7/28/2019 Malaysia's New Competition Law

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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.