malaysian competition law ensuring a level playing field for all to prosper presented by dr. wafi...
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Malaysian Competition LawEnsuring A Level Playing Field for All to
Prosper
Presented by
Dr. Wafi Nazrin Abdul Hamid
Sarawak 18 and 19 October 2010
© 2010. All rights reserved
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Part I - Background The need for competition law - an economic issue World-wide enforcement Back home in Malaysia
Part II – the Prohibitions Application Exclusions Prohibition 1: Agreements which Distort Competition Prohibition 2: Abuse of Dominant Position General Exclusions
Part III – Malaysian Competition Commission Guidelines and Competition Champion Complaints and investigation Sanction and Appeal Civil actions
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Synopsis
"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,"
Dato’ Seri Najib Tun Razak tabling the 10th Malaysia Plan
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Part I: Background
Crystal Clear Message
Caveat and Disclaimer !
The Malaysian Competition Commission will only be set up on 1st January 2011.
However, in the public interest, the advocacy programme has to commence immediately.
Although reasonable care has been taken to present and articulate the issues involving Malaysian Competition Law, the views expressed herein is without prejudice to the views the Malaysian Competition Commission may take eventually.
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BACKGROUND – AN ECONOMIC ISSUE
Principles of Free Market Economy
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Adam Smith, The Wealth of Nations (1776)
“Production and distribution of goods and services in competitive free markets maximizes social welfare. Markets may fail to be efficient for a variety of reasons, so the exception of competition law's intervention to the rule of laissez faire is justified.” Joseph Schumpeter
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BACKGROUND: What’s in it for me?
GovernmentMalaysia Remains Competitive International commitments
BusinessesFairness and Rules for all (big and small)Protect from abuses by Dominant FirmsTo be on par with foreign companies
ConsumersLower pricesBetter products and innovationFreedom of choice
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Background: Fraud on Consumers“I want the future for cartelists to continue to look as bleak as possible. That is why I am further sharpening our tools in this area.” (Neelie Kroes, Former European Communities Commissioner for Competition)
“Hard core cartels are like theft. Criminalisation makes the punishment fit what is indeed a crime.” (John Vickers, then Director of UK Office of Fair Trading) 8
“Cartel activities, such as bid-rigging, price-fixing and market
sharing, will almost always result in less competitive markets.
In the longer term, this will result in industries with lower
levels of efficiency and less innovations. Customers will be
worse off. Therefore, we strongly believe that companies
which engage in such anti-competitive activities must be
deterred.”
(Tan Eng Cheong, Chief Executive , Competition Commission of Singapore)
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World-wide enforcement – More than 130 countries already have competition laws
Highest individual UK fine to date
GBP 122 million in Aug08
(BA, fuel surcharges)
Highest EU cartel fine to date
EURO 1.4 billion In 2008
(Car Glass manufacturer)Largest recent US cartel fine USD 700 million
in 2005/06 (DRAM semiconductor
memory products)
INTEL fine on abuse of dominance for
EURO 1.06 billionon May 2009
Microsoft fined for BundlingEURO 497 million in
March 2004 and further EURO 899 million for not paying earlier fine
in February 2008
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“Mat Sallehs don’t understand Asian culture and the way we do business” ??? Singapore – Competition Commission of Singapore fined
SGD 1.69 million for 16 coach operators.
Korea- Korea Fair Trade Commission fined Microsoft Korea and Microsoft Corporation USD 31 million (33 Billion Won)
Indonesia – Commission for the Supervision of Competition fined few foreign and local telco companies including Temasek holdings & Singtel Rp 15 billion.
China – Anti-Monopoly Commission fined 33 producers of rice noodles for fixing prices. Fines of RMB 100,000. Some had their fines reduced under the leniency programme.
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MALAYSIA BOLEH !
Back home in Malaysia
MALAYSIA BOLEH !
Back home in Malaysia
Malaysian Competition Law – Legal Basis
Competition Law Act 2010
Competition Commission Act 2010
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Part II: The Prohibitions
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The Prohibitions - Application
“commercial activities” - goods or services
Govt companies
Public authority when carrying out “commercial activity”
Within or outside Malaysia
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First prohibition: (a) horizontal and (b) vertical agreements
Covers “agreements” – contracts, understanding, whether or not legally
enforceable“concerted practices” Decision of associations
Prohibition: agreement which has the “object” or “effect” of preventing, restricting or distorting competition.
