World-wide enforcement – More than 130 countries already have competition laws

Highest individual UK fine to date

GBP122 million in Aug 2008

(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 millionin 2005/06

(DRAM semiconductor memory products)INTEL fine on

abuse of dominanceEURO 1.06 billion

on May 2009

Microsoft fined for bundling

EURO 497 million in Mar 2004 and further EURO 899 million for not paying earlier

fine in Feb 2008

MALAYSIA BOLEH !

Back home in Malaysia

Back home in Malaysia

Part II: The Prohibitions

What does the Competition Act do?

Anti-competitive agreements such as price-fixing, market sharing, bid-rigging, limiting or controlling production

Abuse of a dominant position such as unfair pricing, tying/bundling, refusal to deal, predatory pricing

S.3 – Scope of Application

Functionality approach - “commercial activities”

Private or Public authority when carrying out “commercial activity”

Ownership or Status irrelevant

Effect on competition in any market in Malaysia - extra territorial application

Importance

Definition of "commercial activity"

• Facts/ Circumstances based

• Ownership/ Entity irrelevant

S3 - Definition of commercial activity

"negative listing" approach – wide coverage (maximise scope)• government authority• principle of solidarity• purchase of goods not for an economic activity

FACTORS TO CONSIDER Consider the following:

Definition of "commercial activity"

Consider activities

individually

DBKL may:• Have powers to adopt bye laws specifying where car can and cannot park• Own land in which it operates commercially as a car park

Need to adopt functional approach (especially relevant for public entities)

• Normal postal services offered by Pos Malaysia

• Pos Laju services offered by Pos Malaysia

• Pos Malaysia selling general insurance

Especiallywhen there areother producer/

competitoroffering the

same goods orservices

Offering goods or services on a given market is a commercial activity

Exercise powersof a government

authority

ECJ in Wouters v Algemene Raad van Neferlandsche held:

“do not apply to activity, which by its nature…does not belong to the sphere of economicactivity…or which is connected with the exercise of the powers of a public authority”

Activities that are not commercial

Felda Global : History and equity structureeg of commercial activity of a GLC

KoperasiPermodalan

Felda

Felda Holdings Bhd(Incorporated 1995)

Felda Global VenturesHoldings Sdn Bhd

FELDA(Established 1956)

Company:Commercial activities

(International)

Company:Commercial activities

(Malaysia)

Government agency:Social responsibilities

51%

100%

49%

Definition of "enterprise"

• “enterprise” - any entity carrying on commercial activities relating to goods or services, and for the purposes of this Act, a parent and subsidiary company shall be regarded as a single enterprise if, despite their separate legal entity, they form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their actions on the market;

• Single economic entity doctrine - ECJ in Viho vs Commission (1996)

• Why definition important?- immunity from competition law - considered to be internal arrangement - penalty computation

Definition of "market"

“market” means a market in Malaysia or in any part of Malaysia, and when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services

What is the relevant market?

Market definition test

Hypothetical monopolist test - would customers substitute to other products or to other suppliers elsewhere if producers of a product were to raise prices by 5 to 10 per cent (would there be competitive constraint - profitability)

Market definition test

"Small but Significant Non-transitory

Increase in Price"

S S NI P

Prohibitions regime

Market Behaviour

Section 4Prohibition

Anti – competitiveagreements

Section 10Prohibition

Abuse of dominantposition

Mergers and

Acquisition

S4 Prohibitions - Anti – competitive agreements•Section 4 of the Competition Act 2010 (Act 712) (“Act”) prohibits horizontal agreements and vertical agreements between enterprises where such agreements have the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services

Section 4Prohibition

Horizontal orvertical

agreementsObject or

effect

Significant prevention,

restriction ordistortion ofcompetition

Definition of ‘agreements’

• Need not be in the form of formal agreement– Contracts, understanding, whether or not

legally enforceable– “concerted practices” or "gentleman's

handshake" – Decision of associations

Meaning of concerted practice

ICI vs Commission (usually referred to as Dyestuffs case) (1972)

"a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition"

Main elements:1. Mental consensus - direct or indirect contact/conduct2. Factual based (similar behaviour/circumstantial evidence)3. Differentiate with independent parallel behaviour/oligopoly defence

Consider the following:(a) Fixing of prices by companies. “Coincidently” identical price increase,

decision to increase made during similar timing and same modus operandi

(b) Golf Gathering among competitors. Casual discussion about future prices, output but no agreements were reached.

Horizontal agreement

• Traditionally, competition policy regards horizontal agreements as being more objectionable as these agreements are made between competitors.

• Some horizontal agreements are considered Hard Core and are absolutely prohibited (S4(2)).

