COMPETITION ACT 2010

SECTION A: AN OVERVIEW OF THE CA 2010

Status:

Passed by Parliament: 26 April 2010.
Date of Royal Assent: 2 June 2010.
Date of publication in the Federal Government Gazette: 10 June 2010.
In force from: 1 January 2012

Application of the CA

• The CA 2010 applies to any commercial activity, both within and outside Malaysia.
• In relation to the application of CA 2010 outside Malaysia, CA 2010 applies to any commercial activity transacted outside Malaysia which has an effect on competition in any market in Malaysia.
• “Commercial activity” – means any activity of a commercial nature but does not include:
• (a) any activity, directly or indirectly in the exercise of governmental authority;
• (b) any activity conducted based on the principle of solidarity; and
• (c) any purchase of goods or services not for the purposes of offering goods and services as part of an economic activity.

Non- application of CA

The CA 2010 does not apply to any commercial activity regulated under the following legislation*:

1. Communications and Multimedia Act 1998 [Act 588]
2. Energy Commission Act 2001 [Act 610]

(*The list of legislation is subject to amendment by the Minister)

Purpose

(a) To promote economic development by promoting and protecting the process of competition thereby protecting the interest of consumers and to provide for matters connected therewith; and

(b) To encourage efficiency, innovation and entrepreneurship, which promotes competitive prices, improvement in the quality of products and services and wider choices for consumers.

Key subjects envisaged in the CA

“concerted parties” – means any form of coordination between enterprises which knowingly substitutes practical co-operation between them for the risks of competition and includes any practice which involves direct or indirect contact or communication between enterprises, the object or effect of which is either-

(a) to influence the conduct of one or more enterprises in a market; or

(b) to disclose the course of conduct which an enterprise has decided to adopt or is contemplating to adopt in a market, in circumstances where such disclosure would not have been made under normal conditions of competition;

“agreements” – any form of contract, arrangement or understanding, whether or not legally enforceable, between enterprises, and includes a decision by an association and concerted parties (p/s - the formal legal meaning of “agreement” is not applicable for CA 2010)

“horizontal agreement” - an agreement between enterprises each of which operates at the same level in the production or distribution chain

“vertical agreement” - an agreement between enterprises each of which operates at a different level in the production or distribution chain

Ambit of “supply”

It includes:

• (a) in relation to goods, the supply and resupply, by way of sale, exchange, lease, hire or hire-purchase of the goods; and
• (b) in relation to services, the provision by way of sale, grant or conferment of the services;

“Commission”

"Commission" means the Competition Commission established under the Competition Commission Act 2010;

“dominant position”

Means a situation in which one or more enterprises possess such significant power in a market to adjust prices or outputs or trading terms, without effective constraint from competitors or potential competitors.

“enterprise”

Means any entity carrying on commercial activities relating to goods or services, and for the purposes of this Act, a parent and subsidiary company shall be regarded as a single enterprise if, despite their separate legal entity, they form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their actions on the market.

“Market”

Means a market in Malaysia or in any part of Malaysia, and when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services.

“Minister”

Minister is the Minister of Ministry of Domestic Trade and Consumer Affairs of Malaysia

Prohibitions in the CA

The competition in market in Malaysia, the competitors are prohibited from the following:

1. Anti-competitive agreement:

• Anti-competitive agreement – Agreement with the “object” or “effect” that may significantly prevent, restrict or distort competition in the market
• A horizontal or vertical agreement between enterprises is prohibited as the agreement has the effect of significantly preventing, restricting or distorting competition in any market for goods or services
• Act of infringement in horizontal agreements, including but not limited 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:-
• (i) production;
• (ii) market outlets or market access;
• (iii) technical or technological development; or
• (iv) investment; or
• (d) perform an act of bid rigging.
• Examples of vertical agreements:
• (a) supply agreements;
• (b) distribution agreements;
• (c) licensing agreement;
• (d) franchise agreements;
• (e) agency agreements;
• (f) contract manufacturing agreements.

