Competition Act 2010
- Under the Competition Act 2010, can business associations indulge in "price - fixing" of goods or services offered by their members?
- Are GLCs subject to this law?
- Does the Competition Act provide for any leniency?
- For those who are currently involved in cartel practices, is there any imprisonment provided for under the Competition Act 2010?
- How do you address issues like electric or internet charges, especially if the major players abuse their dominant position?
- Under this Competition Act 2010, are government staff involved in enforcing the Competition Law?
- If price - fixing activities are discovered, where can one lodge a complaint and to whom?
- What is the reason for not having a fixed quantum of the market share when deciding "dominance" as it would be difficult for the Commission to prove its case.
- Will the Commission consider breaking the monopoly of Intellectual Property rights’ holders and issue Guidelines on how these rights’ holders should behave in line with the new law.
- Would joint venture activities be covered under this Act?
- How does the "whistleblower" provision in the Competition Act work?
- What is the rationale behind the provision of rights of private action which allows parallel action?
- How will the Competition Commission handle tender or bid rigging in government agencies? How about direct negotiation between the vendor and the government? Will this law address this?
- Due to globalization, many companies have opened new branches in Malaysia, especially in the case of foreign hypermarkets . Is the Competition law able to protect the interest of the local retailers; who may face challenges from the foreign big players.
- The big players in the markets tend to dictate lower purchasing prices of raw materials whereas the smaller players pay higher prices for the same materials. This puts the smaller players at a disadvantage and they can't seem to compete with the big boys.
- Transporters seem to charge the same rate for the transportation of the product. They do not want to reduce citing that their association has fixed the rate. Can the Commission act against them?
- Banks when selling products force customers to buy their insurance. Is this against the law?
- How can a private company apply for exemption under the Competition Act 2010 and when can it do so?
- Would the Government abolish the Price Control Act 1946 with the introduction of the Competition Act 2010?
- What is the function of the Competition Commission in protecting the interest of the consumer?
- Does the Act apply to the Government?
- Is there any commercial activity that is excluded from the application of the CA 2010?
Agreement between competitors to price-fix is prohibited under section 4 of the CA. Section 2 of the CA defines ‘agreement’ to include decisions made by any associations.
All entities engaging in commercial activities including the GLCs are subject to this law. Commercial activity is defined in section 3 (4) of the CA. However, the GLCs may apply for individual exemption from the CA if it fulfils the requirements stated in section 5 of the CA.
Section 41 of the CA provides for a leniency regime with a reduction of up to a maximum of 100% of any penalties that would be otherwise imposed. In essence, the leniency program is designed to encourage those who are involved in cartel practices to whistleblow by cooperating with the Commission in identifying the infringement.
The Competition Act 2010 does not provide for any imprisonment for cartel practices, unlike the US Anti trust for example.
Electric charges, which are fixed by TNB, come under the purview of the Energy Commission; while internet comes under the purview of the Communication and Multimedia Commission. Both these sectors are excluded from the application of the CA. However, a Special Committee comprising all sectoral regulators will be set up to discuss competition matters. If no action is taken on complaints directed to sector regulators, then such issues will be discussed at the Special Committee.
The enforcement of the Competition Act will carried out by the officials of Malaysia Competition Commission (MyCC) once the law is enforced in January 2012.
Complaints regarding cartel or abuse of dominant position can be lodged with the MyCC by providing complete and comprehensive information about the infringement.
The reason for not having a fixed quantum of the market share is to provide a flexible regime of competition law. This approach is also in line with other developed jurisdictions such as EU and UK. Market share is one of the factors to determine dominance but not the sole factor in determining dominance. The fact that market share of any enterprise is above or below any particular level shall not itself be regarded as conclusive as to whether that enterprise occupies, or does not occupy, a dominant position in that market. Other additional factors indicating dominance such as barriers to entry and buyer power must also be taken into consideration.
Nevertheless, guidelines on abuse of dominance will usually indicate the market share threshold for companies presumed to be holding a dominant position.
It is not an offence to be a monopoly and the Act will kick in only when a firm in a monopolistic position , i.e. a dominant position, abuses this position by imposing unfair prices or trading terms etc. Competition law is relatively new to/in Malaysia. Formulating further guidelines on the interface between competition and intellectual property policies would be a long term goal of the Commission.
