Malaysian Competition and Anti-Trust Law

A. INTRO TO COMPETITION ACT 2010

SEC 4: prohibits any agreement between enterprises that has object or effect of
significantly restricting, preventing or distorting competition in any market for goods
and services.

Definition of Enterprise
Covers:
- every entity engaged in an economic activity.
- including companies, businesses, business organisations (producers, sellers,
traders), organisations, associations, public authorities, state-owned
enterprises and govt agencies.

Definition of Market
“significantly” – determine the market power of the parties to see:
- whether their conduct substantially affects competition
- whether deminimis rule applies if the parties lack market power

Single Economic Unit

SEC 2: the scope of enterprise also covers consolidated action between companies
in the same group which prevails over the notion of separate legal entities.
- A parent & subsidiary company is regarded as a single enterprise, despite
their separate legal entity if the subsidiary does not enjoy real autonomy in
determining their actions on the market.
- To identify a single economic unit, the commission will look into:
o Whether parent has control of BOD
o Whether parent takes the profit of subsidiary
o Whether subsidiary complies with the parent on matters like marketing
etc

Anti-Competitive Agreement
Agreement by Effect
- An anti-competitive agreement is prohibited if it has an effect on competition.
- If the anti-competitive object is not found, the agreement may still breach the
Act if there is an anti-competitive effect.

Agreement by Object
- Agreement that has obvious object of restricting competition is prime facie an
infringement of Section 4.
- For agreement with anti-competitive object, MyCC does not need to prove the
anti-competitive effect.

De Minimis Rule
- SEC 4(1): agreements are prohibited if they have the object or effect of
significantly preventing, restricting, distorting competition in any market for
goods and services.
 - CHAP 1 MyCC Guidelines: anti-competitive agreements will not be
considered significant if:
o Horizontal – parties’ total combination of market share is less than 20%
o Vertical – parties’ individual market share is less than 25%
- De minimis rule does not apply to conducts falling under SEC 4(2) – hardcore
restrictions (ie: cartel). Thus, any conduct falling under SEC 4(2) will be
prohibited despite the parties having small market shares in the relevant
market.

B. HORIZONTAL AGREEMENT

SEC 2: Agreement between enterprises that operates at the same level in

production or distribution chain.

SEC 4: Prohibition of horizontal & vertical agreement

(1) These agreements are prohibited if they have the object or effect of
significantly preventing, restricting, distorting competition in any market for
goods and services.
(2) A horizontal agreement between enterprises is deemed to have the object of
significantly prevent, restrict, or distort competition in any market for goods or
services if it has the object to:
a. Price fixing
b. Share market or supply sources
c. Limit or control of
i. Production
ii. Market outlets or access
iii. Technical or technological development
iv. Investment
d. Perform an act of bid rigging
(3) Enterprise which is a party to such agreement is liable for infringement of the
prohibition.

Types of Horizontal Agreement

1. Price Fixing
- Done in two ways:
o Directly: agreement between enterprises to increase or maintain prices
at a certain level.
o Indirectly: prohibiting other enterprises from offering discounts (limiting
discounts), exchanging sensitive information that may facilitate
collusion.

2. Market Sharing
- Firms agree to divide market geographically or by customer type among
themselves in order to maintain their monopolistic position.
- Firms agree not to compete or supply products or services in areas assigned
to other competitors.

3. Bid Rigging
 - Collusion among bidders to predetermine who should win a particular tender
and at what price.
- When winning bidders are determined, the others will either submit
unacceptable higher prices, withdraw, or refrain from bidding.
- Winning party has to compensate losing parties in the form of sub-contract
awards.

4. Output Limitation
- Collusion to limit output or production instead of fixing it.
- When demand exceeds supply, prices will increase.
- Firms collude to limit output in order to increase prices and maximise profits.

