The Regime Of Malaysia Competition Act 2010

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November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
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THE REGIME OF MALAYSIA COMPETITION ACT 2010
Assoc Prof Dr Nazura Abdul Manap
Faculty of Law
National University Malaysia, 43650 Bangi,Selangor,Malaysia
Email: nazura@ukm.edu.my
Haliza A.Shukor
Faculty of Law
National University Malaysia, 43650 Bangi, Selangor, Malaysia
Email: hliza@usim.edu.my
ABSTRACT
Malaysia introduced national legislation on fostering competition under the Competition Act 2010. The Act, which came into effect in 2012, aims to encourage economic development by strengthening competition among commercial entities in Malaysia. In order to enforce provisions under the Competition Act 2010, Malaysia Competition Commission (MyCC) has been established under Competition Commission Act 2010. Major focuses of the Competition Act 2010 are competition advocacy, anti-competitive agreements and abuse of dominant position. This paper focuses on the provisions in the Competition Act 2010 and establishes that the Competition Act 2010 contains key provisions which may be used for the purpose of implementing competition laws in Malaysia.
Keywords: competition law, Competition Act 2010, Malaysia Competition Commission (MyCC)
INTRODUCTION
Malaysia is one of the earliest member states to join Association of Southeast Asian Nations (ASEAN) since ASEAN establishment in 1967. As a member states in ASEAN, Malaysia is committed in participating and supporting ASEAN economic agenda for the benefit of ASEAN member states. As such, Malaysia has agreed to the establishment of the ASEAN Economic Community (AEC) by 2015, via the Declaration on the ASEAN Economic Community Blueprint (the Blueprint) signed in 2007.1 According to Article 8 of the Blueprint, the AEC regards (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy as its key characteristics.2 As such, competition law and policy has become one of its key area to be developed in order to reflect the characteristics of the AEC. Several actions relating to competition have been addressed by the Blueprint which consists of the following; endeavour to introduce competition policy in all ASEAN Member Countries by 2015; establish a network of authorities or agencies responsible for competition policy to serve as a forum for discussing and coordinating
1 ASEAN Economic Community Blueprint at http://www.asean.org/archive/5187-10.pdf [ retrieved 14 October 2014]
2 Article 8 of the ASEAN Economic Community Blueprint at http://www.asean.org/archive/5187-10.pdf [ retrieved 14 October 2014]

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competition policies; encourage capacity building programmes or activities for ASEAN Member Countries in developing national competition policy and to develop a regional guideline on competition policy by 2010 based on country experiences and international best practices with the view to creating a fair competition environment.3
The expansion of the competition law and policy agenda led to the establishment of ASEAN Experts Group on Competition (AEGC) which was endorsed by the ASEAN economic ministers in 2007. The main purpose of the AEGC is to act as a regional forum to discuss and co-operate on competition law and policy among ASEAN member states. The AEGC is also tasked to identify competition law best practices among ASEAN Member States and assist ASEAN Member States in strengthening its competition law and policy through various advocacy programmes.4
Efforts done by AEGC in respect of competition law and policy is undeniable when AEGC introduced the ASEAN Regional Guidelines on Competition Policy (ASEAN, 2010) and compiled a Handbook on Competition Policies and Laws in ASEAN for Businesses (ASEAN, 2010) in 2010 during the 42nd ASEAN Economic Ministers in Vietnam.5 The main purpose of the ASEAN Regional Guideline is to provide guidance for ASEAN member states in developing their competition law but it has no binding effect on member states.6 It only facilitates member states in developing their own competition law in terms of increasing awareness as well as providing best practices relating to competition law.
ASEAN Regional Guidelines consists of 10 chapters namely; Chapter 1 on objectives of the Regional Guidelines, Chapter 2 on Objectives and benefits of competition policy, Chapter 3 on scope of competition policy and law, chapter 4 on role and responsibility of competition regulatory body, chapter 5 on legislation and guidelines, chapter 6 on enforcement powers, chapter 7 on due process, chapter 8 on technical assistance and capacity building, chapter 9 on advocacy and chapter 10 on international cooperation.7
MALAYSIA COMPETITION LAW
The backdrop to the Malaysia Competition Law can be divided into two phases, namely prior to the existence of the Competition Act 2010 and during the existence of the Competition Act 2010.
Prior Competition Act 2010
During the 1990’s, the issue of competition law in Malaysia was addressed by two sectors namely, energy sector and communication sector. There is absent of national competition legislation to govern commercial sectors except the above mentioned sectors. By virtue of Section 133 of Communications and Multimedia Act 1998, it expressly prohibits anti-competitive conducts which “will substantially lessen competition in the communications and
3 Article 41 of the ASEAN Economic Community Blueprint at http://www.asean.org/archive/5187-10.pdf [retrieved 14 October 2014]
4http://www.asean.org/communities/asean-economic-community/category/competition-policy [ retrieved 14 October 2014]
5 http://www.asean.org/communities/asean-economic-community/category/competition-policy[ retrieved 14 October 2014]
6Article 1.2.2 ASEAN Regional Guidelines on Competition Policy at http://www.asean.org/images/2012/publications/ASEAN.pdf [ retrieved 14 October 2014]
7 http://www.asean.org/images/2012/publications/ASEAN.pdf [ retrieved 14 October 2014]

