecommunications or energy, or whatever the case may be, because it will no longer be regulated under a specially created regulator under written laws, the default mode would be that it would come under the ambit of the Competition Act. So the very way we have crafted it - some Members have raised it - the wording seems to be a bit general and broad, but the intent is that eventually more and more of these sectors will come under direct regulation of the Competition Act.

I want to say a few things about abuse of dominance. We are not against big companies. We are not even against dominant companies. In the nature of a small economy like ours, some companies will grow very, very big, and will have a dominant position. What we want to prevent is abuse of that dominant position. In fact, if you look again carefully at our legislation and compare it to other jurisdictions, we have defined it in a more difficult but ultimately more useful way. I will give you an example of that.

The Competition Commission has to find that a certain anti-competitive act or certain abuse of dominant position has actually led to a distortion, reduction or elimination of competition before it finds that this activity has transgressed the provisions of this Act. Let me try to explain that in greater detail. It is much easier to craft a legislation to say that specific acts are illegal. Instead, we have said the act is illegal only if it is performed

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and it has impact on our local economy, which actually puts a higher onus of proof on the person or party who wants to allege that a certain company has engaged in anti-competitive behaviour, and the Commission then has to find it accordingly. So, it is not being done in a haphazard, slipshod or easy manner. It has been done very, very carefully.

I was intrigued by the fact that when we started talking about the Competition Commission, there were so many suggestions. Mr Leong Horn Kee said that it should just be a department. Mr Ang Mong Seng, Mr Inderjit Singh and Mr Sin Boon Ann all stressed the need for independence. And I think two of them said that it should be a tribunal, and they argued eloquently why it should be run by lawyers, rather than businessmen. Without getting into an ideological debate, we agree with Members that there is a need for independence, there is a need for integrity, and there is a need for integrity and impartialness to be seen as well. That is why we decided to create another statutory body. Yes, there will be some costs incurred in setting up another statutory body. But I think Members have to agree with me that we felt this was important enough to create a statutory body that whilst it may be supervised by MTI, it is not just another department or another policy arm of the Ministry of Trade and Industry. I can assure Members that we will keep it as small as possible. But we will ensure that the people who staff it are well qualified and know what they are supposed to do and will not waste time.

I also take Members' points that there is a need for this Competition Commission to make decisions in a timely way. As some Members have said, you do not want vexatious and frivolous comments or allegations to come in and keep things in limbo, and result in unnecessary friction

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and paralysis for the real businesses pursuing their objectives. These sentiments of this House will certainly be transmitted to this Commission when it is created and we will do our best to make sure they do. We will do our best to make sure we equip them with the staff, investigative and enforcement powers, so that they can make their decisions quickly, efficiently, but fairly.

I also take Members' point that, if you just look at this legislation as it is, people need more information. They need more definitions. They need more education. And that is why, if Members read carefully our implementation roll-out plan, on 1st January 2005, if this House approves this piece of legislation, the only thing that will come about is the Competition Commission. This Competition Commission then spends the next 12 months issuing guidelines. And it is not going to unilaterally issue guidelines but to discuss with all the stakeholders, because these are complex issues which none of us on our own have a monopoly of wisdom on. So those 12 months are meant to provide a period of intense consultation, the drawing up of guidelines so that, as Mr Inderjit Singh said, our businesses will have greater certainty as to how this law will operate.

Assuming this goes well, then on 1st January 2006, the provisions which will basically prohibit anti-competitive agreements and abuse of dominant position will come into effect. The more complex prohibition on mergers and acquisitions, we anticipate, will take two years before we put it into effect, and that is because we feel we need more time to consult and arrive at workable, sensible guidelines and modus operandi which the businesses understand.

There has been concern about the retrospective provisions. I think I can quite understand all lawmakers' concerns with retrospective provisions. We thought

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long and hard about this. One alternative would have been to just grandfather all the current agreements, but there are dangers with doing that. First, we did not want a flurry of agreements to be made because people knew they could slip it through the grandfather's net. Secondly, there may really be current agreements that do need to have their provisions relooked at and reviewed, in order to move our economy to a more competitive phase. After all, we said this is meant to move our economy up one quantum step.

