CCS Stops Price Increase Agreement Between Four “Fa Gao” (发糕) Manufacturers

7 April 2008

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The Competition Commission of Singapore (“the CCS”) swung into action when four “Fa Gao” producers jointly announced that they had discussed and agreed to a price increase of “Fa Gao”.

The four “Fa Gao” producers are Thomson Cake & Confectionery, Lian Hup Huat Food Manufacturer, Sin Hong Huat Food Stuffs Manufacturing and Hup Yew Confectionery. On 21 March, they announced that they would increase the prices of “Fa Gao” uniformly, with effect from 1 April 2008. The CCS made enquiries and confirmed that the four manufacturers had reached an agreement to increase prices of “Fa Gao”. The agreement between the four manufacturers would likely infringe the section 34 prohibition of the Competition Act against price-fixing.
On 31 March 2008, the owners of the four manufacturers assured the CCS that they would put an end to their agreement and set their prices independently. The CCS has since monitored the prices of the four manufacturers and found no indication to suggest that the agreement has been carried out.

Had the CCS concluded its investigations and found that the manufacturers had infringed the section 34 prohibition, it could have issued an infringement decision and imposed financial penalties on the manufacturers. However, the CCS decided to take no further action on this case because it was able to prevent the agreement from taking effect. Nonetheless, CCS will resume the investigation if there are further developments which suggest that the companies are still carrying out their agreements.
Mr Teo Eng Cheong, Chief Executive of CCS added, “In this instance, CCS believes that preventing an anti-competitive agreement from taking effect is a better outcome.”

Open competition is a fundamental principle to economic growth. Singapore companies are subject to global competitive forces because of our open policy in international trade and foreign investment. Our companies and industries have over the years become more efficient and resilient as a result.
The CCS adds to this by ensuring that the micro-economic environment is also not distorted by anti-competitive behaviour, especially cartels colluding to set or fix prices. By promoting healthy market competition, the CCS ensures a level playing field for companies, more choices for consumers and in the long term, greater resilience in the economy.
However, the CCS does not intervene just to keep prices down. With open competition, it is possible for prices to be higher and lower. Lower-cost producers may enter the market and have lower-priced products. However, there may also be producers which aim for higher end market segments and have higher-priced products. But the end result is more choice for the consumer and hence better for consumer welfare.
Mr Teo pointed out, “The CCS does not regulate prices and is not against price increase per se. However, we advocate independent setting of prices. Prices should be determined by the market forces of supply and demand, not based on any agreements among businesses.”