(p/s – the vertical agreements shall not affect entry barriers)

2. Abuse of Dominant Position:

• An enterprise is prohibited from engaging in any conduct which amounts to an abuse of a dominant position in any market for goods or services;
• The test for abuse of dominant position:
• i) whether an undertaking is dominant in a relevant market either in Malaysia or elsewhere; and
• ii) if it is, whether it is abusing the dominant position in a market in Malayisa.
• The relevant market must be determined (as explained below) to assess whether an undertaking is dominant. An undertaking will not be considered dominant unless it has potential market power. This assessed through various factors such as:
• i) its market share and the degree of fluctuations in market shares. A market share above 60% is likely to indicate that an undertaking is dominant in the relevant market;
• ii) existing competitors in the market whom its customers would be able to go to if it raises its prices, its competitors market share;
• iii) barriers that potential competitors would face to enter the market. Lower entry barriers are usually indicate less dominance by the incumbent market players; and
• iv) its ability to sustain a long period of sale below cost.
•  an abuse of a dominant position may include:-
• (a) directly or indirectly imposing unfair price or other unfair trading condition;
• (b) limiting or controlling:-
• (i) production;
• (ii) market outlets or market access;
• (iii) technical or technological development; or
• (iv) investment, to the prejudice of consumers;
• (c) refusing to supply to a particular enterprise;
• (d) applying different conditions to equivalent transactions with other trading parties to an extent that may:-
• (i) discourage new market entry or expansion or investment by an existing competitor;
• (ii) force from the market or otherwise seriously damage an existing competitor which is no less efficient than the enterprise in a dominant position; or
• (iii) 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 behavior 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 commercial justification for buying up the intermediate goods or resources to meet its own needs.

Exemptions

1. Anti-competitive agreement

 an enterprise which is a party to an agreement may relieve its liability for the infringement of the prohibition based on the following reasons:

(a) there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;

 (b) the benefits 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 benefits provided; and

(d) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.

Individual exemptions:-

 An enterprise may apply to the Commission for an exemption with respect to a particular agreement from the prohibition for the reason set out above.

 The Commission may, by order published in the Gazette, grant the exemption if, in the opinion of the Commission, the agreement is one of the reasons set out above.

 The individual exemption granted by the Commission may be:-

(a) subject to any condition or obligation as the Commission considers it appropriate to impose; and

(b) for a limited duration as specified in the order.

Cancellation or variation of individual exemption

 If the Commission is satisfied that:-

(a) there has been a material change of circumstance since it granted an individual exemption; or
(b) an obligation has been breached,

the Commission may, by order published in the Gazette:-

(i) cancel the individual exemption;
(ii) vary or remove any condition or obligation; or
(iii) impose additional condition or obligation.

If the Commission is satisfied that:-

(a) the information on which the Commission based its decision to grant an individual exemption is false or misleading in a material particular; or

(b) any condition has been breached,

the Commission may, by order published in the Gazette, cancel the individual exemption.

 An individual exemption which is cancelled:-

(a) when there has been a material change of circumstance since it granted an individual exemption, shall be void ab initio; or

(b) when an obligation has been breached, shall have effect from the date the condition is breached.

Block exemptions:-

 the Commission may also, by order published in the Gazette, grant an exemption to the particular category of agreements (the same principle for individual exemptions shall apply for the block exemptions).

2. Abuse of Dominant Position:

An enterprise in a dominant position is allowed to take the necessary step which has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor.

Exclusions

The prohibitions are not applicable to the *matters listed below:

(a) an agreement or conduct to the extent to which it is engaged in an 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;

(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 prohibitions would obstruct the performance, in law or in fact, of the particular tasks assigned to that enterprise.

(*The list of exclusions is subject to amendment by the Minister)

Determination of infringement by way of market survey

The Commission may, on its own initiative or upon the request of the Minister, conduct a review into any market in order to determine any infringement action in the market.