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multimedia sector”8 while Section 14(h) of Energy Commission Act 2001 requires the energy commission to be responsible in monitoring competition and monopoly in energy sector.9
Competition Act 2010
The initial step towards introducing a single national legislation governing competition matters in Malaysia was through the introduction of Fair Trade Practices Bill which was approved on 26th October 2005 in the Parliament. Several policy objectives have been addressed by Fair Trade Practices Policy which is hoped to provide a fair and competitive market in the business environment.10 For the purpose of accommodating the economic growth in Malaysia, the Malaysia government decided to introduce its national legislation on competition in 20 June 2010, known as the Competition Act 2010 which later came into force in January 2012.
The Competition Act 2010 aims to promote economic progress, protection of the process of competition and consumers. These aims are indicated from the title of the Competition Act 2010 which provides as follows:
“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”
ENFORCEMENT OF COMPETITION ACT 2010 IN MALAYSIA
i. Malaysia Competition Commission (MyCC)
MyCC was established in 2011 to implement and enforce matters relating to competition law. It is made up of a Chairman, four representatives from the government and three to five members made up of those knowledgeable in commerce.11 MyCC plays an important role in shaping the future direction of the competition law due to its various functions which include among others advocacy and enforcement role. The advocacy role of MyCC is demonstrated when MyCC organized competition awareness seminar12 and advertising competition awareness advertisement in the electronic media while its enforcement role can be seen when MyCC decided to impose financial penalty to Malaysia Airlines and AirAsia for contravening Section 4(2) of the Competition Act 2010.13
ii. Competition Appeal Tribunal (CAT)
The Competition Appeal Tribunal which comprises of a President and between seven and twenty other members appointed by the Prime Minister on the recommendation of the Minister14 also plays an important role in relation to the enforcement of decisions delivered by the MyCC. According to Section 44 of the Competition Act 2011, the CAT is set up to review decisions made by the Competition Commission on matters relating to Section 35 of the
8 Section 133Communications and Multimedia Act 1998.
9 The Commission shall have all the functions imposed on it under the energy supply laws and shall also
have the following functions;
(h) to promote and safeguard competition and fair and efficient market conduct or, in the absence of a competitive
market, to prevent the misuse of monopoly or market power in respect of the generation, production, transmission, distribution and supply of electricity and the supply of gas through pipelines.
10 www.mycc.gov.my/legislation.
11 Section 5(1) Competition Act 2010.
12 http://mycc.gov.my/advocacy/.
13 http://mycc.gov.my/wp-content/uploads/2014/05/final-decision-on-MAS-AIRASIA-PDF.pdf, at page 85
14 Section 45(1) (a)-(b) Competition Act 2010.

