21 April, 2016
General
What is the main piece of legislation of general application which regulates anti-competitive behavior? What are the main prohibitions in the legislation?
Competition Act 2010 (MCA). The MCA is centred around two key prohibitions: anti-competitive agreements (Chapter 1 Prohibition) and abuse of a dominant position in the market (Chapter 2 Prohibition).
Which regulator is responsible for administering and enforcing competition laws?
The Malaysian Competition Commission (MyCC).
Are there any exclusions from the competition legislation of general application? Are there any sector-speci c competition laws or regulations?
Yes. The MCA does not apply to any commercial activity regulated under the following legislation:
(a) Communications and Multimedia Act 1998, which regulates the communication and multimedia industries in Malaysia;
(b) Energy Commission Act 2001, which regulates the energy supply activities in Malaysia; and
(c) Petroleum Development Act 1974 and the Petroleum Regulations 1974, in so far as the commercial activities are directly in connection with upstream operations comprising the activities of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia.
In addition, the Chapter 1 and Chapter 2 Prohibitions also do not apply to:
(a) an agreement or conduct to the extent it is engaged in in order to comply with a legislative requirement;
(b) collective bargaining activities or collective agreements in respect of employment terms and conditions and which are negotiated or concluded between parties which include both employers and employees or organisations established to represent the interests of employers or employees; and
(c) an enterprise entrusted with the operation of services of general economic interest or having the character
of a revenue-producing monopoly in so far as the Chapter 1 and Chapter 2 Prohibitions would obstruct the performance.
Does the competition legislation apply extraterritorially to persons, behaviour or action outside the jurisdiction?
Yes. The MCA applies to any commercial activity transacted outside Malaysia which has an effect on competition in any market in Malaysia.
What penalties and liabilities may be imposed for a breach of the competition law?
Upon nding of an infringement of either the Chapter 1 or Chapter 2 Prohibition, the MyCC has the power to require that the infringement be ceased immediately; specify steps which are required to be taken by the infringing enterprise which appear to the MyCC to be appropriate to bring the infringement to an end; impose a nancial penalty (up to a maximum of 10% of the worldwide turnover of an enterprise over the period during which an infringement occurred); or give other direction as it deems appropriate.
In addition, any person who suffers loss or damage directly as a result of an infringement of Chapter 1 or Chapter 2 Prohibition has a right of action for relief in civil proceedings against any enterprise which is or which has, at the material time, been
a party to such infringement. The action may be brought by such person regardless of whether the person dealt directly or indirectly with the enterprise.
Prohibition on anti-competitive agreements
What kinds of agreement or conduct is illegal under the prohibition?
The Chapter 1 Prohibition covers both horizontal and vertical agreements, insofar as the agreement has the object or effect of signi cantly preventing, restricting or distorting competition in any market for goods or services.
What types of agreements or conduct are illegal by object? And which are illegal only if they are signi cantly anti- competitive in effect?
Under the MCA, a horizontal agreement between enterprises which has the object to:
(a) fix, directly or indirectly, a purchase or selling price or any other trading conditions;
(b) share market or sources of supply;
c) limit or control production, market outlets / market access, technical / technological development or investment; or
(d) perform an act of bid rigging, is deemed to have the object of signi cantly preventing, restricting or distorting competition in any market for goods or services (i.e. illegal per se).
All other agreements will amount to an infringement of the MCA if they can be shown to have the object or effect of signi cantly preventing, restricting or distorting competition in any market for goods or services.
Is there regulation of vertical agreements and if so, what type of vertical restraints or provisions in such agreements are typically examined?
Yes, the MyCC has issued the Guidelines on Chapter 1 Prohibition which includes a non-exhaustive list of vertical restraints that will typically be examined i.e.:
(a) resale price maintenance;
(b) agreements that require a buyer to buy all or most supplies from the supplier;
(c) exclusive distribution agreement covering a geographical territory;
(d) exclusive customer allocation agreement; and
(e) upfront access payments.
Is resale price maintenance allowed? Are recommended resale prices or maximum resale prices permitted?