Investigation and Enforcement

1. Investigation by Commission

The Commission, shall, upon request by the Minister or may, upon complaints from public or by its own discretion, conduct an investigation in order to determine infringement in the market.

2. Powers of Investigation

a. to require provision of information;

b. to retain documents;

c. to access records;

d. to search and seizure with warrant from Magistrate;

e. to search and seizure without warrant, if the Commission Officer has reasonable cause to believe that by reason of delay in obtaining a search warrant, the investigation would be adversely affected;

f. to access to computerized data.

3. Offences

a. Obstruction – refusing access to any premises, assaults, obstructs, hinders or delays the investigation

b. Tipping off – revealing information which is likely prejudice any investigation to any other person

c. Threat and reprisal

d. Giving false or misleading information, evidence or document

e. Destruction, concealment, mutilation or alteration of records, etc

4. Cost and Damages

No person shall, institute any proceedings before any court in respect of any action by Commission during investigation unless such action was made without reasonable cause.

5. Decision

a. interim measures

Before completion of investigation, the Commission may impose the following directions:

i) to suspend the effect of, and desist from acting in accordance with, any agreement which is suspected of infringing any prohibition;

ii) to desist from any conduct which is suspected of infringing any prohibition ; or

iii) to do, or refrain from doing, any act, but which shall not require the payment of money,

if the Commission considers that it is necessary for it to do so as a matter of urgency for the purpose of:-

(I) preventing serious and irreparable damage, economic or otherwise, to a particular person or category of persons; or

(II) protecting the public interest. The interim measure is only valid up to the completion of the investigation or twelve (12) months from the direction was given, whichever is earlier.

b. Upon completion of investigation

Findings of Non-Infringement

Where the Commission has made a decision that there is no infringement of a prohibition under Part II, the Commission shall, without delay, give notice of the decision to any person who is affected by the decision stating the facts on which the Commission bases the decision and the Commission’s reason for making the decision.

i) Proposed decision, setting out the reason for the decision and penalty must be forwarded by the Commission to the enterprise under complaint;

ii) the enterprise under complaint may make an oral representation by way of application before the expiry of time period provided in the proposed decision

iii) Hearing may be conducted to determine the infringement.

iv) Decision to be made after completion of investigation, representation or hearing:-

 shall require that the infringement to be ceased immediately;

 may specify steps which are required to be taken by the infringing enterprise, which appear to the Commission to be appropriate for bringing the infringement to an end;

 may impose a financial penalty; or

 may give any other direction as it deems appropriate.

v) the Commission may initiate proceeding in High Court in the event the enterprise under complaint or any person fails to comply with the Commission’s directions, interim measures or upon completion of investigation provided that the consent of the Public Prosecutor has been obtained.

Privileged communication

 No person shall be required, under any provision of this Part, to produce or disclose any communication between a professional legal adviser and his client which would be protected from disclosure in accordance with *section 126 of the Evidence Act 1950.

*126. Professional communications.

(1) No advocate shall at any time be permitted, unless with his client's express consent, to disclose any communication made to him in the course and for the purpose of his employment as such advocate by or on behalf of his client, or to state the contents or condition of any document with which he has become acquainted in the course and for the purpose of his professional employment, or to disclose any advice given by him to his client in the course and for the purpose of such employment:

Provided that nothing in this section shall protect from disclosure -

(a) any such communication made in furtherance of any illegal purpose;
(b) any fact observed by any advocate in the course of his employment as such showing that any crime or fraud has been committed since the commencement of his employment.

(2) It is immaterial whether the attention of the advocate was or was not directed to the fact by or on behalf of his client.

