Sole Distributorship Agreements under Competition Act

Dr Tan Wu Meng asked the Minister for Trade and Industry (Trade) (a) whether the Competition Commission of Singapore regards sole distributorship agreements as anti-competitive under the Competition Act; and (b) if so, what are the preferred modes of redress for sole distributorship agreements.

Sole distributorship agreements are generally understood as vertical agreements, whereby a supplier sells its product through a single distributor. Such vertical agreements are not agreements between competitors and, hence, do not in themselves constitute anti-competitive behaviour under the Competition Act. However, anti-competitive behaviour can arise in a situation where a sole distributor abuses its market power to impose other restrictions in the market to impede its competitors from competing. The Competition Commission of Singapore (CCS) will have to assess each case based on the specific facts to determine if there is any infringement of the Act.

In the event where a sole distributor is found to have infringed the Act, CCS has the power to impose a financial penalty on the infringing player and also issue directions to bring the infringement to an end. This may include directing the infringing player to amend its sole distributorship agreement by removing the offending clauses or terminating the entire agreement.