The Growth And Evolution Of Competition Law In Malaysia

THE GROWTH AND EVOLUTION OF COMPETITION LAW IN MALAYSIA

We expect MyCC's enforcement against price fixing cartels to further strengthen in the coming years as well as CAT issuing its decision this year to the long-standing price-fixing case brought against PIAM, the general insurer's association and 22 general insurers for a whopping aggregated penalty exceeding Ringgit One Hundred Million

Ten years after the Competition Act 2010 ("Competition Act") came into force on 1 January 2012, its regulator, the Malaysia Competition Commission ("MyCC"), can proudly display a sizable number of enforcement actions. There is currently a respectable body of Malaysian competition law found not only in MyCC's decisions and those of its appellate tribunal, the Competition Appeal Tribunal's ("CAT") judgments but also in judgments of the High Court (as a number of CAT's cases were challenged by way of judicial review at the High Court) as well as in the Court of Appeal's and the apex Federal Court's judgments.

Briefly, save for certain exceptions and certain sectors with industry-specific regulators, the Competition Act applies to any commercial activity by any enterprise (including Government-linked companies) within and outside Malaysia, the latter only if it affects competition in any market in Malaysia. The Competition Act by and large follows the European Union's antitrust law principles save that merger controls are still pending (although the aviation and telecommunication sectors with their own sectoral regulator have already introduced merger notification requirements in Malaysia).

Anti-Competitive Agreements

Section 4(1) of the Competition Act prohibits horizontal agreements and vertical agreements between enterprises where an agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services. MyCC has in its guidelines (which are merely for illustration purposes and not a substitute for the law), set out a non-exhaustive list of the types of agreements that could potentially be anti-competitive.

Hardcore cartel arrangements between competitors (i.e. price fixing, fixing of trading conditions, market sharing, limiting or controlling production, market access and bid rigging) are deemed to be significantly anti-competitive and continues to be a key focus of MyCC's enforcement actions. MyCC's CEO has emphasized that "price fixing cartel is the supreme evil of competition law, which must be stopped in order to protect the consumers". MyCC has issued no less than 7 infringement findings on price-fixing, with two findings made in 2021, one against Langkawi Ro-Ro operators and the other against seven warehouse operators. We expect MyCC's enforcement against price fixing cartels to further strengthen in the coming years as well as CAT issuing its decision this year to the long-standing price-fixing case brought against PIAM, the general insurer's association and 22 general insurers for a whopping aggregated penalty exceeding Ringgit One Hundred Million. An interesting argument raised by the insurers was that they were merely complying with their sectoral regulator, namely the Central Bank of Malaysia in their alleged imposition of certain prices for spare parts and labor charges against panel workshops raising the very interesting question of which regulator having jurisdiction in the matter.

A decision issued by MyCC which has attracted significant media interest is the market sharing infringement finding made against Malaysian Airline System Berhad ("MAS") and AirAsia Berhad ("AirAsia"). In this case, MAS, AirAsia and AirAsia X entered into the Comprehensive Collaboration Framework with the purported goal of seeking cost savings and increase in revenues in relation to certain sectors and categories of aviation services. MyCC imposed a financial penalty of Ringgit Ten million on each of MAS and AirAsia. The airlines appealed to CAT who overturned MyCC's decision but MyCC appealed to the High Court seeking a judicial review of CAT's decision and succeeded there. The airlines however appealed against the High Court's judgment and succeeded at the Court of Appeal. Although MyCC sought to appeal to the Federal Court against the Court of Appeal's judgment, leave to appeal was not granted to MyCC by the Federal Court in February this year, bringing this saga which commenced with MyCC's infringement decision issued in 2014 finally to an end in 2022!

Despite its relative youth, MyCC has also tackled enforcement actions in respect of anti-competitive vertical arrangements which carries a heavier evidentiary burden on MyCC to prove significant anti-competitive effects (as opposed to hardcore cartels which are deemed to be significantly anti-competitive by Section 4(2) of the Competition Act). MyCC however did not find Coca-Cola Bottlers (Malaysia) Sdn Bhd and its affiliate, Coca-Cola Refreshments Malaysia Sdn Bhd as having implemented resale price maintenance (RPM) which MyCC considers a serious infringement of competition law.

MyCC succeeded in securing an undertaking from Giga Shipping Services Sdn Bhd and Nexus Mega Carriers Sdn Bhd. undertaking to MyCC to cease exclusivity relationships with their customers and to only impose exclusivity clauses which are for 2 years or a shorter term. It is important to note that exclusivity obligations may raise competition concerns under the prohibition against anti-competitive agreements as well as the prohibition against abuse of dominance.

Abuse of Dominance

Section 10 of the Competition Act addresses the conduct of dominant enterprises. The Competition Act does not prohibit any enterprise from becoming a monopoly. It however prohibits enterprises from engaging in any conduct which amounts to an abuse of a dominant position such as imposing an unfair purchase or selling price, limiting or controlling production, market outlets or market access, refusing to supply, applying discriminatory conditions that discourage new market entry, engaging in predatory behavior towards competitors or buying up scarce supplies in excess of the dominant enterprise's own needs.

MyCC's decisions issued for abuse of dominance seemed to focus on the technology sector. MyCC has found MyEG Services Bhd ("MyEG"), a monopoly which provides portal services for applications to certain Government agencies as having imposed different conditions for equivalent transactions. MyCC also took action against Grab Inc., GrabCar Sdn. Bhd. and MyTeksi Sdn. Bhd. (collectively, "Grab") for abusing its dominance by imposing a number of restrictive clauses on its drivers that prevented the drivers from promoting and providing advertising services for Grab's competitors in the e-hailing and transit media advertising market. MyCC found Dagang Net Technologies Sdn Bhd for engaging in exclusive dealing through the imposition of an exclusivity clause in its agreement with its software suppliers. An important factor to note from MyCC's action against MyEG is the imposition of a daily penalty for every day MyEG failed to abide by the order to cease the abusive conduct.

Merger Control

Much ink has been spilt on the need for an economy-wide merger control regime in Malaysia and MyCC's endeavor to amend the Competition Act to include merger control provisions has been in progress for some years. In its most recent Strategic Plan, MyCC has reiterated its intention to carry out the mentioned amendments which will not only provide for a new merger control regime in Malaysia but also strengthen its investigative powers under the Competition Act.

Notwithstanding the lack of merger controls in the Competition Act, the first merger clearance decision has been issued by the Malaysian Aviation Commission ("MAVCOM") last year when MAVCOM approved the merger of Korean Air Lines Co, Ltd and Asiana Airlines, Inc. MAVCOM's decision was based on legal and economic principles such as the failing firm defense and was reflective of the market. Another merger assessment decision is expected to be issued this year by the telecommunications regulator, in respect of the Celcom-Digi merger.

Conclusion

Malaysian competition law and the body of caselaw continue to grow steadily. MyCC has achieved much in the past decade since its establishment. With merger controls in place which are expected soon, MyCC will finally have the full arsenal of legislative power to continue in its role of ensuring the process of competition takes place and ultimately protecting consumers.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.