5. Information Sharing
- Information sharing is considered anti-competitive by taking into consideration
the economic conditions of relevant market and characteristics of information
exchanged.
- Economic conditions: the market itself is concentrated (oligopoly) and
conducive for coordination and concerted decision.
- Characteristics of information:
o price and non-price information
o frequent exchange of sharing information without disclosing it to
consumers
o future price and disaggregated data (data broken down by detailed
sub-categories: marginalised group, gender, region or level of
education)
o actual prices charged or forecasted prices – ie; sharing pure premium
(basic cost of loss) can be anti-competitive if it is an agreement on a
single figure and not on an entire schedule of prices

6. Standardisation
- Two categories:
o Standardising technical specifications or quality requirements
o Standardising terms & conditions in SPA
- Anti-competitive examples:
o Standard discounts
 It will restrict price competition
 Prevent firms from setting prices lower than the rates permitted
by rules and regulations
o Terms & conditions that do not allow for product differentiation or
preventing deviation from established standards
 It will restrict product innovation
 Limits ability of consumers to enjoy new innovative products

7. Restriction on Advertising
- Arrangement that restricts advertising.
- Trade fair (exhibition organized so that companies in a specific industry can
showcase and demonstrate their latest products and services) or
advertisement rules that restrict participants from participating in fairs or
exhibitions.
C. VERTICAL AGREEMENT

SEC 2: Agreement between enterprises which operates at a different level in the

production or distribution chain.

SEC 4(1): horizontal or vertical agreement between enterprises is prohibited if the

agreement has the object or effect of significantly preventing, restricting or distorting
competition in any market for goods or services.
- Occur when one of the parties (supplier or reseller) has enough market power
to exert influence or control over other party to the contract.
- Usually occur when supplier in upstream market supplies inputs to reseller in
downstream market.

Types of Vertical Agreements

1. Resale Price Maintenance
- The only form of price vertical restraint.
- Para 3.16 MyCC Guidelines: firms at downstream level may ask dominant
firm at the upstream level to fix the retail price in order to enforce cartel
between retailers.
- MyCC will assess whether the conduct has the effect of forcing out
competitors or foreclosing the market at both upstream and downstream level.

2. Exclusive Distribution Agreement

- The supplier grants a reseller exclusive distribution right for a particular
geographical location or territory.
- This provides reseller with monopolistic position as they are assigned in a
particular territory.

3. Exclusive Customer Allocation Agreement

- The reseller agrees to the supplier to resell the product only to a particular
class of customers.

4. Upfront Access Payment

- Supplier pays a certain amount of money in order to get access to a retailer’s
network. (hypermarket or supermarket).
- Supplier pays a fee to access shelf space of retailers.
- Supplier ensures the presence of certain products for a longer period at
retailer’s shelf.

5. Single Branding
- Agreement that requires the buyer to buy all or most of their supplies from a
- particular supplier.
- Supplier may impose conditions on buyer to buy all or substantial portion of
supplier’s products by way of cumulative discounts.
 - If supplier captures a substantial part of the downstream market, other
competitors may be forced out.

6. Selective Distribution Agreement

- Supplier selects certain resellers to distribute its products based on quality
and location.
- It prevents other unauthorised resellers from distributing their products.

D. RELIEF OF LIABILITY

SEC 5: enterprise which is a party to an agreement may relieve its liability from
infringement on section 4 if (cumulatively satisfied):
a) there are significant identifiable technological, efficiency or social
benefits directly arising from the agreement;
b) the benefits could not reasonably have been provided by the parties to the
agreement without the agreement having the effect of preventing, restricting
or distorting competition;
c) the detrimental effect of the agreement on competition is proportionate to
the benefits provided; and
d) the agreement does not allow the enterprise concerned to eliminate
competition completely in respect of a substantial part of the goods or
services.

- Burden of proof is on the parties to assert that their conduct or agreement

benefit from the hardcore cartel behaviour.

Individual Exemption
SEC 6: An enterprise may apply to the Commission for an exemption with respect to
a particular agreement from the prohibition under section 4.
- Enterprise may apply for an exemption before entering into an agreement.
- Commission will analyse agreement to determine its effect on the market and
whether it fulfils criteria under Section 5.
- An exemption is granted subject to conditions, obligations and for a limited
duration.

Block Exemption
SEC 8: If agreements which fall within a particular category of agreements are, in the
opinion of the Commission, likely to be agreements to which section 5 applies, the
Commission may, by order published in the Gazette, grant an exemption to the
particular category of agreements.
- Alternative to reduce bulk of applications for individual exemption.
- MyCC has power to grant block exemption if an agreement is likely to be
agreements to which Section 5 applies.
- Enhance legal certainty, save enforcement costs.
- MyCC can examine similar agreements simultaneously without the need for
enterprise to submit separate applications.