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BM062-3.

5-2-CMLAW Individual Assignment TP039638

INDIVIDUAL ASSIGNMENT
BM062-3.5-2-CMLAW
COMMERCIAL LAW
UC2F1605IBM

HAND OUT DATE: 16 Dec 2016


HAND IN DATE: 23 Jan 2017

STUDENTS NAME: Chen Zhibing


STUDENT ID: TP039638
LECTURERS NAME: DR SAROJA A/P DHANAPAL

WORD COUNT: 2260

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BM062-3.5-2-CMLAW Individual Assignment TP039638

Table of Contents
1.1 Introduction .............................................................................................................. 3
1.1.1 Malaysia's Competition Act 2010 (CA2010) ................................................. 3
1.1.2 The frame of CA2010 .................................................................................... 3
1.1.3 Malaysia Competition Commission (MyCC) ................................................ 3
2.1 Key Provisions of the Competition Act ................................................................... 4
2.1.1 Anti-Competitive Agreements ....................................................................... 4
2.1.2 Case Study: My Egg Consortium Sdn. Bhd. (2010) ...................................... 5
2.1.3 Abuse of dominant position ........................................................................... 6
2.1.4 Case Study: Megasteel Sdn. Bhd. (2016) ...................................................... 8
3.1 Challenges of Competition Act 2010 ....................................................................... 9
3.1.1 Issues relating to mergers ............................................................................... 9
3.1.2 Issues relating to intellectual property ........................................................... 9
4.0 Conclusion and Recommendation ......................................................................... 11
5.0 Reference ............................................................................................................... 12

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1.1 Introduction

1.1.1 Malaysia's Competition Act 2010 (CA2010)


Malaysia's Competition Act 2010 (CA2010) came into effect on 1 January 2012
under the ASEAN Economic Community (AEC). It is a milestone of legislation and
setting with the Prime Minister's New Economic Model which is largely by trade
liberalization, deregulation and flair market competition drive (Alb,2014).

1.1.2 The frame of CA2010


The frame of the law aims to ensure the firm operate in the free market without
restriction or market distortion to make the market function optimally to give the
consumer benefit. The Competition Act has a specific regulation that prohibits the
firms from engaging in anti-competitive agreements under Section 4 CA2010, which
have the aims of effect of preventing, restricting or distorting competition in any
market for goods or services ("Chaper1 Prohibition"). According to Section 10 of the
act it prevents any abuse of a firm's dominant position in any market ("Chaper2
Prohibition"). But no mergers and acquisition are regulated. Therefore, CA2010
establishes the Malaysia Competition Commission (MyCC) to administer all
functions in implementation and enforcement of the CA2010 (Angayar, 2015).

1.1.3 Malaysia Competition Commission (MyCC)


The MyCC empowered by the CA2010 have the rights to manage laws and
regulation in proper way such as investing complaints on anti-competition behaviors,
carrying out market reviews and impose penalties on companies found to infringe the
competition law. In addition, it has rights to impose fees or charges for services and
perform any tasks incidental to its functions and powers (MyCC, 2017).

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2.1 Key Provisions of the Competition Act


There are 2 main areas of regulations, which are a prohibition on anti-competitive
agreements and a prohibition on the abuse of a dominant market position.
However, the Act does not apply to specific activities for sector regulated under the
Communications and Multimedia Act 1998 and the Energy Commission Act 2001.
(Nancy, 2013).

Moreover, the prohibitions on anti-competitive agreements and the abuse of a


dominant market position do not apply to the following situation:

a. An agreement or conduct to the extent it is engaged in order to comply with a


legislative intent;
b. Collective agreements; and
c. An enterprise entrusted with the operation of services of general economic
interest or having the character of a revenue-producing monopoly

It is also need to concern that the Act does not contain merger control which is a
usual feature in competition law in many other jurisdictions (Nancy, 2013).