As to how we are going to do it, again, the key word is "carefully". For agreements which have been in existence for more than five years before the Competition Act comes into operation, we will allow the companies to apply to the Competition Commission for more time, or a longer transitional period, so that they will have time to negotiate, renegotiate or amend those agreements so that they will comply with the requirements of the Competition Act. In any case, we are not repudiating all agreements. We are saying only those provisions which infringe the tenets of the Competition Act would, if complained about and if the Competition Commission finds against them, be held to be null and void. We are not saying everything is to be thrown away and everything has to be renegotiated. Yes, there will be a bit more work for Mr Sin Boon Ann, but I hope it will not be very much work for him.

Related to this also is Mr Iswaran's point about frivolous and vexatious complaints. Again, if you look at the way we constructed it, if someone complains to the Competition Commission, it is not the same as if he has gone to a court of law and filed an affidavit against you. Because it is the Competition Commission's own discretion to decide whether there is or there is not a bona fide case that merits investigation, decision and ultimately enforcement. So, again, if we have a properly constituted,

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properly qualified and equipped Competition Commission, this should expeditiously filter out vexatious and frivolous complaints.

Mr Chiam was a bit confused, I am afraid, with respect to the role of the District Court and the Competition Commission. In clause 69, it refers to the sanctions which the Competition Commission can impose on businesses for infringing the prohibitions listed in the Bill, and the Bill provides that no financial penalty may exceed 10% of the annual turnover for up to a maximum of three years. Clauses 82 and 83 that Mr Chiam referred to refer to offences that would be committed by people who do not cooperate with the Commission in the course of its investigations or in its attempts to enforce its actions. So, I am afraid, they are two completely different issues. You will not get a situation of people saying, "Am I going to be fined by the District Court, or the Competition Commission can find against me?"

Perhaps it is worth reiterating the process. If the Competition Commission finds against you and if you disagree, you then have recourse to appeal to a Competition Appeal Board. Mr Sin Boon Ann will be glad to know that the chairman of the Appeal Board will have to be a lawyer who is qualified to be on the Supreme Court. I think that means he must have at least 10 or more years of practice. So the lawyers will still have a role in this process. If you disagree with the decision of the Competition Appeal Board, you can still appeal to the High Court on points of law and on the quantum of the penalty or sanction levied against you. And if you disagree with the findings of the High Court, you can then go to the Court of Appeal.

So, you can see that we have taken the trouble to set up a proper system with proper checks and balances and a right

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balance between business and law. But I want to conclude by saying that if you look at what other jurisdictions have done - I think in the case of the UK, it has been several decades that they have been working on competition law and evolving it, and the most recent legislation of 1998 which we have looked at - I have no illusion that this is a big first step, but it is a first step of a much longer journey, and one which we have to go into with our eyes open, clear-headed leadership, and sensible people of integrity operating the system.

Dr John Chen Seow Phun: Mr Deputy Speaker, Sir, the Minister has not addressed the point that I have made and, that is, to promote competition. You will discover that there are a lot of Government policies and practices which may stand in the way of effective competition. How do we handle those issues and whether there will be coordinated review of all these practices and policies?

Dr Vivian Balakrishnan: Thank you for that reminder. There is a big point and there is a small point in response. On the small point first. Technically, I would just like to inform this House that car dealers will be subject to the Competition Act. So there is no question about them escaping the coverage by this Bill. With regard to his specific point about why there are apparent variations in OMV valuation by LTA or MOF, I am sure LTA and MOF would quickly look into this. And if there is really a loophole, I am sure they will address it.