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Competition Act 2010,15 Section 39 of the Competition Act 201016 and Section 40 of the Competition Act 2010.17 By virtue of Section 58(3) of the Competition Act 2010, it provides that a decision decided by the CAT is final and binding on the parties to the appeal.
iii. Judiciary
Courts interference in matters relating to enforcement of competition provisions happens when there is failure to comply with direction given by the MyCC under Section 35 of the Competition Act 2010 or decision under Section 40 of the Competition Act 2010. This is expressly mentioned by Section 42 (1) of the Competition Act 2010 which provides as follows:
The Commission may bring proceedings before the High Court against any person who fails to comply with a direction given by the Commission under Section 35 or a decision under Section 40.
In addition, by virtue of Section 64 of the Competition Act 2010, it allows any person who suffers losses as a result of an infringement under the prohibitions of the Competition Act 2010 to initiate private action in civil proceedings in a court.
iv. Competition Commission Fund (CCF)
The existence of CCF under Section 27 of the Competition Commission Act 2010 is to act as a source of finance for the operation of the MyCC and its members. By virtue of Section 28 of the Competition Act 2010, it provides under paragraph (g) that the CCF shall be expended for the purpose of ‘paying any expense for carrying into effect the provisions of the competition laws’. The CCF is credited with among others, grants allocated by the government or income received by the MyCC in the form of fees or investments made by the MyCC.18
THE COMPETITION ACT 2010
The discussion relating to the Competition Act 2010 will be divided into the following:
i. Coverage of the Competition Act 2010
The Competition Act 2010 applies to commercial activity both in Malaysia and abroad as provided under Section 3(1) of the Competition Act 2010. This extra territoriality effect makes it possible for the Competition Act 2010 to be applied to commercial activities carried out away from Malaysia providing that it has effects on competition in the Malaysian market.
The determination of what constitute commercial activity is provided under Section 3(4) of the Competition Act 2010 which means ‘any forms of activity which are commercial in nature.’ Nevertheless, the coverage of commercial activities under Section 3(4) is limited and does not include the followings:
(a) activities directly or indirectly authorized by the government;
(b) activities conducted on the basis of solidarity principles;
(c) purchase and offering of goods and services which is not part of any economic activity.19
15 Section 35 of the Competition Act 2010 deals with interim measures.
16 Section 39 Competition Act 2010 deals with finding of non-infringement.
17 Section 40 Competition Act 2010 deals with finding of infringement.
18 Section 27 (2)(a)-(i) Competition Act 2010.
19 Section 3(4) Competition Act 2010.

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The limitation relating to commercial activities further extends to Section 3 (3) of the Competition Act 2010 which identifies commercial activities not governed by the Competition Act 2010. Commercial activities carried out by communication, energy and petroleum sectors falls outside the ambit of the Competition Act 2010 or also known as sector specific regulation. It means that matters relating to competition for the abovementioned sectors are governed independently by their respective legislations namely Communications and Multimedia Act 1998, Energy Commission Act 2001 and Petroleum Development Act 1974.20
Apart from that, Section 13 of the Competition Act 2010 provides that although certain matters resemble anti- competitive practices but it will not be applicable to the following situations namely:
(a) An agreement or conduct engaged merely to comply with a legislative requirement;
(b) Collective bargaining activities or collective agreements pertaining to employment terms and conditions not negotiated or concluded between both employers and employees or organizations established on behalf of the interests of employers or employees;
(c) An enterprise trusted to operate on services of general economic interest or with characteristics of a revenue-producing monopoly whereby the prohibition under Chapter 1 and Chapter 2 of Part II would prohibit the performance, whether in law or the fact that particular tasks was assigned to that enterprise.21
ii. Anti-competitive agreement
Section 2 of the Competition Act 2010 provides the following definition of agreement:
Any form of contract, arrangement or understanding, whether or not legally enforceable, between enterprises, and includes a decision by an association and concerted practices.22
The term ‘agreement’ as provided under the Competition Act 2010 indicates that it may exists in the form of formal or informal arrangement. In addition, it signifies that ‘agreement’ as understood in the context of Competition Act 2010 includes:
a) Arrangement between enterprises
b) Understanding between enterprises
c) Decision by association
d) Decision by concerted practices
The term ‘enterprise’ is defined by the Competition Act 2010 to mean ‘any entity carrying on commercial activities relating to goods or services’. In relation to the prohibition on anti-competitive agreement, Section 4(1) of the Competition Act 2010, states that:
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.23
20 Section 3(3) Competition Act 2010.
21 Section 13 Competition Act 2010.
22 Section 2 Competition Act 2010.
23 Section 4(1) Competition Act 2010.

