Our Group Legal Department organised a talk on “Competition Law” on 15 December 2011 to introduce the Competition Act 2010 which came into force on 1 January 2012. The Act is applicable to all commercial activities undertaken within and outside Malaysia that affect the competition in the domestic market. Its purpose is to promote economic development by promoting and protecting the process of competition; and encouraging efficiency, innovation and entrepreneurship, which promotes competitive prices, improvement in quality of products and services and wider choice for consumers.
The talk by Mr Tay Beng Chai, Managing Partner of Messrs Tay & Partners covered the following salient features of the Act :
Malaysia Competition Commission (MyCC)
- Responsibility to enforce and administer the Competition Act 2010.
- Appeal against MyCC's decision to Competition Appeal Tribunal.
- Decision of Tribunal is final and binding on parties.
Basic Concepts
- Market definition - competition exists within markets defined by geographical areas and products. This helps determine market share.
- Relevant Market Definition
- A market in Malaysia or in any part of Malaysia (the focal area).
- In relation to goods and services that are substitutable or competitive to relevant goods or services (the focal products and substitute products).
- Market power - a firm with huge market share generally has market power to fix prices and conditions of sale.
- Horizontal agreements - agreements between enterprises within the same level of production or distribution.
- Vertical agreements - agreements between enterprises at different levels of production or distribution.
Horizontal Agreements – Assessments Required
- Information Sharing reduces uncertainty competitors face and therefore reduces competition. Can result in some form of price coordination.
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- Restriction on Advertising reduces competition too.
- Standard Agreements pose barrier to new improved ideas and barrier to new entrants.
Vertical Agreements
Generally less harmful than horizontal agreements. Singapore Competition Act exempts vertical agreements. EU has also moved to regulate vertical agreements.
Vertical Agreements Involving Price
- Resale Price Maintenance (RPM) usually seen as uncompetitive. Downstream enterprises or retailers cannot compete on price.
- Exceptions - relief if can prove ‘significant identifiable technological, efficiency or social benefits’ if RPM is allowed.
Vertical Non-Price Restrictions
- Tying Customer buying a product (tying product) - must also buy the tied product which customer does not want.
- Minimum Purchase Buyer - must buy all or most of the supplies from Seller, or otherwise Seller won’t sell at all or will not give the discount or volume discount.
Distributorship Agreements
- Exclusive appointment over a geographical territory - limits intra-brand competition.
- Exclusive customer allocation - also limits intra-brand competition.
- Higher threshold - MyCC will not examine if both Seller and Buyer market share are less than 30% and exclusivity is less than 5 years.
What is 'Abuse' of Dominance?
- Unfair selling or purchase prices or trading conditions.
- Limiting or controlling production or market access, technological development or investment.
- Refusing to supply to a particular customer.
- Apply different terms to different trading partners. u Predatory behaviour towards competitors.
- Buying up scarce supply of intermediate goods or resources required by competitors.
- However, a conduct is not an abuse by a dominant player if it has reasonable commercial justification or represents a reasonable commercial response to market entrant or market conduct of a competitor.
Financial Penalty
- Section 40 - where there is a finding of infringement, the financial penalty could be up to 10% of worldwide turnover of an enterprise over the period of infringement.
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