The bigger point is, in fact, that there are times when the goals of public policy may need to trump the market and that is why this Competition Act should not be an overarching blunderbuss law that acts to fetter all other exercises of Government

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or statutory bodies. So I am saying that we need to be very clear that where this is business and where this is going to lead to an efficient functioning of the market and more competitive firms, we use this more appropriately. In other circumstances where there are other policy objectives, then we do so. But when we do so, this Government is very aware that every regulation, every tax, or every new rule that we promulgate in pursuit of a public policy objective may, and very often, have market impact as well. And we need to balance the impact of that rule versus the impact on the way the market functions. And I will assure this House that this Government is ever mindful of that and we will not unnecessarily be so pig-headed about it that we will just impose a system and ignore the impact on businesses. But this is something which we will have to feel our way and cross each bridge as we come to it. So please do not treat this Bill as a panacea or as a solution for all ills, real or perceived. Otherwise, we will end up like Mr Steve Chia who thinks this Bill is going to be used to reform the political system.

Dr John Chen Seow Phun: Sir, my question is: will the Commission take up the issue with the relevant regulators to see that, in fact, there are greater purposes in having a certain policy at the expense of competition to satisfy themselves which is, indeed, the case?

Dr Vivian Balakrishnan: I think this is something which will have to be sorted out later on, especially during the process of generating the guidelines. But the general principle is that if the Competition Commission is satisfied that there is a problem in which there is an unfair market practice, distortion or restriction of competition ---

Dr John Chen Seow Phun: Due to Government policy.

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Dr Vivian Balakrishnan: --- then that dialogue must occur between the agency and the Competition Commission. But I would not accept the position that competition must trump at all costs.

Dr John Chen Seow Phun: I did not say that.

Dr Vivian Balakrishnan: There are public policy objectives which, sometimes, we must impose.

Mr Leong Horn Kee: Taking the point from the Minister, I would also like to ask him the question which I posed about the proposed merger of SPH and MediaCorp where, in fact, it did not give rise to competition but a monopolistic body will be formed.

Dr Vivian Balakrishnan: I am almost tempted to ask the Minister for MICA to answer that. Anyway, that question was asked and answered during the Question Time earlier today. Again, all I would say, at this stage, is that there are only two points. That is a sector which does not come under the ambit of the Competition Act. It is regulated by MDA. And these issues which the Member has raised should properly be resolved by MDA. But I would like to reiterate what the Minister said, which is that the Government has not reversed its position on openness to competition in the media sector.

The other point which he made, and I think is worth reiterating, is that we cannot insist on competition at all costs. Let us not forget that at the end of the day, this is a business that needs to be run and a business that needs to be viable. To blindly insist that you must keep the appearance, the form of competition at all costs even when it does not make business sense would be wrong. It would be wrong for the Government to insist on that and for the Government to impose that on listed companies.

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Mr Iswaran: May I just ask the Minister? I appreciate the explanation given on why the Government has chosen to maintain sector-specific bodies and striking a delineation between those and the Competition Commission. But my reading of the Bill is that there are certain parts of the Bill, I think clauses 33 and 61, which give the impression that the Commission would have certain powers to enact or prescribe codes that would impinge on those sectors. So there appears to be a contradiction there that the Government's policy intent is to decouple, but the drafting of the Bill suggests that there might actually be an overlap. So I do not know whether the Minister can give a clarification now.

Dr Vivian Balakrishnan: Thank you for the question. It is a good question. If you read carefully the clauses he is referring to, it provides for consultation to occur between the Competition Commission and the regulators in those sectors. And his next question should be: why is there a need for any consultation? There are two reasons. First, as a general rule, we want to ensure that we are moving forward in the same direction and aiming towards some future congruence. That is not something which we want to specify or lock ourselves into. But the other more important reason is that we have also said that where the companies in that sector get involved in cross sectoral businesses or, indeed, engage in businesses outside that sector, then the Competition Bill must apply to them. So there will be circumstances when a certain amount of coordination and dialogue is needed between the Competition Commission and the regulators of those sectors.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

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The House immediately resolved itself into a Committee on the Bill. - [Dr Vivian Balakrishnan].

Bill considered in Committee; reported without amendment; read a Third time and passed.

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