E-Commerce and Its Impact on Competition Policy and Law in Singapore
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E-commerce and its impact on competition policy and law in Singapore A DotEcon study for the Competition Commission of Singapore Final Report – October 2015 DotEcon Ltd 17 Welbeck Street London W1G 9XJ www.dotecon.com Content Content 1 Introduction ................................................................................................................. 1 2 E-commerce activity in Singapore ............................................................................... 4 2.1 An introduction to e-commerce ........................................................................... 4 2.2 E-commerce adoption in Singapore ................................................................... 17 3 E-commerce and competition .................................................................................... 38 3.1 What changes with e-commerce? ...................................................................... 38 3.2 The impact of e-commerce on market boundaries ............................................. 59 3.3 The impact of e-commerce on market structure and competition ...................... 65 3.4 Vertical restraints ............................................................................................... 77 4 Implications of e-commerce for competition policy in Singapore .............................. 83 4.1 Defining a relevant market ................................................................................. 84 4.2 Assessing market power .................................................................................... 91 4.3 Assessing agreements ........................................................................................ 95 4.4 Dealing with abusive behaviour ....................................................................... 101 4.5 Assessing mergers ........................................................................................... 104 4.6 Remedies ......................................................................................................... 109 4.7 Advocacy.......................................................................................................... 112 5 Conclusions .............................................................................................................. 114 Annex A Case studies.................................................................................................. 120 Annex B Literature review .......................................................................................... 150 Annex C The Singapore government’s e-commerce initiatives ................................... 203 Annex D Bibliography ................................................................................................. 211 i Tables & Figures Tables & Figures Table 1: Top five retail categories for online shopping ................................................. 26 Table 2: Reasons for not using mobile services to engage customers and e-payments 34 Table 3: Examples of e-commerce entry into Singapore market ................................... 36 Figure 1: Web traffic share in March 2014 of largest shopping sites in Singapore (hits in millions of visitors per month) ...................................................................................... 13 Figure 2: Who controls e-commerce activity within firms in South-East Asia? ............. 14 Figure 3: Level of e-commerce adoption amongst businesses with internet usage ...... 18 Figure 4: Proportion of online shoppers ....................................................................... 19 Figure 5: Businesses using mobile services to engage customers ................................. 23 Figure 6: Revenue share of online sales in 2010 ............................................................ 25 Figure 7: Retail Chains vs Pure-plays in the US: The sales figures and Compound Annual Growth Rate (CAGR) of pure-play (Web-Only) retailers compared to retail chains. ...... 32 Figure 8: Proposed framework for defining relevant markets in the case of multi-sided platforms ...................................................................................................................... 90 Figure 9: Feedback effects and the SSNIP test in multi-sided markets ......................... 91 ii Glossary Glossary B2B Transactions between businesses B2C Transactions between businesses and consumers B2B2B and B2B2C These terms are used to describe the business models of platforms that act as intermediaries, either between different businesses (B2B2B), or between businesses and consumers (B2B2C) Big data A broad term popularly used to describe large volumes of data usually created as a byproduct of other activities (including data generated and collected online) Brick-and-mortar firm A firm that does not conduct business online, but only through ‘traditional’ offline channels (e.g. in physical stores) C2B Models The ‘C2B’ model captures cases where consumers create value for a business by providing information (e.g. about willingness to pay) or marketing services (via social media or a personal website) in return for reduced prices or free products and services C2C Transactions between consumers Click-and-mortar firm A firm that conducts business online and also through ‘traditional’ offline channels Competitive bottleneck A term describing multi-sided platforms where users on one side (e.g. buyers) do not multi-home and users on the other side (i.e. sellers) wishing to interact therefore have no choice but to use the platform chosen by the single-homing users Drip pricing or A pricing strategy whereby a firm advertises an initial component pricing ‘headline’ price that does not include additional fees, some of which may be unavoidable Drop shipping A supply chain model where orders received by a retailer are fulfilled directly by a wholesaler E-commerce Activities related to the buying and selling of goods or services over the internet, including ordering of goods and services online and ancillary activities that support such transactions, including the interaction between iii Glossary businesses across the supply chain E-commerce adoption Level of take-up of e-commerce. Among firms, it may be measured for example by percentage of firms offering online sales or conducting online marketing. Among consumers, it may be measured, for example, as the percentage of internet users that have purchased an item online G2B Transactions between government and businesses Geo-blocking Restricting access to content or redirecting to an alternative website based on a user’s physical location Long tail hypothesis or The possibility that e-commerce will be associated with phenomenon an increase in range of available products and a shift of demand towards niche products M-commerce E-commerce activities conducted via a mobile device Marketplace An online platform that connects buyers and sellers. A B2C marketplace is analogous to shopping malls in the brick-and-mortar world Most favoured nation Agreements between a platform (e.g. price comparison (MFN) clauses, or price website) and sellers, that restrict sellers’ ability to offer parity agreements lower prices through other sales channels (e.g. on other price comparison websites) Multi-home Where individual users make use of multiple platforms offering comparable services Network effects Network effects occur where the value of a product or service to an individual user depends on the number of other users (for a more detailed explanation, see page 11) Offline channel This phrase refers to trading that takes place offline (e.g. in physical stores), regardless of whether the firms involved are brick-and-mortar firms or click-and-mortar firms Omni-channel retailing An emerging business model where firms seek to engage with customers and supply products or services seamlessly across different channels (e.g. online and offline) Online channel This phrase refers to trading that takes place online, regardless of whether the firms involved are pure-play firms or click-and-mortar firms iv Glossary Online firm A firm that conducts business online (whether as a pure- play firm or as a click-and-mortar firm) Online trading Buying and selling goods or services over the internet Platform (including two- An intermediary, connecting different types of users on sided or multi-sided each ‘side’ (e.g. a marketplace with buyers on one side platforms) and sellers on the other) Price dispersion Variation in price of an item by different sellers or on different channels Pure-play firm A firm that conducts business only online and not through ‘traditional’ offline channels Social commerce Buying and selling of goods or services online involving social media, social interactions and social collaborations Social listening service Services provided by companies who scrape social media websites and monitor traffic to gather comments or messages linked to clients’ names, brands or products Tipping Where network effects exist, it is possible that a single firm will become sufficiently large that the market ‘tips’ in its favour, meaning that the firm captures a majority share of the market and its strong position is reinforced by the network effects TvO ratio – Relative TvO hit ratio, Traditional versus Online Platform hit website hit ratio ratio, compares the number of visitors to traditional retailer websites versus online retailers or online platforms. It is calculated by examining monthly traffic data (adjusted for the rate at which users are directed to a site but do not browse it) Web