Transcript Slide 1

Malaysian Competition Law
Ensuring A Level Playing Field for All to Prosper
Presented by
Dr. Wafi Nazrin Abdul Hamid
Sarawak
18 and 19 October 2010
© 2010. All rights reserved
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Synopsis
 Part I - Background
 The need for competition law - an economic issue
 World-wide enforcement
 Back home in Malaysia
 Part II – the Prohibitions
 Application
 Exclusions
 Prohibition 1: Agreements which Distort Competition
 Prohibition 2: Abuse of Dominant Position
 General Exclusions
 Part III – Malaysian Competition Commission
 Guidelines and Competition Champion
 Complaints and investigation
 Sanction and Appeal
 Civil actions
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Part I: Background
Crystal Clear Message
"Healthy competition is needed to make the economy more
efficient and dynamic. For this, the Competition Law will be
introduced to provide a regulatory framework against market
manipulation and cartel practices that may affect market
efficiency,"
Dato’ Seri Najib Tun Razak tabling the 10th Malaysia Plan
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Caveat and Disclaimer !
The Malaysian Competition Commission will only be set up
on 1st January 2011.
However, in the public interest, the advocacy programme has to
commence immediately.
Although reasonable care has been taken to present and
articulate the issues involving Malaysian Competition Law, the
views expressed herein is without prejudice to the views the
Malaysian Competition Commission may take eventually.
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BACKGROUND – AN ECONOMIC ISSUE
Principles of Free Market Economy
“People of the same trade seldom meet
together, even for merriment and diversion,
but the conversation ends in a conspiracy
against the public, or in some contrivance to
raise prices.” Adam Smith, The Wealth of
Nations (1776)
“Production and distribution of goods and
services in competitive free markets
maximizes social welfare. Markets may fail
to be efficient for a variety of reasons, so the
exception of competition law's intervention
to the rule of laissez faire is justified.”
Joseph Schumpeter
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BACKGROUND: What’s in it for me?
 Government
 Malaysia Remains Competitive
 International commitments
 Businesses
 Fairness and Rules for all (big and small)
 Protect from abuses by Dominant Firms
 To be on par with foreign companies
 Consumers
 Lower prices
 Better products and innovation
 Freedom of choice
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Background: Fraud on Consumers
“I want the future for cartelists to continue to look as bleak as
possible. That is why I am further sharpening our tools in this
area.”
(Neelie Kroes, Former European Communities Commissioner for
Competition)
“Cartel activities, such as bid-rigging, price-fixing and market sharing, will
almost always result in less competitive markets. In the longer term, this
will result in industries with lower levels of efficiency and less innovations.
Customers will be worse off. Therefore, we strongly believe that companies
which engage in such anti-competitive activities must be deterred.”
(Tan Eng Cheong, Chief Executive , Competition Commission of
Singapore)
“Hard core cartels are like theft. Criminalisation makes the
punishment fit what is indeed a crime.”
(John Vickers, then Director of UK Office of Fair Trading)
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World-wide enforcement –
More than 130 countries already have competition laws
Largest recent US cartel fine
USD 700 million
in 2005/06
(DRAM semiconductor
memory products)
Highest individual UK
fine to date
GBP 122 million
in Aug08
(BA, fuel surcharges)
Microsoft fined for Bundling
EURO 497 million in
March 2004 and
further EURO 899 million
for not paying earlier fine
in February 2008
Highest EU cartel
fine to date
EURO 1.4 billion
In 2008
(Car Glass manufacturer)
INTEL fine on abuse of
dominance for
EURO 1.06 billion
on May 2009
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“Mat Sallehs don’t understand Asian culture and
the way we do business” ???
 Singapore – Competition Commission of Singapore fined
SGD 1.69 million for 16 coach operators.
 Korea- Korea Fair Trade Commission fined Microsoft Korea
and Microsoft Corporation USD 31 million (33 Billion Won)
 Indonesia – Commission for the Supervision of
Competition fined few foreign and local telco companies
including Temasek holdings & Singtel Rp 15 billion.
 China – Anti-Monopoly Commission fined 33 producers of
rice noodles for fixing prices. Fines of RMB 100,000. Some
had their fines reduced under the leniency programme.
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Back home in Malaysia
MALAYSIA BOLEH !
Back home in Malaysia
MALAYSIA BOLEH !