Any activity of commercial nature is covered under the CA unless it is expressly excluded or exempted by the Commission provided it fulfills the requirements stated in section 5 of the Act.
The leniency regime under section 41 of the CA provides that the enterprise involved in a cartel activity a reduction of up to a maximum of 100% of any penalties that would be otherwise imposed if it admits involvement and co-operates with MyCC in its investigation of the infringement.
Section 64 of the CA gives the right to any person who suffers loss or damage directly as a result of an infringement of any provision under Part II (section 4 and 10) a right of action for relief in civil proceedings in a court. The right of private action will increase the likelihood of such anti- competitive behaviour to be detected thus acting as an incentive for businesses to comply with the law. Therefore, the risk of double recovery is outweighed by the public interest in ensuring that anti-competitive behaviour is deterred and that those who suffer loss as a result are adequately compensated. Besides, the Commission would have, as strategic priorities, cases which it may not want to pursue, as these cases may not have a significant effect on a market. As such an individual seemingly deprived of an action being taken up by the Commission, can pursue his/her case in a court as private action.
Bid rigging activities, regardless of who is bidding for the tender, is prohibited under the CA. Section 4 of the CA treats bid rigging as an agreement which has the object of restricting competition. When a few people get together to defeat the tender exercise and agree to fix or bid rig for a contract or project, it does infringe the law.
CA does not deal specifically with direct negotiation issues. However direct negotiation in most cases is only allowed where there are not many players in the market or when it involves highly confidential or security – related matters.
Competition law protects the process of competition rather than competitors be it small or big players. However, there are several ways competition law benefits small players. One of the ways is through regulating the behaviour of a dominant player from abusing its market power, for instance by imposing unfair purchase and selling prices and trading terms. This law guarantees that small players will be able to compete with big players on a level playing field.
Another way is by exempting the conduct of the SMEs from the competition law, as generally SMEs do not assert much influence on the market . For example, small retailers may form a "buying association" in order to increase their buying power and further increase their competitiveness in the local market.
Section 10 of the CA prohibits a dominant firm from abusing its market power by imposing unfair purchase and selling prices and other trading terms. Unfair prices do not necessarily mean a high price but could also refer to lower prices offered by the dominant purchaser (monopsony) to its supplier. Therefore, competition law gives opportunity to small players to compete with the big players on a level playing field.
Any agreement among transport operators to fix their rate either in writing or made orally would be a cartel and is prohibited under section 4 of the CA. Agreement includes a decision of an association. Therefore, the conduct of the transporter’s association to fix their price will also be contravening section 4. The Commission can act against both the transporters and their association.
The scenario is known as bundling or tying. The behaviour may be prohibited under section 4 and section 10 depending on the circumstances of the case.
A private company which is a party to an agreement may apply for an individual exemption from the Commission. The individual exemption may be granted if the party can prove that the criteria under section 5 of the Act is met, one of which is if there are significant efficient benefits arising from the enforcement of an agreement. Instead of applying for individual exemption, a company may also conduct a self-assessment on whether the agreement entered into meets the criteria under section 5. The company may then proceed with the agreement and invoke a defence if action is being taken against the company. MyCC is still in the process of formulating guidelines containing clear and detailed processes and procedures for individual exemptions.
For now, the Government is not planning to abolish the Price Control Act 1946. Price control is necessary to ensure that the price of essential goods such as sugar, flour and cooking oil is always at reasonable levels and is affordable. Price control is also important to prohibit profiteering especially on non-controlled items such as food and beverages among traders.
The main function of the Competition Commission is to enforce the Competition Act 2010. The Act contains several prohibitions to ensure that there is healthy competition in the local market such as prohibiting cartel and abuse of market power. By regulating these behaviours and ensuring a healthy competition in the market, consumers will indirectly enjoy the benefits in the form of lower prices and a wider choice of quality products.
The Government will also be subject to the law if it is involved in an activity which is of a commercial nature.
Pursuant to the First Schedule to the CA 2010, commercial activities regulated under the following legislation are excluded:
1) Communications and Multimedia Act 1998;
2) Energy Commission Act 2001;
3) Petroleum Development Act 1974 and the Petroleum Regulations 1974 in so far as the commercial activities regulated under these regulations are directly in connection with upstream operations comprising the activities of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia; and
4) Aviation Commission Act 2015.