R O K I A H A L AV I

I n t e r n a t i o n a l I s l a m i c U n i v e r s i t y M a l a y s i a a n d

C o n s u l t a n t f o r C o n s u m e r I n t e r n a t i o n a l M a l a y s i a

C r e w I n t e r n a t i o n a l C o n f e r e n c e , 1 8 - 1 9 N o v e m b e r, 2 0 1 4 , B a n g k o k , T h a i l a n d

Reflections on the CREW Methodology and Uptake in Other Countries/Sectors:

MALAYSIA

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Competition Policy in Malaysia

• Competition Act enacted in 2010 and enforced in 2012 – still at infancy stage.

• Provisions – anti-competitive behaviour of vertical and horizontal agreements and abuse of dominance.

• The key objective is to promote economic development by regulating market structure and behaviour of market players – process of competition.

• Consumers welfare – indirect outcome – complemented by Consumer’s Protection Act 1999.

• Merger Controls, Energy Sector and Telecommunication Sector not included in the Act

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Issues in the Implementation of CA

Introduction of CA – will have significant impact on the way businesses are conducted.

Businesses are still unaware of the law and what constitutes anti-competitive behaviour – especially the SMEs - need to educate the public – both businesses and consumers.

Media plays an important role in reporting anti-competitive cases – should take advocacy role as well

Enforcement – challenging to ensure effectiveness of the law.

Transparency on the cases that have been taken action by MyCC - why the decision was taken and how the Commission is enforcing the law – need to made available to the public.

Monitoring and evaluation – output-based vs impact-based.

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Many anti-competitive activities in the economy are the result of the government’s policies itself: price-control (the case of hyper-market discounted price

for price-controlled items) Subsidy (case of subsidy for paddy farmers) Creation of champions through mergers and take-overs

(plantation, mobile phone service and financial sector) Licensing (case of taxi permits, Mega steel, Astro,

Telekom, Cahaya Mata cement company)Hence, the enforcement of competition policy

becomes difficult and politically sensitive.

Issues in the Implementation of CA

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Lack of data and resources:

the authority needs to have a clear understanding on how the market works, what is the fundamental forces underlying firm’s conduct and what are the effects of competition law on the economy.

this requires substantial data and rigorous economic analysis

Challenge: lack of data, resources, expertise

Issues in the Implementation of CA

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• Safety• Transparency (information)

• Implementation and actions• Monitoring & evaluation (impact-based vs output-based)

There is hardly any studies/economic analysis on the impact of anti-competitive practices in Malaysia – mostly legal analysis and market review. Hence, replicating CREW project is highly relevant and necessary for Malaysia. Comments on Crew Project –

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Sectors that have possibility for replicating CREW Project in Malaysia

1. Automotive Sector There are many anti-competitive activities in this sector:

Approved Permit – APs are given to specific firms (to create Bumiputera entrepreneurs) to import CBUs. Distributors then obtain supply for these firms, including manufacturers/assemblers like Honda, Toyota.

Excise duty exemption – based on local content of the car –the higher local content the higher is duty exemption. This means Proton and Perodua get higher duty exemption.

National Auto Policy (NAP) - The excise duty exemption will only be given to locally assembled or completely-knocked-down (CKD) hybrid and electric cars. Out of the seven EEV or hybrid players in Malaysia, only one player benefits from the new policy and that is DRB-Hicom Bhd. Before 2014 – all (EEVs) hybrids and EVs were exempted from import duties and get a 50% exemption from excise duties. Excise duty ranges from 80% to 105%, import duties are at around 30%.

Such discriminatory practices – competitive harm effect – consumers have to pay more

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Sectors that have possibility for replicating CREW Project

2. Pharmaceutical Industry -

Predatory practices by large chain pharmacies – drug suppliers give huge discount for bulk purchase

Drug companies also give big discount for clinics Community pharmacies are worse off – have difficulty to

compete. Hence – there is competitive harm in the pharmaceutical

industry – especially for small independent pharmacies Chain pharmacy do not open their branches in remote

areas or where the size of the market is small – affect the consumers

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Sectors that have possibility for replicating CREW Project

3. Banking Sector

Adjustment of the base lending rates between financial institutions and the margin of financing - set almost simultaneously.

Possibility of parallel behaviour Fees on transactions determined by the Association of

Banks – possibility of the fees being fixed though collusion among the banks.

Similar behaviour can be found in the insurance sector as well.

Consumers are worse off – have to incur high financial transaction costs

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Sectors that have possibility for replicating CREW Project

4. Cement Industry

Good case of implicit collusion or concerted practice. There are currently five players: Lafarge (controlled 40 per cent of the

domestic cement market), YTL Cement (29 per cent), CIMA (16 per cent), Tasek (9 per cent) and Holcim (the balance).

In 2008 and 2012 - when Lafarge Malayan Cement Bhd announced that it would raise the price of cement in 2008, other players follow suit.

The mutual interdependence between firms in the oligopolistic market creates market power that could have anti-competitive effect.

Challenge: difficult to prove that there is concerted practice.

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Operational Issues

CREW project – comprehensive and has several stages of implementation.

Would require legal and economics expertise.Time consuming – time-frame of the research.Impact-based approach would be politically

sensitive for anti-competitive practices that arise from government policies.