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The Competition Commission Act 2010 and the Competition Act 2010 of Malaysia

Introduction

More than a decade after it was first mooted, the Malaysian Parliament has now passed the Competition Commission Act 2010 and the Competition Act 2010 of Malaysia. Competition, as the introductory words to the Act indicate encourages efficiency, innovation and entrepreneurship, which promotes competitive prices, improvement in the quality of products and services and wider choices for consumers.

Competition law was first introduced through the Communications and Multimedia Act 1998 which for the first time applied the relevant principles to the communications and multimedia sector. The Competition Act however will have general application over all industries except for that governed by the Communications and Multimedia Act 1998 and the Energy Commission Act 2001. These laws have their own scheme for competition regulation and will remain outside of the remit of the Competition Commission.

It should be noted that the object and scope of the Competition law is not to deal with consumer protection issues such as unfair contracts, defective goods and profiteering. Such matters are dealt with under other legislation.

Scope

The Competition Act 2010 itself borrows heavily from the EU Competition regime. The two main concepts are that of anti-competitive agreements and the abuse of a dominant position. It should be noted that the Act applies to ‘commercial activity’ and does not therefore apply to

Any activity in the exercise of governmental authority;
Any activity based on the principle of solidarity;
Any purchase of goods or services not for the purposes of offering goods and services as part of an economic activity.

Anti competitive Agreements

Both vertical agreements (between entities at different levels of the chain of production or distribution) and horizontal agreements (between entities at the same level of production or distribution) which have the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services is prohibited. This includes agreements which have the object of –

Fixing prices;
Sharing markets or sources of supply;
limiting or controlling production;
bid rigging.

The Act provides for exemptions to be issued for agreements. This may be done by individual exemptions for particular agreements or block exemptions for a particular category of agreements. To obtain the benefit of exemptions the enterprise concerned will have to establish the following:

that there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;
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;
the detrimental effect of the agreement on competition is proportionate to the benefits provided; and
the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.

Abuse of Dominant Position

The Act also prohibits the abuse of a dominant position, whether independently or collectively. Among the examples of abuse are –

imposing unfair purchase or selling prices o other unfair trading conditions;
limiting production
limiting market access
refusing to supply
predatory behaviour

It is interesting to note that the Act expressly states that the market share of any enterprise shall not in itself be regarded as conclusive as to whether that enterprise is dominant. This will add a burden to the Commission as in every case including for example where an enterprise has more than 80% of the market share, the dominance must be proved. This is in contrast to the position in the EU where case law has established that a stable market share of 50% and above raises a rebuttable presumption of dominance.

Investigation

The Commission has wide powers of investigation and also have powers to conduct market reviews which will enable it to identify and subsequently deal with enterprises that are infringing the law. The Act also makes the act of tipping off i.e. alerting any person of an investigation or disclosing any information likely to be prejudicial to the investigation an offence.

After conducting an investigation the Commission is bound to make a finding of infringement or a finding of non infringement. Before a finding of an infringement is made the Commission must give written notice of its decision. An affected enterprise has a right to make oral representations before the decision is made. The commission also has powers to conduct hearings in the course of its investigation.

The finding of an infringement may result in an order to cease the infringement and also a financial penalty. This penalty is capped at 10% of the worldwide turnover of the enterprise over the period during which the infringement occurred.

Competition Appeal Tribunal

A Competition Appeal Tribunal (CAT) comprising a President and between 7 and 20 members is to be established with exclusive jurisdiction to review any decision made as to interim measures, a finding of an infringement and a finding of non-infringement. The President of the CAT is to be a judge of the High Court but its other members may be experienced in industry, commerce, economics, law, accountancy or consumer affairs.

Leniency regime

The Act also provides for a leniency regime where an enterprise which admits involvement in any infringement, or assists in cooperating in an investigation, or provides information or other form of cooperation to the Commission in the identification or investigation of any finding of an infringement of any prohibition by any other enterprises.

This can result in a result in the grant by the Commission of a reduction of the financial penalty by up to 100%.

The Competition Commission Act 2010

The Competition Commission is to be established comprising a Chairman, 4 members representing government, one of whom will be from the ministry concerning domestic trade and consumer affairs. Additionally there will be between 3 and 5 members who have experience and knowledge in business, industry, commerce, law, economics, public administration, competition, consumer protection or any other suitable qualification as determined by the Minister. Members are appointed by the Prime Minister upon recommendation by the Minister. The relevant Minister under the Law is the Minister in charge of domestic trade and consumer affairs.

Body corporate

The Commission is a body corporate with powers to enter into contracts, to sue and be sued etc. It will be funded by, among others, grants from Parliament and fees, administrative charges or other charges imposed by or payable to the Commission.

Chief Executive

The office of the Chairman is separate from the office of the chief executive. The Chief Executive is responsible for the overall administration and management of the functions, activities and day to day affairs of the Commission. In particular the chief executive has general control of the employees of the Commission.

The functions of the Commission include:

Advising the minister or any other public or regulatory authority on all matters concerning competition;
Alerting the minister to the actual or likely anti-competitive effects of current or proposed legislation and to make recommendations , if appropriate, for the avoidance of these effects
Implementing and enforcing the competition laws;
Acting as an advocate for competition matters
Informing and educating the public regarding the ways in which competition may benefit consumers in and the economy of Malaysia.

It is understood from statements made by the authorities in the press that there will be a period of advocacy before the Competition Act 2010 itself becomes effective. This will give the Commission time to do the substantial preparatory work required for the effective implementation of the Act.

Conclusion

It is encouraging to note that Malaysia is taking steps to bringing its legislative framework in line with developed countries as it prepares to deal in an increasingly competitive international market place and globalised world.