malaysia's new competition law
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7/28/2019 Malaysia's New Competition Law
1/1
Malaysia
Kadir Andri & Partners
Malaysias newcompetition law
The coming into force of the
Competition Act 2010 on
January 1 2012 ushers in a
comprehensive competition regime in
Malaysia. This new regime is expected to
herald a paradigm shift in the way
business is conducted in the country.
Entrenched business practices that are seen
to hinder competition will now come
under close the scrutiny of the Malaysian
Competition Commission (MyCC).
As the new law beds down, it is clear that
cartels and other forms of collusivebehaviour between competitors are
prohibited. Less obvious though, is the
impact of the Act on age-old commercial
practices such as exclusive distributorships,
controls on re-sale prices, tying and
bundling, and joint ventures, to name a
few.
MyCCs Draft Guidelines on Chapter 1
Prohibition and Market Definition (final
versions are expected soon) provide an
initial insight into its approach and
enforcement priorities. They favour an
economic approach by subjecting the
prohibitions in the Act to an assessment of
an enterprises market power and the
impact of that power on the competitive
process.
If the notion of power over market is key
to analyzing competition issues, then it is
imperative that the market or relevant
market is defined, as it is in MyCCs own
words, a crucial first step in competition
analysis. MyCCs Draft Guidelines on
Market Definition deploy the hypothetical
monopolist test (also known as the Small
but Significant Non-transitory Increase in
Price test, or SSNIP) to define the relevant
market.
According to this test, a relevant market
is the narrowest collection of products thata hypothetical monopolist would find it
profitable to institute an SSNIP (specified
at a 5-10% increase). Simply put, the test
includes in the market everything that
offers substitution to the product and
excludes un-realistic substitutes. As such,
the more narrowly the relevant market is
defined, the more likely enterprises will be
found to have market power.
Safe harbours
While not the sole determinant, an enter-
prises market share is the first indication ofits competitive importance in a market.
The Guidelines prescribe market share
thresholds which may point to how influ-
ential market share figures will be in
analysing anti-competitive practices in days
to come. Like it or not, these thresholds
serve as a useful benchmark for competi-
tion analysis on the following practices con-
trolled by the Act:
Horizontal agreements with the object
of engaging in cartel practices section
4(2). For example price fixing, market
sharing and bid rigging. There are no
safe harbours for these practices. These
are deemed anti-competitive as they are
so clearly inimical to the objective of
fostering competition. .
Anti competitive agreements (horizontal
and vertical) that significantly prevent,
restrict or distort competition section
4(1) The legitimacy of such
arrangements under section 4(1) must
be tested for its anti-competitive effect
and this requires a wide ranging analysis
of the significance of the conduct on the
market. Safe harbours are provided for
agreements between competitors where
the combined market share of parties is
less than 20%, and agreements between
parties that are not competitors wheretheir individual market share is not
more than 25%.
Parties affected by the prohibitions in
section 4 can apply for relief of liability
under section 5 provided that evidence in
support of efficiency gains can be adduced.
Abusive behaviour (including unilateral
actions) by a dominant entity with
substantial market power section 10.
No safe harbour threshold has as yet
been prescribed for an assessment of
dominance. A crucial factor to note is
that dominance per se is not unlawful,only abuse. Yet, a dominant entity in
Malaysia may be subject to a special
responsibility not to allow its conduct to
impair undistorted competition as
has been routinely held of dominant
entities in Europe by their regulators
and Courts.
A person (including an aggrieved
competitor) who suffers loss or damage
directly as a result an infringement above
enjoys a parallel right to seek relief through
the Courts under section 64, independently
of a finding of infringement by the MyCC.
The MyCC is set to embrace
international standards of competition law
enforcement. Enterprises should take a
close look at their existing commercial
practices, strategies, arrangements and
agreements to avoid being caught unawares.
Dato E Sreesanthan and Shanthi Kandiah
Contacts:8th Floor, Menara Safuan
80 Jalan Ampang50450 Kuala Lumpur
Tel: +603 2078 2888Fax: +603 2078 8431E-mail: partner@kaaplaw.comWeb: www.kaaplaw.com
INTERNATIONAL BRIEFINGS
4 IFLR/April 2012 www.iflr.com
Examples of agreements that require assessment of significant anti-competitive effect
Horizontal
(agreements between enterprises at thesame level in the production/distributionchain)
Vertical
(agreements between enterprises at differ-ent levels in the production/distributionchain)
Agreements relating to:
Information sharing
Restrictions in advertising
Standardisation that limit new productinnovation or acts as a barrier to entry
Agreements relating to:
Vertical price fixing such as resale pricemaintenance
Vertical non-price restrictions that have
the effect of foreclosing the market tocompetitors such as tying, exclusive dis-tribution agreements, exclusive customerallocation agreements, franchise agree-ments, or up-front access payments.
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