 If the Commission makes a requirement of an advocate and solicitor in respect of any information or document; and the information or document contains a privileged communication made by or on behalf of or to the advocate and solicitor in his capacity as an advocate and solicitor, the advocate and solicitor is entitled to refuse to comply with the requirement unless the person to whom or by or on behalf of whom the communication was made or, if the person is a body corporate that is under receivership or is in the course of being wound up, the receiver or the liquidator, as the case may be, agrees to the advocate and solicitor complying with the requirement, but where the advocate and solicitor so refuses to comply with the requirement, the advocate and solicitor shall forthwith furnish in writing to the Commission the name and address of the person to whom or by whom the communication was made.

Private Civil Actions

 Any person who suffers loss or damage directly as a result of an infringement of any prohibition under CA 2010 shall have a right of action for relief in civil proceedings in a court against any enterprise, which is or which has at the material time been a party to such infringement, regardless of whether such person dealt directly or indirectly with the enterprise.

Lenience regime

 There shall be a leniency regime, with a reduction of up to a maximum of one hundred percent of any penalties which would otherwise have been imposed, which may be available in the cases of any enterprise which has:-

(a) admitted its involvement in an infringement of any prohibition under CA 2010; and

(b) provided information or other form of co-operation to the Commission which significantly assisted, or is likely to significantly assist, in the identification or investigation of any finding of an infringement of any prohibition by any other enterprises.

 A leniency regime may permit different percentages of reductions to be available to an enterprise depending on:-

(a) whether the enterprise was the first person to bring the suspected infringement to the attention of the Commission;

(b) the stage in the investigation at which:-

(i) an involvement in the infringement was admitted; or

(ii) any information or other co-operation was provided; or

(c) any other circumstances which the Commission considers appropriate to have regard to.

Competition Appeal Tribunal

An Appeal Tribunal needs to be set up to hear appeals by any aggrieved person against the decision of the Commissioner.

Powers of the Appeal Tribunal:

a. to summon parties to the proceedings or any other person to attend before it to give evidence in respect of an appeal;
b. to procure and receive evidence on oath or affirmation, whether written or oral, and examine all such persons as witnesses as the Appeal Tribunal considers necessary;
c. to require the production of any information, document or other thing in his possession or under his control of a summoned person which the Appeal Tribunal considers necessary for the purposes of the appeal;
d. to administer any oath, affirmation or statutory declaration, as the case may require;
e. where a person is so summoned, to allow the payment for any reasonable expenses incurred in connection with his attendance;
f. to admit evidence or reject evidence adduced, whether oral or documentary, and whether admissible or inadmissible under the provisions of any written law relating to the admissibility of evidence;
g. generally to direct and do all such matters as may be necessary or expedient for the expeditious decision of the appeal.

The Appeal Tribunal shall have the powers of a subordinate court with regard to the enforcement of attendance of witnesses, hearing evidence on oath or affirmation and punishment for contempt.

Decision of the Appeal Tribunal

 The decision, which will be decided, based on majority of the member shall be final and binding.
 The Competition Appeal Tribunal may confirm or set aside the decision which is the subject of the appeal, or any part of it, and may:-

(a) remit the matter to the Commission;

(b) impose or revoke, or vary the amount of, a financial penalty;

(c) give such direction, or take such other step as the Commission could itself have given or taken; or

(d) make any other decision which the Commission could itself have made.

 No action, suit, prosecution or other proceedings shall lie or be brought, instituted or maintained in any court against:-

(a) the Competition Appeal Tribunal;
(b) President or any member of the Competition Appeal Tribunal;
(c) the Secretary or any other officer of the Competition Appeal Tribunal; or
(d) any person authorized to act for and on behalf of the Competition Appeal Tribunal, in respect of any act or omission done or omitted by him or it in good faith in such capacity

Procedure:

The Tribunal may regulate their own procedure.

Appeal

An appeal shall be made by way of filing Notice of Appeal to the Appeal Tribunal.

Filing of Notice of Appeal:

1. must be made in writing.

2. filed within thirty (30) days from the date of the decision by the Commissioner.

3. the appellant shall serve a copy of the Notice of Appeal upon the Commissioner.