While resale price maintenance (RPM) is not illegal per se under the MCA, the MyCC has indicated in its Guidelines on Chapter 1 Prohibition that it will take a strong stance against minimum RPM and nd it anti-competitive.
Any other form of RPM (including recommended resale pricing and maximum resale pricing) which serves as a focal point for downstream collusion would also be anti-competitive.
Are there any defences or relief from liability provided by the legislation?
Yes. The MyCC’s Guidelines on Chapter 1 Prohibition provides that generally, anti-competitive agreements or association decisions will not be considered to have signi cant anti- competitive effect if:
(a) the parties to the agreement are competitors and their combined market share is less than 20% of the relevant market; or
(b) the parties to the agreement are not competitors and their individual market share in any relevant market is not more than 25%.
The MCA also provides that an enterprise which is a party to an anti-competitive agreement may be relieved from liability for infringement of the Chapter 1 Prohibition if:
(a) there are signi cant identi able technological, ef ciency or social bene ts directly arising from the agreement;
(b) the bene ts could not reasonably have been provided by the parties to the agreement without the agreement having the effect of preventing, restricting or distorting competition;
(c) the detrimental effect of the agreement on competition is proportionate to the bene ts provided; and
(d) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods and services.
Is there a leniency regime? If there is, please describe the extent of and process in seeking leniency?
Yes. The MCA provides for a leniency regime where an enterprise which admits its involvement in any infringement of the per se violations, and provided information or other form of co-operation to the MyCC, may obtain immunity or a reduction of up to 100% of any penalties which would have otherwise been imposed.
Abuse of Dominance or Market Power
How is “dominance” or “market power” determined? Is there a market share test?
For purposes of the MCA, dominant position refers to one or more enterprises possessing such signi cant power in a market that they are able to adjust prices, outputs or trading terms without effective constraint from competitors or potential competitors.
The MyCC, in its Guidelines on Chapter 2 Prohibition, indicated that generally, market share above 60% would be indicative that an enterprise is dominant. However, market share, on its own, is not conclusive evidence and the MyCC would also take into account other factors in assessing whether an enterprise is dominant.
What type of conduct constitutes abuse of dominance or abuse of market power?
Under the MCA, an abuse of a dominant position may include:
(a) directly or indirectly imposing unfair purchase or selling price or other unfair trading condition on any supplier or customer;
(b) limiting or controlling production, market outlets or market access, technical or technological development or investment, to the prejudice of consumers;
(c) refusing to supply to a particular enterprise or group or category of enterprises;
(d) applying different conditions to equivalent transactions with other trading parties to an extent that may discourage new market entry or expansion or investment by an existing competitor, force from the market or otherwise seriously damage an existing competitor which is no less ef cient than the enterprise in a dominant position or harm competition in any market in which the dominant enterprise is participating or in any upstream or downstream market;
(e) making the conclusion of contract subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject matter of the contract;
(f) any predatory behaviour towards competitors; or
(g) buying up a scarce supply of intermediate goods, or resources required by a competitor, in circumstances where the enterprise in a dominant position does not have a reasonable justi cation for buying up the intermediate goods or resources to meet its own needs.
Are there any defences or relief from liability or exclusions applicable for abusive conduct?
Yes. The MCA does not prohibit an enterprise in a dominant position from taking any step which has reasonable commercial justi cation or represents a reasonable commercial response to the market entry or market conduct of a competitor.
Merger Control
Is there a merger control regime? What is considered a “merger”?
No. There is currently no merger control regime under the MCA.
Is the merger noti cation a mandatory or voluntary process?
N/A
When must the merger be noti ed to the regulator?
N/A
What are the ling thresholds and are there any exemptions from noti cation requirements?
N/A
Please provide a brief description of the merger clearance process and the typical timeline for merger clearance.
N/A
What are the consequences of failing to notify the regulator when required?
N/A
For further information, please contact:
Adeline Wong, Partner, Wong & Partners
adeline.wong@wongpartners.com