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Prohibits anti-competitive conduct between Competitorse.g. of hardcore infringements – fixing prices or other trading
conditions, allocate markets, market allocation, bid rigging.
Towkay, we are losing money. Let’s all sell at RM150 per unit so we all prosper.
Okay. I scratch your back and you scratch my back!!!
What about my
back?
First prohibition: (a) Horizontal agreements
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First prohibition: (b) Vertical agreements
Agreement between supplier and its independent distributors
Example of infringement: Resale price maintenance (setting a minimum price)Setting Maximum price or Recommended retail
price for distributors is allowed.
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Prohibit anti-competitive conduct within a distribution chaine.g retail price maintenance (setting a MINIMUM price)
You all must not sell below
RM15
Consumer
RM10
RM15
RM15
Okay, I will not sell below RM15
Okay, I will not sell below RM15
Okay, I will not sell below RM15
First prohibition: (b) Vertical agreements
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RM15
Relief and Exemptions for First Prohibition4 conditions :
technological benefits indispensible proportionate and does not eliminate competition
Commission may grant exemptions and publish in gazette.Individual exemptionBlock exemption
Hard core infringements such as price fixing and bid rigging unlikely to be exempted
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“Dominance” - Market power to “behave independently”
Factors indicating dominance: large market share barriers to entry countervailing buyer power
No prohibition of becoming Dominant
Prohibition relates to ABUSE of Dominance Bundling predatory pricing, refusal to supply, discrimination, margin squeeze
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Second Prohibition: Abuse of dominant position
Prohibit dominant companies from abusing their power e.g tying and bundling.
If you want to buy the sweets, you must also
buy the cigarettes.
MEROKOK MEMBAHAYAKAN KESIHATAN !
Second Prohibition: Abuse of dominant position
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Abuse of Dominance –Refusal to supply and Margin squeeze
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A
A B
Relief for Second Prohibition
Dominant firm may take stepsReasonable commercial justificationReasonable commercial response to conduct of
competitor
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General Exclusions Commercial activity under
Energy Commission ActCommunications and Multimedia
General exclusionCompliance with LEGISLATIVE requirementEmployee Collective agreements Services of “general economic interest” or
National Service
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Part III – Malaysian Competition Commission
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Guidelines and Competition ChampionCommission has power to publish Guidelines to
clarify and supplement the Competition ActProcedureDefinition of MarketLeniency etc.
CommissionTo advise Govt. on all matters concerning
competitionConduct market review on competition issues in any
market and make recommendations to the Govt.
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Very broad powers Commission officers have powers of police officersMay RETAIN (not merely make copies) documents and
recordsMay seal premises and seize all things “other than the
necessary clothing”
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Complaints and Investigation
Complaints and Investigation Any victim of anti-competitive behavior can
complain to the Commission
Commission has very wide powersRaidsSeizure of documents
OFFENCE (distinct from INFRINGEMENT):Obstruction“tipping off” is an offenceThreats and reprisals are offences – includes
cancellation of orders or refusal to trade
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Commission Decisions: Sanctions Power to grant interim measures
INFRINGEMENT - Financial penalty not exceeding 10% of worldwide TURNOVER of an “enterprise” (includes the group turnover)
General penalty for OFFENCES (obstruction, tipping off, threats and reprisals, false information, concealment): Companies: fine not exceeding RM5m or RM10m for
subsequent offence Individuals: up to fine of RM 1m and/or 5 years jail; up to fine
of RM 2m and/or jail up to 5 years for subsequent offence
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Commission Decisions: Sanctions and AppealFor OFFENCES - Director, CEO, COO, manager, secretary, other
similar officer responsible for management may be charged severally or jointly unless he had no knowledge AND all reasonable precautions / due diligence taken to prevent the infringement
Whistle blower – leniency and reduction up to 100% of penalty
Victims of infringement may bring action for Damages in civil courts
Appeal to Competition Appeal Tribunal
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Kini, “Anti-trust law” menjadi kenyataan,
Ianya terpakai kepada semua perniagaan,
“Compliance Programme” dijadikan amalan.
Jangan terlambat, nanti terkilan.
Kuih Bangkit, Kuih Bahulu,
Mak Janda mengidam berlian,
Dalam Anti-trust bersusahlah dahulu,
Supaya kita tidak di Saman kemudian.
Only 2 things to remember!
1. Avoid Anti-competitive Agreements (e.g cartels and
price fixing)
2. If you are Dominant, do not abuse your Dominance
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Don’t we tell our kids that “Competition is Healthy?”
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