Not quite, but while others are rushing towards new regulation of digital platforms, the Competition and Consumer Commission of Singapore (CCCS) took a more ‘steady as you go’ approach in its recent market study on e-commerce platforms.
The market study was triggered by a significant increase in the use of mobile phones for the purchase or ordering of goods or services – as at 2019, 66% of Singapore residents made online purchases on their mobile phones. The study was launched to understand and examine the implications of this digitalization of commerce on competition, and focused on multi-sided platforms with e-commerce as its primary activity, such as Grab, Amazon, FoodPanda and Carousell. The study did not examine search, social media or digital content platforms such as Google, Facebook and Apple.
The CCCS did not identify any significant competition concerns in the e-commerce space. Although it tweaked its existing guidelines for public consultation, including on how to analyse market definition and market power in a digitalized environment, it concluded that its existing competition framework is “currently sufficiently robust” to address the competition issues that may arise from e-commerce platforms.
The CCCS’s views relied on the results of interviews conducted with industry stakeholders and results of online surveys of platform users and suppliers.
On the demand side, this research revealed that customers practice “multi-homing”, using more than one platform simultaneously to buy or sell. Customers actively check other e-commerce platforms for better prices and switch platforms depending on the price which was the main driver of their decisions about which platform on which to trade.
On the supply side, the CCCS came to the view, again informed by the survey results, that e-commerce platforms function in a ‘self-levelling’ way. Because e-commerce platforms operate as multi-sided, the platforms are constrained in their behavior by the fact that both suppliers and customers are driven by price – there is a ‘cause and effect’ relationship on both sides of the platform so that if the platform increases price on one side, such as prices charges to buyers, buyers will shift to other platforms, and suppliers on the other side of the platform will follow them (even if the increase in prices to buyers was to reduce prices to suppliers).
Another contrasting position to that taken by other competition regulators is the CCCS’ conclusion that a lack of data is not presently an insurmountable barrier to entry. This is despite acknowledging the competitive advantages leveraging data and data analytics capabilities – using data collected to improve the quality of products and services offered – provides e-commerce platforms. The market research indicates that any internal data deficiencies can be overcome by alternative means of accessing data, or other kinds of advantages, such as rewarding loyalty to gather information.
Likely informing the CCCS’ view was the relaxed attitude of Singaporeans on e-commerce platforms holding data. 57% of consumers surveyed indicated that they would continue to use platforms, even if personal data from text messages, browsing data and location information were being collected, without permission being explicitly provided. While the CCCS did not explicitly make this finding, it may be that in an e-commerce setting, unlike social media generally, consumers see that they are engaged in a transactional relationship with the platform where they are trading data as part of the value they get back.
The market study also found that the provision of e-payment services by e-commerce platforms is unlikely to be a pre-requisite for an e-commerce platform’s success at this point in time. The survey results indicated that credit cards were by far the most common payment method for customers in Singapore.
Update to CCCS guidelines
Although the CCCS found that lack of data isn’t currently a barrier to entry, it acknowledged that the importance of data for e-commerce platforms may increase over time, particularly with the rise of technology such as AI and algorithms. It has therefore updated its guidelines on abuse of dominance to note that data constitutes a key input in considering a company’s market power.
The CCCS also introduced self-preferencing as a new theory of harm, bringing the CCCS guidelines in alignment with overseas jurisdictions. Digital platforms can leverage data collected to prioritise a product and engage in preferential treatment. Other theories of harm identified by the CCCS included personalized pricing and tying and bundling.
The CCCS did not consider that its merger regime required any alteration to deal with the increasing prevalence of digital platforms, even in the context of “killer acquisitions”. However, it has updated its guidelines to note that it will consider a proposed transaction’s impact on innovation. This update recognizes the fact that effective competition may be impeded by a merger between two important innovators.
Read more CCCS E-commerce Platforms Market Study