2.1.1 Anti-Competitive Agreements


According to Section 4 of the CA2010, it prohibits horizontal and vertical
agreements between enterprises that any agreements has the object or effect of
significantly preventing, restricting or distorting competition in any market for goods
or services.
Horizontal agreements is the simplest form of anti-competitive agreements which
are practiced by cartels. Especially, the Act incorporates a deeming mechanism under
Section 4(2) lists the following horizontal agreements between enterprises which has
an anti-competitive object to fix, directly or indirectly, a purchase or selling price of
any other trading conditions; share market or sources of supply; limit or control
production, market outlets or market access; technical or technological development;
or perform an act of bid rigging is deemed to have the object of significantly

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preventing, restricting or distorting competition in any market for goods or services.


Any horizontal agreements which have the aim of the list that I mentioned below is
a flagrant breach of the Act and MyCC will not evaluate such agreements for their
anti-competitive effect. As for other horizontal conduct not falling within Section 4(2),
MyCC states that it will evaluate if the agreements have a trivial or crucial influence.
MyCC also prescribe in the Chapter 1 Prohibition Guidelines, a safe harbour by
stating that anti-competitive agreements or decisions will not be considered as
significant if the combined market share of the parties to the agreement is not more
than 20% of the relevant market; or If the parties to the agreement are not competitors,
their individual market shares in any relevant market is less than 25% (The report:
Malaysia 2010, 2010).
In addition, any enterprise which is a party to an agreement which is prohibited
under this section shall be liable for infringement of the prohibition.

2.1.2 Case Study: My Egg Consortium Sdn. Bhd. (2010)


Act:
Section 4(2)(b) Prohibited horizontal and vertical agreement
Without prejudice to the generality of subsection (1), a horizontal agreement between
enterprises which has the object to share market or sources of supply.
Facts:
On November 2012, MYCC receive an anonymous complainant which alleged My
Egg was set up by members of the Federation of Livestock Famers Association
Malaysia (FLFAM) in 2010 with the aim of reducing the supply of chicken eggs in
the local market to drive up the egg prices in the end. The complaint also alleged that
the producers of My Egg representing more than 75% of the total production of eggs
in West Malaysia. It is said that My Egg export large amount of chicken eggs to the
international market in order to reducing supply and increasing the demand, which
will ultimately push up egg prices (MyCC, 2015).
Issue
Is My Egg established with the object of reducing egg supply in Malaysia in order to

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raise the prices of eggs by dumping eggs in the overseas market?


Decision
Malaysia Competition Commission (MYCC) concludes that there is no infringement
of a prohibition under Part II of the Act.
Reasons
Based on the economic analysis data from the Department of Veterinary Science
(DVS) and the Ministry of Domestic Trade, Cooperatives and Consumerism
(KPDNKK), MYCC found that there had excessive egg production in Malaysia
before and after the establishment of the My Egg. Moreover, MYCC has found that
price of eggs is controlled during festive seasons. The Festive Season
Price-Controlled Scheme in essence state briefly that certain times of the year, this is
not reflect collusion or infringement of a prohibition when price of eggs is controlled
under Part II of the Act but rather a mechanism introduced by the Government to
ensure that consumers are not exploited. After a review of all evidence obtained, there
is no indication that My Egg has entered into any agreement in order to reduce the
supply of eggs in the domestic market by dumping of eggs through the My Egg nor is
there any evidence pinpointing agreement coordinated culling of live chickens (MyCC,
2015).

2.1.3 Abuse of dominant position


Dominance itself is benign and an there is no prohibition that enterprise being
dominant. Economic theories state efficiency and innovation are benefit for
consumers and therefore no penalty among a dominant player who is efficient and
innovative. Therefore, it is important to ask how a dominant enterprise got the
achievement. Is it through abusive conduct or through efficiency and innovation?
Where an organization becomes dominant and tightens its grip by abusing its
dominance, MyCC have rights to investigate. There are 2 types of abusive conducts,
which are exclusionary abuse and exploitative abuse. Exclusionary abuse is evaluated
according to its effect on competition. Is the conduct complained of adversely
influencing customers and does it exclude an equally efficient competitor? For

