Market behaviour prohibitions – Bid rigging

6 pest control companies implicated for bid rigging • First CCS case, 2 October 2007 • Colluded to submit tender for termite treatment project • Submitted cover bids / pricing

Total penalties imposed: SGD 262,759.66

Case - Bid rigging

“Bid rigging activities resulted in increase of 36% of tender value”

Study on bid rigging activities in the construction industry by Gregory Werden of the Antitrust Unit, Department of Justice, USA (2004)

Straits Times 2 August 2007

The Business Times, 6 August 2008

Relief and Exemptions for First Prohibition

• Need to satisfy 4 conditions : – Identifiable Benefits – Benefits could not have been provided without the ‘anti competitive agreement’ – Detrimental effect proportionate to the benefits provided and – Does not eliminate competition •

Hard core infringements unlikely to be exempted

such as price fixing and bid rigging

Relief and Exemptions for First Prohibition

Consider the following: (a) Control/limit of supply of plastic bags by hypermarkets every Saturdays (b) Agreements between banks to share information on credit rating and the refusal to offer services to loan defaulters/ dishonoured cheques (c) Agreement between members of a Gun Association to limit/refuse supply of inferior air guns made from China (d) Decision to fix prices to its retailers to enhance branding

Prohibitions regime (Second Prohibition) Section 4 Prohibition

Anti – competitive agreements

Market Behaviour Section 10 Prohibition

Abuse of dominant position

Abuse of dominant position

•

S10(1) prohibits conduct which amounts to an abuse of the dominant position in any market

-

firm’s It’s ok to be in a dominant position, but illegal if/when that position is abused

-

Dominance arising out of efficiency should be encouraged

• Being dominant is NOT illegal Verizon Communications In., Petitioner vs Law Offices of Curtis V. Trinko, LLP (2004) 540 U.S. 398:

“ The opportunity to charge monopoly prices at least for a short period is what attracts "business acumen" in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the

possession of monopoly power will not be found unlawful unless it is

accompanied by an element of anti-competitive conduct.

”

Will only be concerned on abusive behaviour of such monopolistic powers

Abuse of dominant position

• • SUBSTANTIAL MARKET POWER

A firm cannot be dominant unless it has “ substantial market power ”

(UK OFT)

A firm has substantial market power when it can:

–

Raise prices consistently & profitably above competitive levels price) ; and (power over

–

Take action to exclude rivals from the market or deter them from entering the market (power to exclude)

DOMINANCE • Dominance = Market power • Factors indicating dominance: – Large market share – Barriers to entry – Statutory Monopolies • No prohibition of becoming Dominant

Exclusionary vs Exploitative Type Section 10(2)

(a): Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions on suppliers or customers (b): Limiting or restricting production, market outlets or 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 dissimilar conditions to equivalent transactions with other trading parties

Examples

Excessive pricing / raising rival’s cost Market foreclosure / exclusion Refusal to supply, refusal to deal Price discrimination, discounts, rebates, and price (or margin) squeeze Tying (e): Making the conclusion of contracts 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 contracts (f): Predatory behaviour towards competitors (g): Buying up a scarce supply of intermediate goods or resources required by a competitor Predatory pricing Market foreclosure / exclusion

Market Foreclosure

CASE

Maintain or strengthen pre-existing market power in supply market for CPU for domestic PC markets Intel (USA

)

Rivals ’ market share: 24% (2002)



76% (2002)



AMD Japan Transmeta Intel Japan 11% (2003) Intel Japan ’ s market share: 83% (2003) Exclude rival CPU suppliers by giving rebates if domestic PC makers meet conditions that it buys 90% to 100% of its supply of CPUs from Intel Japan, or doesn ’ t use rivals ’ CPUs for its popular PC products from May 2002 Manufacturer market for PCs in Japan Mitsubishi Toshiba

Excessive/Predatory Pricing

•

Napp Pharmaceuticals Holdings Ltd v Director General of Fair Trading (IR) (2002) CAT 1000/1/1/01,

• Major supplier of drugs to the government hospital and other parts of UK •

Predatory discounting

of drugs (selling below cost) to government hospitals and charged

excessive prices

to other customers (less or no competitor) • Prices of drugs raised by more than 100%

Tying/Market Foreclosure/Refusal to Supply

• Microsoft v Commission (2007) • Microsoft was found to have abused its dominant position based on: - Tying of its media player with its OS (client pc market) - Refusal to supply interoperability information (work group server market) • Microsoft were fined EURO 497,000,000

General Exclusions

•

Commercial activity under

– Energy Commission Act 2001 – Communications and Multimedia Act 1998 • General exclusion – Compliance with LEGISLATIVE requirement – Employee Collective agreements – Services of “general economic interest”

Part III – Malaysian Competition Commission

Competition law eco system in Malaysia

Inter regulatory working committees Section 39 Competition Commission Act

• Special Committee with

regulators

• Malaysian authorities &

sector regulators

• MACC?? • International authorities

Commission may appoint to carry out its functions Agents, consultants, advisers Section 17(2)(d) Competition Commission Act Inter working Competition Appeal Tribunal Decision Appeal Enterprises Competition Commission Working Committees can be formed under Section 14 Competition Commission Act Complaint Decision Enterprise/ Consumer Private action Appeal Enterprises Court Decision

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Guidelines and Competition Champion

• Commission has power to publish Guidelines to clarify and supplement the Competition Act – Procedure – Definition of Market – Leniency etc.

• Commission – To advise Government on all matters concerning competition – To conduct market review on competition issues in any market and make recommendations to the Government

Complaints and Investigation

• Any victim of anti-competitive behavior can complain to the Commission • Minister can direct MyCC to conduct investigation • Commission has very wide powers – Raids (with or without warrant) – Seizure of documents • OFFENCE (distinct from INFRINGEMENT): – Obstruction – “tipping off” is an offence – Threats and reprisals are offences – includes cancellation of orders or refusal to trade

Complaints and Investigation

• Very broad powers • Commission officers have powers of police officers • May RETAIN (not merely make copies) documents and records • May seal premises and seize all things “other than the necessary clothing”

Closure – inform complainant Suspected infringement of Chapter 1 or 2 Power to accept undertaking 2 Leniency regime 3 Competition Commission PROCESS Competition Appeal Tribunal Investigation Processes Complaints Market Review Investigation Proposed decision by the Commission Written representation or oral hearing Finding of an Infringement 4 Competition Appeal Tribunal Decision- FINAL Interim Measures 1 Finding of non infringement High Court Order – directing party to comply

PENALTIES SECTION 4 AND 10 Maximum 10 % of WORLDWIDE TURNOVER Penalties OFFENDERS entity)

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PENALTIES FOR OTHER OFFENCES OTHER TYPES OF PENALTIES FIRST OFFENCE RM 5 MILLION SUBSEQUENT OFFENCE RM10 MILLION FIRST OFFENCE RM 1 M OR 5 YRS IMPRISONMENT SUBSEQUENT OFFENCE RM 2 M OR 5 YEARS IMPRISONMENT BODY CORPORATE NOT A BODY CORPORATE

Other Issues Other Issues 1. Right of Private Action

 Stand Alone rather than mere follow on   Advocacy needs of judges Friends of the court  Experiences of other jurisdiction

2. Leniency provision under Section 41 Competition Act 2010

 Mechanism for application   Application of leniency plus Application of leniency where cartel has been discovered in other jurisdiction  Application of leniency under civil action

Thank You

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