COMPETITION LAW: IMPACT ON BUSINESS AND

LEGAL PRACTICE

TAN SRI DATO’ SERI SITI NORMA YAAKOB CHAIRMAN, MALAYSIA COMPETITION COMMISSION

4 July 2013

2

An Act to provide for the establishment of the Competition Commission, to set out the powers and functions of such Commission, and to provide for matters connected therewith or incidental thereto.

Came into force on 1 April 2011

COMPETITION COMMISSION ACT 2010 (ACT 713)

3

MALAYSIA COMPETITION COMMISSION (MyCC)

S. 16: An independent body established under the Competition Commission Act 2010 to

enforce the Competition Act 2010.

Main roles include:•Advocacy•Investigation & Enforcement•Market review

•Exemption•Compliance & Leniency

4

Overview of Competition Law

5

COMPETITION ACT 2010 (ACT 712)

An Act to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected therewith

Came into force on 1 January 2012

6

SCOPE OF LAW

Applies to all commercial activities, both within and outside Malaysia which has an effect on competition

in any market in Malaysia

7

SCOPE OF LAW (ACTIVITIES NOT INCLUDED)

1. Any activity, directly or indirectly in the exercise of governmental authority;

2. Any activity conducted based on the principle of solidarity; and

3. Any purchase of goods or services not for the purposes of offering goods and services as part of an economic activity

“Commercial activity” means any activity of commercial nature but does not include:-

8

SCOPE OF LAW (EXCLUSION)• Commercial activities regulated under:

Communications and Multimedia Act 1998 [Act 588] Energy Commission Act 2001 [Act 610]

• Agreement or conduct that comply with any legislative requirement

• Collective bargaining activities in respect of employment terms & conditions

• Services of general economic interest or having the character of a revenue-producing monopoly

9

ANTI-COMPETITIVE PRACTICES

ANTI-COMPETITIVE AGREEMENTS

ABUSE OF DOMINANT POSITION

MAIN PROHIBITIONS

10

Exemptionsa) Significant identifiable technological,

efficiency or social benefitsb) Benefits could not be provided without

the anti-competitive agreementc) The detrimental effect of the agreement is

proportionate to the benefitsd) Competition is not eliminated completely

11

Impact of Law on Business

12

OVERVIEW OF BUSINESSES IN MALAYSIA

Public Administration, Support Services and Defence

6% Construction, Mining and Quarrying

9%

Professional, Scientific and Technical Activities

9%

Accommodation and Food Services

4%

Information and Communica-tion4%

Real Estate, Financial and Insurance

11%

Manufacturing8%

Wholesale and Retail Trade, Repair of Motor Vehicle

37%

Agriculture, Forestry and Fish-ing3%

Others8%

Companies Registered for 2011According to Business Category based on Malaysia Standard Industrial Classification 2008 (MSIC 2008)

Enterprise means any entity carrying on commercial activities relating to goods and services for the purpose of the Malaysia Competition Act 2010.

As at 2011, Malaysia has approximately 46,629 companies

13

IMPLEMENTATION OF THE COMPETITION LAW IN ASEAN COUNTRIES

IndonesiaSingaporeThailandVietnam Malaysia

• Implemented

MyanmarLao PDRBrunei

CambodiaPhilippines

• Yet to implement• By 2015

14

Section 4 (1) of the Competition Act 2010

A HORIZONTAL or VERTICAL AGREEMENT between ENTERPRISES is prohibited insofar as the agreement has

the OBJECT or EFFECT of SIGNIFICANTLY preventing, restricting or distorting competition in any MARKET for

goods or services.