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example, exclusionary abuse is preventing competitor enter into market to by locking


in customers with loyalty rebates which are not related to cost savings. An
exploitative conduct always happens when a dominant enterprise exploit the situation
by raising its prices when there is no effective competition (Nancy, 2013).
According to CA 2010, The Act lists the following behaviour as abuses of a dominant
position:
(a) Imposing an unfair purchase or selling price or other unfair trading conditions on a
customer or supplier;
(b)Limiting or controlling of production, market outlets or access, technical or
technological development or investment to the prejudice of consumers;
(c) Refusing to supply to a particular firm or category or group of enterprise;
(d)Applying discriminatory situations that discourage new market entry, seriously
damage a competitor that is no less efficient than the dominant enterprise, or harm
competition in the relevant market;
(e) Imposing supplementary conditions that by their nature or commercial usage have
no connection with the subject matter of a contract;
(f) Engaging in predatory behavior towards competitors; or
(g) Buying up scarce supplies surpass the dominant enterprises own needs.

However, these are not the exhaustive list, there are many other instances of abuse
mentioned in Chapter 2 Guidelines and cautions that every case has to be scanned on
a case by case basis. Despite all this, the Act preserves the right of a dominate
enterprise to have reasonable commercial justification or which represents a
reasonable commercial response to the market entry or market action of a competitor
(Nancy, 2013).

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2.1.4 Case Study: Megasteel Sdn. Bhd. (2016)


Act
Section 10(1) Abuse of dominant position is prohibited
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.
Facts
Complainant owns a subsidiary Mycron Steel CRC Sdn. Bhd. where is the first
company in Malaysia who produce Cold Rolled Coil (CRC). Complainant alleged
Megasteel is the only supplier of its raw materials Hot Rolled Coil (HRC) is
charging higher than the international price. In addition, Complainant suspected
Megasteel is competing with Complainant in the CRC market and often undercut its
price (Mycc, 2016).
Issue
Did Megasteel abuse its dominant position nor practice margin squeeze in the relevant
domestic market?
Decision
Malaysia Competition Commission (MYCC) finds that there is no infringement of the
Act by Megasteel.
Reasons
Due to Governments Industrial Policy, Megasteel at all material times was the only
enterprise that produced scrap metal-based HRC in the upstream market and it holds a
dominant position in the upstream market. In downstream market, Megasteel
participates and competes with the other four (4) Re-rollers in producing and selling
CRC. The data obtained by the Commission do not substantiate the Complainants
allegation that Megasteel often undercut its CRC prices. In addition, inconclusive data
indicate that there is no practice of margin squeeze by Megasteel (Mycc, 2016).

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3.1 Challenges of Competition Act 2010


Competition Act 2010 in Malaysia is consider as a step towards promoting fair
competition in the market. It is a comprehensive legislation because it includes
common provisions relating to anti competitive practices in order to act as a legal
mechanism in combating unfair business behavior in the market. However, according
to Europe and United State of America competition law, Competition Act 2010 need
some improvement in some ways such as the issue relating to mergers and issue
relating to intellectual property (Haliza, 2015).

3.1.1 Issues relating to mergers


There is no specific provisions that control mergers and acquisitions under the
Competition Act 2010, it shows that there is lack of a comprehensive system that
regulating anticompetitive mergers and acquisitions in Malaysia. Nowadays, mergers
and acquisition in Malaysia are regulated by apartments such as Bank Negara
Malaysia, Malaysia Communication and Multimedia Commission and Energy
Commission. It may infringe the competition law when take over and merger,
especially the parties in horizontal mergers decide to share information such as
sharing price information with competitors. Another case is that there is a risk when
the merger has taken place because combination of two companies in the market
would lead to dominant position in the market which may lead to abuse of dominant
position and cartel (Haliza, 2015).