Manufacturer A Manufacturer BHorizontalAgreement

Distributor A Distributor BHorizontalAgreement

Vertical agreement

Manufacturer

Wholesaler

Retailer

Vertical Agreement

Vertical Agreement

Meaning of 'object' or 'effect''Object' Type of Agreement

Types of agreement the anti-competitiveness of which can be determined simply from their object

– deemed to have the purpose of restraining competition

– unnecessary to prove agreement would have an anti competitive effect

– subjective intention irrelevant

Benefits for MyCC:(a) Certainty of activities(b) Need not prove agreement has an adverse economic effects (demonstrate

extensive empirical evidence)(c) Focus on proving existence of an agreement (resources)

Meaning of 'object' or 'effect'

'Effect' Type of Agreement

Where it is not possible to say that the object of an agreement is to restrict competition, it is then necessary to conduct an extensive analysis of its effect on competition in the market before it can be found to infringe section 4 CA 2010

Factors to consider in conducting analysis:(a)Determine type of agreement(b)Define the relevant market - product and geographical market(c)Determine whether access to the market was impeded(d)Determine whether agreement contributor to the foreclosure effect

Stay Away !!!!

Horizontal agreements:

•to fix prices •to limit/share markets •to limit sales/production •to bid rig •to exchange current or future price information•collective exclusive dealing•perform group boycott

Vertical agreements:

•to fix resale prices to wholesalers/distributors/retailers

The Object Box

04/19/23

Vertical Restraints...mostly requires effect type analysis

Resale pricemaintenance

(RPM)

• A producer / manufacturer’s contractual requirement that its product be retailed at a fixed or minimum price to consumers

• Specification of a maximum price and/or recommended resale price (RRP) is “usually OK” unless the specified price has the effect of fixing the retail terms of sale or dampening retail price competition.

Exclusivedistribution

• A manufacturer supplies its (branded) product to only one distributor or wholesaler or retailer in a particular territory or geographical area

• It may have the effect of preventing “downstream” market entry and “intra – brand” competition

Selectivedistribution

• A manufacturer supplies its (branded) product to a limited number of dealers who are contractually restricted from selling other brands

• It may foreclose a market to inter – brand competition at the retail level

Market behaviour prohibitions

Price cartel

Users and Consumers

Entrepreneur A

Entrepreneur B

Entrepreneur C

Entrepreneur D

Decision of selling price

among competitors

Case – Price cartel

Discussion of Express Bus Agencies Association (EBAA) case 3 November 2009 (CCS 500/003/08)

• Minimum selling prices

• Fuel and insurance surcharge

• 16 coach operators and EBAA fined a total of SGD1.69 million for price fixing

Case – Price fixing

• JJB Sports Plc vs Office of Fair Trading – Competition Appeal Tribunal CAT 17 2004)

- Concerning price fixing of England and Manchester United F.C. football jersey by retailers (Umbro Holdings Limited, Manchester United Plc, Allsports Limited, JJB Sports Plc)

- Retail price of football jersey increased by £20 (detrimental to consumers)

Total fine imposed: £ 14.92 million

Case – Market Allocation

Palmer vs BRG of Georgia Inc. 498 U.S 4 (1990) Agreement between competitors (BRG and HBJ):-

BRG given exclusive license to market HBJ’s trade name HBJ will not compete with BRG in Georgia, USA BRG not to compete with HBJ outside Georgia, USA

Market allocation of territory and consumers

Agreement not to compete disrupts competitive process resulting in increased of fees from USD$ 150 to USD$400 per course

Cases – Anti–competitive agreements Competition Commission of Singapore• Sixteen employment agencies in Singapore have been fined

S$152,563 for price fixing (discovered through media reports). They were charged with attempting to collectively raise the monthly salaries of new Indonesian maids — from S$380 to S$450 (1 Oct 2011)

• Proposed infringement decision against 11 modeling agencies for coordinating and collectively raising rates for a wide range of modeling services in Singapore (18 May 2011)

People’s Republic of China National Development and Reform Commission (30 March 2010)

• Fines ranging from RMB30,000 (RM14,130) to RMB100,000 (RM47,100) imposed on 21 rice noodle producers for price fixing

• Some received leniency protection

Paramount Bed Case Japan

• Supplies medical beds

DealerDealer

DealerDealer

DealerDealer

Purchases medical beds by

bidding/tendering

process

Tokyo Metropolitan Government

• Takes order at instructed price

• Entrepreneur other than predetermined order/receiver bids at high price

Case - Bid rigging

Paramount Bed Company (Main Manufacturer)

• Predetermined order/ receiver• Order price instruction (Control)