The same day that this decision was announced, the Commission also made an adverse decision against fourteen electrical and building works companies for bid-rigging and collusive tendering. Thirteen of them were ordered to pay fines ranging from S$5,000 to S$44,889.05. One company was not fined because it was the whistle-blower.
Sistic is planning to appeal – I don’t know about the electrical contractors – so the matter is thus not yet closed. Nonetheless, it is good to see the competition watchdog getting into stride. Singapore has needed this for a long time.
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The Sistic case is the more interesting of the two. It had for years been the exclusive ticketing agent for events held at the Singapore Indoor Stadium and the Esplanade Theatres. Its contracts with these two venue providers stipulated that all events held there must be ticketed through Sistic, a condition that applies also to events organised and promoted by third parties who only hire space from the Indoor Stadium or the Esplanade, thus depriving event promoters of choice when it comes to ticketing services.
Sistic is 65-percent owned by the Singapore Sports Council, a government body, and 35-percent owned by the Esplanade Theatres, which in turn is 100-percent owned by the Ministry of Information, Communication and the Arts. The Singapore Sports Council is the owner of the Indoor Stadium as well. The significance of this decision therefore is that the competition watchdog has ruled against a government-linked company.
The Commission dismissed arguments that event promoters, if they didn’t like working with Sistic, could always look to other venues, since the venues at the 13,000-seat Indoor Stadium and the Esplanade are unique.
It found that Sistic was a dominant player in the open ticketing market, with about 90-percent share. Events at the Indoor Stadium and the Esplanade account for about 60 to 70 percent of the market. Sistic was said to have abused its dominant position in two ways: by denying opportunities to competitors through its exclusive contracts and by raising prices as it did in 2008.
Sistic was ordered to remove the exclusivity clauses from its contracts immediately, in addition to the financial penalty.
Exactly how the quantum was calculated is not altogether clear. The Commission’s web-published judgement had many redactions. The law says that the fine may be up to 10 percent of three years’ turnover.
However, there are still a few troublesome aspects of the case.
The Commission ruled that the exclusivity clause was included in contracts at the initiative of Sistic, and thereby excluded the Esplanade Company and the Singapore Sports Council from responsibility, not even for for abetment. Common sense will tell us it is not so obvious. These two are the parent companies of Sistic, and while the ticketing company had separate management, there surely is a conflict of interest. The managements of the Esplanade and the Singapore Sports Council must know that when it comes to signing long-term contracts with ticketing agents, all are not equal. They can easily assume that godfathers will be watching their decision.
What is going to stop the Esplanade, for example, now taking the initiative and telling whoever wants to hire its venues, to use Sistic, even in the absence of exclusion clauses imposed by Sistic? The Esplanade could well calculate that profit for Sistic is profit for them. The Commission, after excluding the venue owners from the scope of its judgement, gave no direction on this. It would seem to me that this conflict of interest issue has to be fixed by a restructuring of ownership.
On this note, I wonder whether the Esplanade’s box office is run by Sistic altogether. Since for years the Esplanade did not handle its own ticketing, it would long ago have made sense to lease the space out to Sistic. What happens in the future when an event at the Esplanade is not ticketed by Sistic? Will it mean that its tickets will not be on sale at the Esplanade’s box office?
No doubt you can buy it online from whichever ticketing agent the event promoter has appointed, but not everybody is internet-savvy. Furthermore, sometimes a visitor (e.g. tourist) to the Esplanade is attracted by advertising within its concourse and decides to see a show there and then. Wouldn’t it be absurd to be told that you can’t buy a ticket from the arts centre’s own box office?
That Sistic has captured 90-percent market share over the years through its tactics create another point of concern. It means that it has weakened its competitors severely; none will have economies of scale, without which, none may be able to compete price-wise (I don’t know, I’m just wondering). The competitors to Sistic have been so injured that they may be in no position to do so, in which case, consumers won’t actually derive much benefit from this ruling.
This decision by the Competition Commission alone may not be sufficient to restore the market to health. To assume that going forward, ticketing agents will now compete purely on merit may be somewhat false. Seven in ten event promoters told the Straits Times that they would continue using Sistic simply “simply because no viable alternative exists” (Straits Times, 12 June 2010, Sistic is still it – don’t expect cheaper tickets).
Other countries’ competition watchdogs have ruled, in extreme cases, that such a degree of market dominance warrants a break-up of the company in order to inject real competition quickly into the market. However, my quick reading of the Competition Act leads me to believe that Singapore law does not confer such power to our Competition Commission. The closest it comes to doing so is only with respect to mergers of previously independent entities.
So, while we’re getting there with this demonstration of bite by our Competition Commission, perhaps we’ve still got a way to go yet.