The Competition and Consumer Commission of Singapore (“CCCS”) has completed its Phase 1 review of the proposed acquisition by London Stock Exchange Group plc of sole control over Refinitiv Holdings Limited.
On 6 April 2020, CCCS accepted an application from the Parties for a decision on whether the Proposed Transaction infringes section 54 of the Competition Act (Cap. 50B), which prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore.
LSEG and Refinitiv overlap in the supply of fixed income index licensing services excluding hybrids to customers in Singapore.
In addition, there are non horizontal links between the Parties arising from six categories of products for which either one or both Parties generate revenue from customers in Singapore and require inputs from either of the Parties to be produced.
Third party feedback revealed concerns as to whether the merged entity will continue to supply Refinitiv’s WM/Reuters foreign exchange benchmarks at Fair, Reasonable and Non-Discriminatory (“FRAND”) terms to rival providers in the market for the global supply of index licensing and derivatives clearing services to customers globally including Singapore.
This is because post-Transaction, Refinitiv would be merged and/or affiliated to a major clearing provider as well as a major index licensing provider with presence, which may reduce its incentive to continue the supply of inputs to rival providers.
Furthermore, feedback suggests that WM/R FX benchmarks are critical inputs for index licensing and derivatives clearing services as they are considered the industry benchmark for foreign exchange reference rates and there is no reasonable substitute that rival index providers and derivatives clearing service providers are able to switch to without incurring significant disruption and costs to their businesses.
CCCS is unable to determine at this stage whether competitors are able to deploy effective and timely counter-strategies to mitigate the risk of foreclosure by the merged entity of access to the WM/R FX benchmarks.
There is also insufficient information available for CCCS to determine if the competition concerns could be addressed through any existing regulations overseas on the global supply of the WM/R FX benchmarks. In view of the concerns raised, CCCS will need to consider in more detail the effect of the Transaction in a Phase 2 review.
At this stage, the Parties may offer commitments to address the potential competition concerns of the Proposed Transaction raised by CCCS, or the merger will proceed to a detailed Phase 2 review upon CCCS’s receipt of the relevant documents from the Parties. Commitments may also be offered at any time during the Phase 2 review. ■