Requirements for Notice of Appeal:

1. shall state briefly the substance of the decision of the Commissioner against which the appeal is filed;

2. contains an address at which any notice or document connected with the appeal may be served on the appellant or his advocate; and

3. the Notice shall be signed by the appellant or his advocate.

Forum of Appeal

The Appeal Tribunal shall consists of:

 a President; and

 between seven and twenty other members appointed by the Prime Minister on the recommendation of the Minister.

Composition:

 The appeal proceedings shall be heard and disposed of by three (3) members or such greater uneven number of members of the Tribunal as the President thinks fit.

Penalties

1. General penalty –

Any person who commits an offence under this Act for which no penalty is expressly provided shall, on conviction, be liable:-

(a) if such person is a body corporate, to a fine not exceeding five million ringgit, and for a second or subsequent offence, to a fine not exceeding ten million ringgit; or

(b) if such person is not a body corporate, to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding five years or to both, and for a second or subsequent offence, to a fine not exceeding two million ringgit or to imprisonment for a term not exceeding five years or to both.

2. Compounding of offences

(1) The Minister may, by regulations, prescribe any offence to be a compoundable offence and may prescribe the manner in which offences may be compounded.

(2) The same can be reduced up to fifty per centum with the consent of the Public prosecutor which is subject to cancellation in the event the discounted amount is not paid, resulting in prosecution.

(3) All sums of money received by the Commission under this section shall be paid into the Federal Consolidated Fund.

SECTION B: AN ANALYSIS OF THE CA 2010

Implications of the CA 2010

Upon its coming into force, the CA 2010 will have a significant impact on industry practices such as in:

1. Licensor-Licensee / Franchisor-Franchisee dealings;
2. Intellectual Property dealings; and
3. Import and export dealings.

 The passing of the Competition Act will significantly change the trade system in Malaysia.

Some concerns with the CA 2010

1. No express provisions in respect the Intellectual Property rights:

• Issues may arise as to whether the prohibitions imposed are applicable to the intellectual property rights.

• The common practice is, the owner of an intellectual property right may impose conditions to his licensee in respect of the licensee’s dealings to safeguard his rights, and this is in contrary to the provisions of CA 2010.

2. It is not clear whether the general default penalty rule can apply where provisions are silent as whether a violation constitutes an infringement or an offence

• According to section 27, the act of an enterprise to refuse access to computerized data is in violation of the competition law. However the act is not defined as an offence or an infringement in the CA 2010. Confusion may arise at this point, especially during the early stage upon the CA 2010 come into force.

3. No element of merger controls

• The CA 2010 has not explained on the merger control laws – a form of regulation adopted by many other countries with competition laws.

• The merger control laws, according to the laws introduced in other countries, would require the notifications of regulators of mergers that have anti-competitive effects, which would be subject to clearance before they can proceed.

 Test to determine contravention

1. Is it an agreement?
2. Is it excluded?
3. Does it have an anti-competitive effect?
4. Are there overriding benefits? 
5. Are there applicable exemptions?

Consequences of non-compliance

1. the adverse reputational impact

• A firm faced with an investigation into a competition law infringement will be viewed negatively by investors, employees and other stakeholders.

2. imposition of large financial penalties

• The financial penalty may go up to 10% of global turnover

3. Personal Sanctions

• Criminal penalties and disqualification as directors to be imposed on employees directly involved in the infringement act.

Proposed measures for compliance with competition law

Resale Price maintenance:

1. Fixing a maximum resale price;
2. Obliging a licensee/distributor to offer a minimum discount;
3. adopting a recommended resale price – provided it is clear that the licensee/distributor is not obliged to stick to it

 Any clause on resale price should make it clear that the licensee is free to set its own price.

Sample: “The Licensee shall take account of the premium nature of the Products and the Licensor’s worldwide philosophy for the Brands when determining all aspects of the market positioning of the Products, including the retail price at which the recommended retail price for each of the Products in the Territory, provided that the Licensee shall be entirely free to determine the prices, discounts and rebates and any other price allowances at which the Licensor shall market and sell the Products in the Territory.”