Malaysian Competition Law – Legal Basis
 Competition Law Act 2010
 Competition Commission Act 2010
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Part II: The Prohibitions
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The Prohibitions - Application
“commercial activities” - goods or services
Govt companies
Public authority when
carrying out “commercial activity”
Within or outside Malaysia
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First prohibition:
(a) horizontal and (b) vertical agreements
 Covers “agreements” –
 contracts, understanding, whether or not legally enforceable
 “concerted practices”
 Decision of associations
 Prohibition: agreement which has the “object” or “effect” of preventing,
restricting or distorting competition.
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First prohibition: (a) Horizontal agreements
Prohibits anti-competitive conduct between Competitors
e.g. of hardcore infringements – fixing prices or other trading conditions,
allocate markets, market allocation, bid rigging.
Towkay, we are losing
money. Let’s all sell at
RM150 per unit so we all
prosper.
Okay. I scratch
your back and
you scratch my
back!!!
What about
my back?
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First prohibition: (b) Vertical agreements
 Agreement between supplier and its independent
distributors
 Example of infringement: Resale price maintenance
(setting a minimum price)
 Setting Maximum price or Recommended retail price for
distributors is allowed.
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First prohibition: (b) Vertical agreements
Prohibit anti-competitive conduct within a distribution chain
e.g retail price maintenance (setting a MINIMUM price)
You all must not
sell below RM15
Okay, I will
not sell below
RM15
RM10
RM15
RM15
Okay, I will
not sell below
RM15
Okay, I will
not sell below
RM15
RM15
Consumer
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Relief and Exemptions for First Prohibition
 4 conditions :
 technological benefits
 indispensible
 proportionate and
 does not eliminate competition
 Commission may grant exemptions and publish in gazette.
 Individual exemption
 Block exemption
 Hard core infringements such as price fixing and bid rigging
unlikely to be exempted
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Second Prohibition:
Abuse of dominant position
 “Dominance” - Market power to “behave independently”
 Factors indicating dominance:
 large market share
 barriers to entry
 countervailing buyer power
 No prohibition of becoming Dominant
 Prohibition relates to ABUSE of Dominance
 Bundling
 predatory pricing,
 refusal to supply,
 discrimination,
 margin squeeze
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Second Prohibition:
Abuse of dominant position
Prohibit dominant companies from abusing their power
e.g tying and bundling.
If you want to buy
the sweets, you
must also buy the
cigarettes.
MEROKOK MEMBAHAYAKAN KESIHATAN !
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Abuse of Dominance –
Refusal to supply and Margin squeeze
A
A
B
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Relief for Second Prohibition
 Dominant firm may take steps
 Reasonable commercial justification
 Reasonable commercial response to conduct of
competitor
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General Exclusions
 Commercial activity under
 Energy Commission Act
 Communications and Multimedia
 General exclusion
 Compliance with LEGISLATIVE requirement
 Employee Collective agreements
 Services of “general economic interest” or National
Service
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Part III – Malaysian Competition Commission
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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 Govt. on all matters concerning competition
 Conduct market review on competition issues in any
market and make recommendations to the Govt.
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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”
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Complaints and Investigation
 Any victim of anti-competitive behavior can complain to
the Commission
 Commission has very wide powers
 Raids
 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
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Commission Decisions: Sanctions
 Power to grant interim measures
 INFRINGEMENT - Financial penalty not exceeding 10% of worldwide
TURNOVER of an “enterprise” (includes the group turnover)
 General penalty for OFFENCES (obstruction, tipping off, threats and reprisals,
false information, concealment):
 Companies: fine not exceeding RM5m or RM10m for subsequent offence
 Individuals: up to fine of RM 1m and/or 5 years jail; up to fine of RM 2m
and/or jail up to 5 years for subsequent offence
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Commission Decisions: Sanctions and Appeal
 For OFFENCES - Director, CEO, COO, manager, secretary, other similar
officer responsible for management may be charged severally or jointly
unless he had no knowledge AND all reasonable precautions / due
diligence taken to prevent the infringement
 Whistle blower – leniency and reduction up to 100% of penalty
 Victims of infringement may bring action for Damages in civil courts
 Appeal to Competition Appeal Tribunal
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Kini, “Anti-trust law” menjadi kenyataan,
Ianya terpakai kepada semua perniagaan,
“Compliance Programme” dijadikan amalan.
Jangan terlambat, nanti terkilan.
Kuih Bangkit, Kuih Bahulu,
Mak Janda mengidam berlian,
Dalam Anti-trust bersusahlah dahulu,
Supaya kita tidak di Saman kemudian.
Only 2 things to remember!
1. Avoid Anti-competitive
Agreements (e.g cartels and
price fixing)
2. If you are Dominant, do not
abuse your Dominance
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Don’t we tell our kids that
“Competition is Healthy?”
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