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CCCS Penalises Warehouse Operators for Fixing the Price of Warehousing Services at Keppel Distripark

2022, Singapore, Anticompetitive Agreeement

17 November 2022

(View Media Release in PDF)

1. The Competition and Consumer Commission of Singapore (“CCCS”) issued today an Infringement Decision (“ID”)[1] against four businesses for infringing section 34 of the Competition Act 2004[2] and imposed a total financial penalty of $2,799,138.

2. The four businesses, namely CNL Logistics Solutions Pte. Ltd. (“CNL”), Gilmon Transportation & Warehousing Pte. Ltd. (“Gilmon”), Penanshin (PSA KD) Pte. Ltd. (“Penanshin”) and Mac-Nels (KD) Terminal Pte. Ltd. (“Mac-Nels”) (each a “Party” and collectively the “Parties”) were found to have engaged in price fixing conduct by imposing in a coordinated manner an additional charge known as the “FTZ Surcharge” for warehousing services at Keppel Distripark .

CCCS’s Investigation

3. Following a complaint received from a member of the public, CCCS commenced investigations and subsequently conducted unannounced inspections simultaneously at the Parties’ places of business at Keppel Distripark on 19 November 2019. During the inspections, Penanshin applied for leniency under CCCS’s leniency programme[3].

4. The Parties coordinated the imposition of an identically named FTZ Surcharge at the same price of $6 per w/m on the same type of goods (i.e. import cargo). The FTZ Surcharge imposed by CNL, Gilmon and Penanshin was effective from 1 July 2017, and Mac-Nels’ FTZ Surcharge was effective from 1 August 2017.

5. CCCS found that the Parties had coordinated their pricing strategies instead of determining them independently. This price fixing conduct by the Parties had restricted price competition in the market for warehousing services. The Parties knew that independently imposing the FTZ Surcharge could cause their customers to switch warehousing service providers, especially if their competitors did not impose such a charge. The exchange between the Parties of their respective intentions to impose the FTZ Surcharge not only reduced their own uncertainty in deciding whether to impose the FTZ Surcharge but also enhanced their negotiating positions in respect of their own customers. In the absence of the price fixing conduct, each Party may not have chosen to implement the FTZ Surcharge or may have imposed it at a lower rate to avoid or reduce the risk of losing customers to other warehouse operators.

6. On 16 March 2022, CCCS issued a Proposed Infringement Decision to the Parties. CCCS received written and oral representations from the Parties and carefully considered all the representations in reaching its findings.

Financial Penalties

7. Based on the findings set out in the ID, CCCS has imposed the following financial penalties on the Parties:

Party

Financial Penalty

CNL

S$522,889

Gilmon

S$1,436,378

Penanshin

S$297,351

Mac-Nels

S$542,520

Total:

$2,799,138

 

8. In levying financial penalties, CCCS took into account each business’s relevant turnover, the nature and seriousness of the infringement and aggravating and mitigating factors. As a leniency applicant which provided useful evidence and had co-operated with CCCS during its investigations, Penanshin had its financial penalty significantly reduced when CCCS applied a leniency discount.

9. Ms. Sia Aik Kor, Chief Executive, CCCS said: “Businesses should determine their pricing strategies independently. This ensures that competitive pressure, in the form of customers switching away if prices are increased, is at play. Co-ordinating prices with one’s competitors is one of the most serious types of anti-competitive conduct. It removes the uncertainty involved in determining pricing strategies and results in customers getting less competitive prices. In a time of inflationary pressures, it is essential to safeguard competition to ensure that markets work well and choices are preserved.”

10. “Any business that is approached to join in anti-competitive agreements should immediately and clearly distance itself from such conduct and report it to CCCS. We also call for any business that is currently involved in a cartel to approach CCCS to make a leniency application as soon as possible. Under the leniency programme, the first business to come forward and provide evidence of the cartel activities before CCCS commences a formal investigation will be given a full waiver of the financial penalty.” she added.

11. Further information on the investigation, analysis of the case and the calculation of financial penalties imposed on the Parties are set out in the Infringement Decision here.