Exclusivity/non-compete clauses

The clause which restricts a distributor’s ability to obtain products from competitors must be avoided in the agreement.

Territorial restrictions

1. Only to prohibit active sales, i.e. direct selling to the end customers, into another exclusive territory;
2. Permit passive sales (i.e. via internet orders).

Sample: “The Licensee shall not actively sell the Products into any territory exclusively reserved to another supplier. Nothing in this clause shall restrict the ability of the Licensee to receive and fulfill unsolicited orders from customers outside the Territory.”

Trade Mark Co-existence/delimitations agreements

The clauses in the agreement must be clear that the coexistence limitations only exist due to the real likelihood of confusion between the marks – Avoid saying “ the parties believe that there is no likelihood of confusion or conflict between their respective trade marks”;

Communication with competitors on anti-competitive agreements

1. In any discussion of anti-competitive practices, even silence of one party may be deemed to be approval or consent by that party of the discussion and the planned anti-competitive activities.
2. Parties in such cases should instead express their firm objection and leave the discussion immediately.

Contracts with the Suppliers/ Customers

The firms shall not impose any irrelevant restrictions or conditions on the suppliers/customers or on the firm itself the on how they conduct their own business where the restriction or conditions are not directly relevant to goods or services acquired from the supplier or provided to the customer.

Bid Rigging agreement, Price discrimination and Tie-in arrangements

The act competitors to agree on who should win a tender, the practice of selling the same product to different customers at different prices without reasonable commercial justification and the sale of one good with condition on the purchase of another good must be avoided.

In-house Competition Law Compliance Committee

The enterprises may set up an in-house committee, led by senior management to ensure the compliance with CA 2010. The in house committee shall be responsible to advise the organization in all activities which relates to competition elements. The committee may create full awareness of competition law among the employees by way of:

1. Conducting Competition Law training to the staffs/employees;
2. Providing questionnaire from time to time, aimed at testing the employees’ knowledge f the requirements of the CA 2010 under various scenarios;
3. Providing detailed rules and procedures to provide guidance on everyday business activities and decisions which may be affected by the requirements of competition law;
4. Involving in the process of review and clearance of commercial agreements, clearance for memberships of trade associations, procedures for dealing with incidences of non-compliance and whistle-blowing hotlines;
5. Monitoring sales and procurement processes;
6. Reviewing the unwritten practice that the firm may have in place with other firms, any unwritten conditions that the firm may impose on prospective dealing and any reasons given for not dealing with another firm.
7. Liaise with the Competition Commission to provide guidelines on the prospective agreements or any other required clarifications.

Conclusion

(a) The scope, obligations and rights provided under the CA 2010 can only be more clearly defined once a set of regulations, guidelines, codes of practices and judicial decisions are made. Nevertheless, it is suggested for organizations to review their current policies and make necessary changes to other processes, contractual obligations and third party transactions which involve or may involve competition elements.

(b) The important highlights of the CA 2010 is shown in the table below:

Competition Act 2010 (to be enforced on Jan 1, 2012)

Some of the main provisions include:

 Prohibitions against anti-competitive agreements

 Prohibition against abuses by dominant players

 Power to conduct market reviews

Examples of prohibited practices includes:

 Anti-competitive agreements

 Price-fixing

competitors agree to fix, control or maintain price of goods and services

 Market allocation

competitors divide customers geographically, or by customer type and sell only to their allotted customers

 Bid-rigging agreement

competitors agree on who should win a tender

 Limiting production

profit maximization by limiting or controlling its supply

 Tie-in arrangements

the sale of one good is conditional on the purchase of another good

 Exclusive dealing

imposition of unfair trading terms such as exclusivity

 Abuse of dominant position

 Price discrimination

the practice of selling the same product to different customers at different customers at different prices without reasonable commercial justification

 Excessive pricing

 Predatory pricing

practice of selling a product or service at a very low price, with the intention to drive out competitors or create barriers to entry for potential new competitors.