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The uniqueness of the Malaysia Competition Act 2010 is that it provides same ruling to two kinds of agreement, namely horizontal and vertical. Agreement between enterprises operating at the same level of production is called horizontal agreement and agreement between enterprises operating at different level of production is known as vertical agreement. Section 4(1) of the Competition Act 2010 provides several elements which constitute anti- competitive agreement, namely a) agreement whether horizontal or vertical b) such agreement contain object or effect c) such object or effect is significant in distorting competition in the market. Deeming provision for horizontal agreement is provided under Section 4(2) of the Competition Act 2010 which means that horizontal agreement which includes the following object such as price fixing, market sharing, limiting or controlling production and bid rigging is regarded to have the object of significantly preventing, restricting or distorting competition in markets of goods or services.24
iii. Market Dominance
Abuse of dominant position is a restriction in the Competition Act 2010 under Section 10(1) which expressly provides:
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.25
According to Section 2 of the Competition Act 2010, if an enterprise or more than one enterprise occupies ‘significant power in a market’ to the extent that they are able ‘to adjust prices or outputs or trading terms, without effective constraint from competitors or potential competitors’, it signifies that an enterprise is in a dominant position.
In addition, the determination of dominance in the market does not rely solely on market shares of an enterprise. It only acts as an indication and not conclusive evidence relating to dominant position. This is addressed by the Competition Act 2010 under Section 10(4) of the Competition Act 2010 which provides that;
The fact that the market share of any enterprise is above or below any particular level shall not in itself be regarded as conclusive as to whether that enterprise occupies, or does not occupy a dominant position in that market.26
The Competition Act 2010 only concerns with abusive conduct of enterprises in a dominant position. Thus, Section 10(2) of the Competition Act 2010 provides examples of situation which may amount to abuse of dominant position which are as follows:
(a) directly or indirectly imposing unfair purchase or selling price or other unfair trading condition on any supplier or customer;
(b) limiting or controlling production, market outlets or market access, technical or technological development or investment to the prejudice of consumers;
(c) refusing to supply to a particular enterprise or group or category of enterprises;
(d) applying different conditions to equivalent transactions with other trading parties;
(e) making the conclusion of contract subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject matter of the contract;
(f) any predatory behaviour towards competitors; or
24 Section 4(2) Competition Act 2010.
25 Section 10(1) Competition Act 2010.
26 Section 10(4) Competition Act 2010.