ANTI-COMPETITIVE AGREEMENTS

ANTI-COMPETITIVE AGREEMENTSHORIZONTAL AGREEMENTS

Agreement between enterprises each of which operate at the same level in the production or

distribution chain

PRODUCTION LEVEL

e.g., between chicken producersbetween sugar manufacturers

DISTRIBUTION CHAIN

e.g., between retailersbetween wholesalers

15

16

ANTI-COMPETITIVE AGREEMENTSVERTICAL AGREEMENTS

Agreement between enterprises each of which operate at a different level in the production or distribution chain

MANUFACTURER

WHOLESALER

RETAILER

VERTICAL AGREEMENT

VERTICAL AGREEMENT

17

ANTI-COMPETI

TIVE AGREEME

NTS

Price-fixing

Limiting or Controlling Bid Rigging

Market Sharing

Example: The Federal Court ordered Malaysia Airlines Cargo Sdn Bhd to pay A$6 million plus costs for price fixing as part of a cartel following action by the ACCC, bringing the total penalties ordered against the alleged international cartel to A$58 million.

(Source: ACCC v Malaysian Airline System Berhad & anor)

18

Competition Act 2010, Section 10

An enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services.

ABUSE OF DOMINANT POSITION

19

ABUSE OF DOMINANT POSITION

“Dominant Position”A situation in which one or more enterprises possess

such significant market power to adjust prices, outputs or trading terms without effective

constraint from competitors

Example: The European Commission had adopted a Decision stating that Microsoft had infringed Article 82 EC by committing abuses of a dominant position because it had engaged in two kinds of abusive conduct, … The European Commission imposed a fine of €497 million on Microsoft, as well as corrective action to be taken within a certain period of time, subject to a complex verification mechanism.

(Source: T-201/04 Microsoft v Commission, judgment of 17 September 2007)

Note: 60% market share indicative of dominance

20

ABUSE OF DOMINANT POSITION

Unfair purchase or

selling prices or unfair trading

conditions

Limiting or Controlling

Refusing to supply

Applying different

conditions

Predatory behaviour

21

ABUSE OF DOMINANT POSITION (continued)

Reasonable Commercial Justification

Conduct defined as ABUSE and prohibited may be allowed if there are reasonable commercial

justification or represents a reasonable commercial response to the market entry or

market conduct of a competitor.

22

Impact of Law on Legal Practice

23

WHAT SHOULD THE LEGAL PROFESSION DO?

Enhance knowledge of Competition Act

Develop understanding as regards the legal & the economic principles of Competition Law

Understand types of agreements that are prohibited

Develop knowledge on compliance to adequately advise client

24

Challenges

25

Developing knowledge & capacity building

With globalisation, need to review existing rules & regulations that may have impact on competition process

Timely to review its business model

Ensure profession remains relevant & effectively compete in global marketplace

CHALLENGES

26

Responsibilities of Companies

27

• Review all existing agreements & practices • Ensure all new agreements are negotiated &

concluded on terms that comply with Competition Law

• Ensure robust Competition Law compliance policies are put in place: • Training staff on the Dos and Don’ts• Code of conduct

i.e. provide reporting channel from employee to senior management, initiate an incentive scheme to encourage employee compliance

INTRODUCE COMPLIANCE PROGRAMMES 1

28

KNOW THE LAW2

• Educating employees about competition law• The rationale of competition law• How competitive markets benefit society• Which types of conduct that are prohibited• How the legal prohibitions apply to the activities of your

company

• Make known the consequences of such conduct to the employee if discovered

29

SELF ASSESSMENT3

• Assess the specific commercial activities engaged in by the company with reference to the prohibited conduct

• Establish periodic competition audit of your company

• Discuss among the senior management on the course of action (to comply) if the company is found to be in breach of Competition Act

30

Increases choice – by stimulating a broader range of products & services

Ensures value for money – by ensuring firms compete on price & quality

Stimulates innovation & productivity – by motivating firms to create new products & reduce costs in order to win customers

Supports economic growth – by promoting choice, value, innovation and productivity

BENEFITS OF COMPETITION

31

“Sword” & “Shield” Approach• How to make use of competition law as a “sword” to

attack the anti-competitive or potentially anti-competitive practices of your market rivals

• How to make use of the same law to “shield” yourself against allegations of anti-competitive behaviour

“Re educate” yourself of your business ‐contracts

• Agreements and practices & assess their possible or potential anti-competitive effects

CONCLUSION

32

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…"

YAB Dato’ Seri Najib Tun Razak , Prime Minister of Malaysia in tabling the 10th Malaysia Plan