SECTION C: KEY CONCEPTS IN COMPETITION LAW

The Policy on Competition Law is based on the following key concepts that a business would have to understand:

• Market definition
• The relevant market
• Market power
• Predatory behavior

Market definition

Market definition is important because it provides a framework within which to assess the critical question of whether a firm or firms possess market power. It is necessary to define all the products on the demand side that buyers regards as reasonable substitutes for the product under investigation (“focal products”) then to identify all the sellers who supply the focal and substitute products or their potential suppliers.

The relevant market

The relevant market is determined by the market definition. It is all the products on the demand side that buyers regard as reasonable substitutes for the product under investigation and all the sellers who supply focal and substitute products or their potential suppliers. There is an addition to what products comprise the market, the geographical are of the market to be considered. Therefore, consideration must be given to both the product market and the geographic market.

Market power

Market power is more likely to exist if the undertaking has persistently high market share. In assessing market power, the following factors maybe considered:-

(d) High entry barriers will prevent competitors from joining the market;

(e) Successful innovation of the undertaking giving rise to persistent high market share; and

(f) Product differentiation because other products in the market may not be close substitutes, etc.

Predatory behavior

Predatory behavior is exploitive or high-handed tactics employed by a dominant firm for the purpose of unfairly suppressing competitors. Examples of predatory behavior are excessively low prices (even below costs) and intention to eliminate a competitor or prevent entry into the market by potential competitors.

Factors in determining if behavior is predatory include:-

(g) When sale price is below the average variable cost of production (i.e. a loss for each unit of production), in the absence of an objective justification. The justification could be loss leading, short run promotions especially for new products;

(h) Where the price is above the average variable cost of production but below average total cost of production, other evidence to be considered may include evidence of intention to harm competition;

(i) Price above the average total cost of production does not indicate predation;

(j) Absence of any benefits in having such low prices;

(k) Discount schemes which have the effect of harming competition e.g. where discounts are conditional upon buyers making all or a large proportion of their purchases from the dominant undertaking (fidelity discounts) or where conditional on the purchase of tied products;

(l) Applying dissimilar conditions to equivalent transactions with other trading parties thereby placing them at a competitive disadvantage e.g. price discrimination or difference in service quality;

(m) Limiting production, markets and technical development to the prejudice of consumers;

(n) Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature or according to commercial usage, have no connection with the subject of such contracts; and

(o) Refusal to supply by a major producer with no objective justification if it causes substantial harm to competition.

SECTION D: COMPETITION COMMISSION ACT 2010 (Act 713) (“CCA 2010”).

COMPETITION COMMISSION

The CCA 2010 is enacted to provide for the establishment of the Competition Commission, to set out the powers and functions of such Commission, and to provide for matters connected therewith or incidental thereto. As with most commissions in Malaysia, the Competition Commission has extensive powers to conduct investigations, request for information, conduct searches and seizures, issue interim measures whilst investigating (please see above).

STATUS

Passed by Parliament: 26 April 2010.

Date of Royal Assent: 2 June 2010.

Date of publication in the Federal Government Gazette: 10 June 2010.

In force from: 1 January 2012

MEMBERSHIP – COMMISSION AND COMMISSION OFFICERS

• The Competition Commission shall comprise a President, four government representatives, one of whom shall be a representative of the Minister of Domestic Trade, Cooperative and Consumerism and between three to five other members who have experience and knowledge in business, industry and consumer protection.

• Appointment and power of Commission Officers

 The Commission may appoint such number of Commission officers as it considers necessary to exercise the powers provided under the competition laws.

 For purposes of an investigation under the competition laws, the Commission may appoint its employee or any other person to be a Commission officer.