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(g) buying up a scarce supply of intermediate goods or resources required by a competitor, in circumstances where the enterprise in a dominant position does not have a reasonable commercial justification for buying up the intermediate goods or resources to meet its own needs.27
Nevertheless, if an enterprise in a dominant position is able to provide reasonable commercial justification, the enterprise may not be held guilty of contravening Section 10(1) of the Competition Act 2010.28
iv. Individual and Block exemption
Compliance with four cumulative requirements under Section 5 of the Competition Act 2010 would enable a party to apply for individual or block exemption under the Competition Act 2010. Bearing in mind that Section 5 of the Competition Act 2010 confines to prohibitions mentioned under Section 4 of the Competition Act 2010, a party to an agreement is required to demonstrate the four cumulative requirements which are as follows:
(a) significant identifiable technological, efficiency or social benefits directly arising from the agreement is present;
(b) without the agreement having the effect of preventing, restricting or distorting competition, the benefits could not have been reasonably provided by the parties to the agreement;
(c) the detrimental effect of the agreement on competition is in proportion to the benefits granted; and
(d) the agreement does not permit the enterprise involved to remove competition completely regarding a substantial part of the goods or services.29
In Malaysia, block exemption is granted to Vessel Sharing Agreements and Voluntary Discussion Agreements with regards to liner shipping thus far.
v. Penalty for infringing prohibitions under Part II of the Competition Act 2010
The effect of contravening provisions relating to prohibitions under the Competition Act 2010, namely on anti- competitive agreement and abuse of dominant position is provided under Section 40 of the Competition Act 2010. According to Section 40(1) of the Competition Act 2010, the Commission may take action by demanding the infringement act to be ceased, specifying mandatory steps to be taken by the infringing enterprise in order to end the infringement, impose a financial penalty or provide other direction deemed as appropriate.30
vi. Legal facility extended to enterprise involving in competition matters
Leniency regime as provided under Section 41 of the Competition Act 2010 can be considered as legal facility extended to enterprise involving in cartels. The reason behind the leniency regime provision is to provide reduction of penalty to those who support the competition authority with matters relating to identifying cartels or involvement in cartels. Due to the purpose of the leniency regime provision, which is to curb cartels, it applies to acts listed under Section 4 of the Competition Act 2010 and thus, not applicable to acts committed under Section 10 of the Competition Act 2010.
vii. Silent provisions in the Competition Act 2010
27 Section 10(2) Competition Act 2010.
28 Section 10(3) Competition Act 2010.
29 Section 5 Competition Act 2010.
30 Section 40(1) Competition Act 2010.

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Unlike its Singapore counterpart, Malaysia Competition Act 2010 is silent on provisions relating to mergers and acquisitions, although mergers and acquisitions might lead to anti-competitive effect in the market. The absence of provisions relating to mergers and acquisitions have been highlighted by the Minister, Dato’ Sri Ismail Sabri bin Yaakob during his presentation of the bill of competition when he said that the provision was not incorporated in the Competition Act 2010 after taking into account views from various agencies such as Bank Negara Malaysia and Securities Commission Malaysia. Dato’ Sri Ismail Sabri bin Yaakob further added that Malaysia government for the time being encourages mergers and acquisitions for the purpose of promoting global corporate competition and to further strengthen the economy of Malaysia.31
Apart from mergers and acquisitions, the provision relating to notifications for guidance is also absent from the Malaysia Competition Act 2010. According to Guidelines on Chapter 1 Prohibition (Anti-Competitive Agreement), the MyCC will not entertain any application for guidance unless it is specifically provided under the Malaysia Competition Act 2010. Notifications for guidance serves as a voluntary system in which an enterprise may apply in advance from the competition authority to determine whether acts performed by an enterprise constitute infringement of the Competition Act 2010. Further, it may be used as a tool to ensure compliance of the Competition Act 2010 in advance so as to avoid violations of provisions in the Competition Act 2010.
CONCLUSION
The Malaysia Competition Act 2010 is still nascent and thus, it has ample room for improvement. Incorporating certain provisions in the Competition Act 2010 should be done with greatest care taking into account the commercial needs plus Malaysia economic background. Nevertheless, the Competition Act 2010 is useful because it contains main provisions which serve as a guide for the MyCC to rule anti-competitive behaviour in the market.
31 Penyata Rasmi Parlimen Dewan Rakyat, 20.4.2010, p 129 at http://www.parlimen.gov.my/hansard-dewan- rakyat.html?uweb=dr [ retrieved 14 October 2014]

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REFERENCES
ASEAN Economic Community Blueprint
ASEAN Regional Guidelines on Competition Policy
Competition Act 2010
Competition Commission Act 2010
http://mycc.gov.my/advocacy/
http://mycc.gov.my/wp-content/uploads/2014/05/final-decision-on-MAS-AIRASIA-PDF.pdf,
http://www.asean.org/archive/5187-10.pdf
http://www.asean.org/communities/asean-economic-community/category/competition-policy
http://www.asean.org/images/2012/publications/ASEAN.pdf
http://www.parlimen.gov.my/hansard-dewan-rakyat.html?uweb=dr
Penyata Rasmi Parlimen Dewan Rakyat 20.4.2010