Proposed Merger of Airfield Lighting Suppliers: CCS Consults on Commitments Provided by Parties to Address Competition Concerns

10 December 2015

(View Media Release in PDF)

1.    The Competition Commission of Singapore (“CCS”) is conducting a public consultation from 10 December to 23 December 2015 and invites interested parties to provide feedback on the proposed commitments by ADB BVBA (“ADB”) (“Proposed Commitments”) in relation to concerns raised by CCS in ADB’s proposed acquisition of Safegate International AB (“Safegate”) from Fairford Holdings Private AB (“Fairford”) (the “Proposed Transaction”).^[1]

2.    CCS had earlier raised competition concerns on the Proposed Transaction following the completion of its Phase 1 review in August 2015.

3.    Specifically, the Parties are direct competitors in the supply of airfield lighting (“AFL”) systems in Singapore.^[2] ADB’s stable of brands for AFL systems includes ADB, LUCEBIT and ERNI. Safegate’s stable of brands for AFL systems includes Safegate, Thorn and Idman. The Parties account for a significant market share in the supply of AFL systems in Singapore, and they may be each other’s closest competitor. If the merger were to proceed, other AFL suppliers may also face difficulties entering the market in the short to medium term due to customers’ extensive testing requirements. The Proposed Transaction may therefore significantly reduce the level of competition in the affected markets in the short to medium term, and may lead to price increases and deterioration in quality and/or technical support.

4.    The Parties have now proposed commitments to address the potential competition concerns that have been identified in lieu of proceeding to a detailed Phase 2 review.

5.    The competition concerns and the Proposed Commitments to address them are set out below:

a)            The Parties may increase prices significantly post-merger due to a substantial reduction of competition in the short to medium term: To address this interim concern, for specified periods, certain ADB and Safegate products and spare parts sold directly or indirectly to any airport operator for use in Singapore will be subject to price ceilings which are calculated based on a formula, where the price ceilings are adjusted in accordance with inflation/deflation indices.

b)            The Parties may reduce the supply of spare parts and technical support to customers: The Parties commit to supply all required spare parts for specific products sold to any airport operator for use in Singapore for a period of 10 years from the completion of the Proposed Transaction. The Parties will also supply any technical support required for these products to the airport operators.

c)            The Parties may “lock in” third party contractors and suppliers in Singapore using exclusive agreements such that competing AFL system suppliers are unable to find suitable partners to enter the Singapore market: To facilitate entry, for the period of four (4) years commencing from the completion of the Proposed Transaction, the Parties commit not to enter into any agreements with any third party contractor or supplier in Singapore which expressly prevent or have the effect of preventing third party contractors or suppliers from carrying, promoting or offering alternative competing products and services.

d)            The Parties may retroactively terminate or jeopardise agreements that have been concluded before the completion of the Proposed Transaction: To address this concern, the Parties commit to ensure that any contracts or agreements relating to the sale of specific products entered into between ADB, Safegate or a third party^[3] and an airport operator in Singapore on or before the completion date of the Proposed Transaction shall continue in full force and effect after that.

e)            Ensuring compliance with Proposed Commitments: To enable CCS to effectively monitor ADB's compliance with the Proposed Commitments, the Parties shall provide to the CCS an independent audit report on a regular basis.

Public Consultation

6.    CCS now seeks feedback to assist its consideration of the Proposed Commitments and its determination of whether they will sufficiently address the potential competition concerns arising from the Proposed Transaction. Following the public consultation, CCS will decide whether to accept or reject the Proposed Commitments. 

7.    More information on the public consultation can be accessed and downloaded from the CCS website at www.ccs.gov.sg under the section “Public Register and Consultation”. The closing date for submissions is 23 December 2015. If the submission/correspondence contains confidential information, please also provide CCS with a non-confidential version of the submission or correspondence.

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