 A Commission officer who is not an employee of the Commission shall be subject to obligations of secrecy, and shall enjoy protection and indemnity as may be specified in this Act or other written law applicable to an employee of the Commission, as the case may be.

 A Commission officer shall have all the powers necessary to carry out inspection and investigation of any offence or infringement under the competition laws.

FUNCTIONS OF THE COMMISSION

The Commission shall have such functions as specified under the competition laws, including but not limited to:

(a) to advise the Minister or any other public or regulatory authority on all matters concerning competition;

(b) to alert the Minister to the actual or likely anti-competitive effects of current or proposed legislation and to make recommendations to the Minister, if appropriate, for the avoidance of these effects;

(c) to advise the Minister on international agreements relevant to competition matters and to the competition laws;

(d) to implement and enforce the provisions of the competition laws;

(e) to issue guidelines in relation to the implementation and enforcement of the competition laws;

(f) to act as an advocate for competition matters;

(g) to carry out, as it considers appropriate, general studies in relation to issues connected with competition in the Malaysian economy or particular sectors of the Malaysian economy;

(h) to collect information for the performance of the Commission's functions;

(i) to publish, and otherwise raise awareness among persons engaged in commerce or trade and among the public of, information concerning the competition laws and the manner in which the Commission will carry out its functions under the competition laws;

(j) to inform and educate the public regarding the ways in which competition may benefit consumers in, and the economy of, Malaysia;

(k) to consider and make recommendations to the Minister on reforms to the competition laws; and

(l) to carry on such activities and do such things as are necessary or advantageous and proper for the administration of the Commission.

POWERS OF THE COMMISSION

The Commission shall have the power to do all things necessary or expedient for or in connection with the performance of its functions under the competition laws including but not limited to

(a) to utilize all the movable and immovable property of the Commission in such manner as the Commission may think expedient, including the raising of loans by mortgaging such property;

(b) to impose penalty for the infringement of the provisions of the competition laws;

(c) to impose fees or charges for services rendered by the Commission;

(d) to appoint such agents, experts or consultants as it deems fit to assist the Commission in the performance of its functions;

(e) to grant loans, scholarships and advances to its employees for such purposes and on such terms as the Commission may determine or as may be approved by the Minister;

(f) to pay remuneration, allowances and other expenses of the members of the Commission;

(g) to formulate and implement programmes for the proper and effective performance of the Commission's functions, including programmes for human resource development, funding and co-operation;

(h) to co-operate with any body corporate or government agency for the purpose of performing the Commission's functions;

(i) to require the furnishing of information by enterprises to assist the Commission in the performance of its functions; and

(j) to do anything incidental to any of its functions and powers.

MINISTER’S DIRECTION

The Commission which is responsible to the Minister shall comply with the directions of the Minister which is given of a general character, consistent with the provisions of the competition laws, relating to the performance of the functions and powers of the Commission.

COMPETITION COMMISSION FUND

The Fund shall consist of all monies received by the Commission under the CCA 2010, including but not limited the penalties paid by the infringers or offenders under CA 2010.

PREPARATION IN ANTICIPATION OF THE ENACTMENT OF THE CCA 2010

All things done by any person or authority on behalf of the Commission in the preparation of and towards the proper implementation or administration of the CCA 2010, and any expenditure incurred in relation thereto, in anticipation of the enactment of the CCA 2010 shall be deemed to have been authorized by the CCA 2010, and all rights acquired or obligations incurred on behalf of the Commission from anything so done shall upon the coming into operation of the CCA 2010 be deemed to be the rights and obligations of the Commission.

METHOD OF PUBLICATION

Where the Commission is given power to publish, or is required to publish, a direction, guidance, withdrawal, clearance, nomination or other decision or document under the competition laws, such publication may be by electronic means in such manner as is likely to make it reasonably accessible to any person wishing to view it, and publication of a document by that method shall be effective for all purposes under CCA 2010.

For more information, contact us at: malaysia@mirandah.com