3.1.2 Issues relating to intellectual property


When intellectual property holders 'engage in practices not authorized by
intellectual property law but consider as anti competitive effects', it becomes part of
the discussion under competition law. The main concern relating to intellectual
property is because the fact that intellectual property is govern by laws relating to
intellectual property, but the manner in which such intellectual property to be
exercised may be controlled by competition law observation. Competition authorities
should be careful when dealing with intellectual property matters, since an overly

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rigorous assessment of competition law in intellectual property matters may limit


innovation.
Examples of intellectual property issue is when licensing agreement signed by
intellectual property owners. Some intellectual property licensing agreements may
create dominant market forces and exclude markets from competitor. Ohter
circumstances, such as the contractual limitations contained in intellectual property
licensing agreements, may be used to cover market-sharing agreements prohibited by
competition law (Haliza, 2015).
Nevertheless, the MyCC endeavor to issue a separate guideline to deal with
intellectual property in the future based on Paragraph 4 of the Guidelines on Chapter 1
Prohibition.

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4.0 Conclusion and Recommendation


Overall, Competition Act 2010 in Malaysia plays an important role in regulating
business conduct such as prohibiting business from participating in anti-competitive
practices and avoiding abuse of dominant position by dominant operators. However,
there are some legal loophole such as there is no specific provisions relating to
mergers and intellectual property in the Competition Act 2010.
Consider to the possibilities of infringement of competition law in the event
mergers happen, it is suggested that provisions relating to mergers be brought in the
CA 2010.
In addition, it is suggested that provide a specific framework for the area of
intellectual property although the CA 2010 provides provisions relating to conducts
condemned by the Act, yet the provision and guidelines only suitable for different
kinds of commercial activities. This is because the framework is helpful that provide a
framework which can be used by the competition authority in deciding issues relating
to intellectual property (Carrier, 2002). Furthermore, the specific guideline relating to
intellectual property provides additional assistance to the competition authority as
well as illustrative examples to solve arising problems relating to intellectual property
and competition law in Europe and United States of America (Haliza, 2015).

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5.0 Reference
ALB, (2014). Malaysia Competition Law. [Online] Available from:
http://www.legalbusinessonline.com/sites/default/files/ALB%20MY%20Competition
%20Law%20Masterclass%20Brochure%2016Sept.pdf [Accessed: 12 Jan. 2015]

Angayar, (2015). COMPETITION LAW AND EXEMPTION POLICY IN MALAYSIA:


WHEN, WHY AND WHY NOT? [Online] Available from:
http://ijbel.com/wp-content/uploads/2016/01/law-29.pdf [Accessed: 13 Jan. 2015]

Carrier, M.A. (2002). Unraveling the Patent-Antitrust Paradox. University of


Pennsylvania Law Review, 150(3), 761-854.

Haliza, (2015). REGULATING ANTI-COMPETITIVE BUSINESS CONDUCT VIA


COMPETITION LAW IN MALAYSIA. Available from:
http://www.kuis.edu.my/icomm/2nd/download/IC%20002.pdf [Accessed: 15 Jan.
2015]

MyCC, (2012). In the matter of the complaint relating to the alleged Infringement of
Section 10(1) of the Competition Act 2010 by Megasteel Sdn. Bhd. Available from:
http://www.mycc.gov.my/sites/default/files/Finding%20of%20Non%20Infringement
%20under%20Section%2039%20of%20Competition%20Act%202010%20-%20Meg
asteel%2015.04.2016.pdf [Accessed: 16 Jan. 2015]

MyCC, (2015). Finding of Non-Infringement under section 39 of the Competition Act


2010 - My Egg Consortium Sdn. Bhd. Available from:
http://www.mycc.gov.my/sites/default/files/My%20Egg%20Consortium.pdf
[Accessed: 13 Jan. 2015]

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MyCC, (2017) Malaysia Competition Commsion. [Online] Available from:


http://www.mycc.gov.my/ [Accessed: 12 Jan. 2015]

Nancy, (2013). An Overview of the Malaysian Competition Act 2010. Available from:
http://www.lawyersworldwide.com/newsletter/201301/article1/ [Accessed: 15 Jan.
2015]

The Report: Malaysia 2010, (2010). Malaysia: Oxford Business Group.

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