Jurisdiction - Malaysia
Reports and Analysis
Malaysia – Competition Commission Issues Draft Guidelines On Leniency And Financial Penalties.

6 February, 2014

 
 

Introduction

 

On 15 January 2014, the Malaysia Competition Commission (“MyCC”) issued a Public Consultation in relation to its Draft Guidelines on Leniency (“Draft Leniency Guidelines”) and Draft Guidelines on Financial Penalties (“Draft Financial Penalty Guidelines”). These draft guidelines are issued pursuant to Section 66 of the Competition Act 2010 (“Act”), which provides the MyCC with the power to “issue and publish such guidelines as may be expedient or necessary for the better carrying out of the provisions of the Act”.

 

Given that the Draft Financial Penalty Guidelines are concerned with the monetary sanctions that the MyCC can impose on entities for infringements of the Act, it is important that businesses be aware of them and make submissions, as may be appropriate, to the MyCC on the draft guidelines to ensure that there is clarity and, importantly, understanding by businesses when they are finalised.

 

The Draft Leniency Guidelines, on the other hand, set out the conditions that a party must satisfy prior to being eligible for leniency under the Act. On this, it is essential that potential leniency applicants have a thorough understanding of the draft guidelines to ensure that they do not compromise or forego the benefit of leniency when the same is being applied for. Hence, parties should make submissions, as may be required, on the Draft Leniency Guidelines to ensure that the conditions for leniency are clear and certain.

 

On the above, the deadline for submission is 28 February 2014.

 

In this update, we provide an overview of the draft guidelines, and potential issues that may arise from them.

 

Draft Financial Penalties Guidelines

 

Section 40(1) of the Act provides MyCC with the power to, amongst other things, impose a financial penalty on entities who have infringed the prohibitions contained in the Act. While the MyCC has, to date, imposed financial penalties on a number of organisations for infringing the Act, there has, as yet, been no guidance on how such financial penalties are being issued. Hence, the Draft Financial Penalties Guidelines serve to provide some clarity on the above procedure.

 

As an overarching principle, the Draft Financial Penalties Guidelines state that, in imposing any financial penalties, the MyCC has the following objectives:

 

(a) to reflect the seriousness of the infringement; and

(b) to deter anti-competitive practices leading to an infringement of a prohibition under the Act.

 

Further, according to the Draft Financial Penalties Guidelines, the MyCC may take the following factors into account when deciding on the amount of financial penalty to impose on an infringing entity:

 

(a) seriousness of the infringement;

(b) turnover of the market involved;

(c) duration of the infringement;

(d) impact of the infringement;

(e) degree of fault;

(f) role of the organisation in the infringement;

(g) recidivism;

(h) existence of a compliance program; and

(i) level of financial penalties imposed in similar cases.

 

Apart from the above factors, the MyCC will also look at various aggravating factors and mitigating factors in deciding on the final amount of financial penalty imposed. As a brief overview, the aggravating factors include the role of the organisation as an instigator, lack of cooperation and recidivism. On the other hand, the mitigating factors include low degree of fault, minor role of the organisation and compensation made to victims of infringement.

 

While the above factors do provide some guidance on the manner in which the MyCC will calculate the amount of financial penalty imposed, they are not comprehensive and the Draft Financial Penalties Guidelines do not set out details of how such factors will be used. As an illustration, the MyCC does not state in the Draft Financial Penalties Guidelines how the duration of an infringement affects the amount of monetary sanctions. By way of comparison, in similar penalty guidelines issued by the Office of Fair Trading in the UK, it is stated that “penalties for infringement which last for more than one year may be multiplied by not more than the number of years of the infringement”, making clear the manner in which the duration of an infringement affects the total amount of financial penalties that may be imposed.

 

Finally, the Draft Financial Penalties Guidelines expressly state that the total financial penalty imposed will be reduced according to the leniency regime, which we will discuss in the next section.

 

Draft Leniency Guidelines

 

Similar to other leniency regimes, the Draft Leniency Guidelines only apply to horizontal agreements, i.e. cartels, as such agreements are “very damaging to customers”. On this note, the Draft Leniency Guidelines provide that for an entity to qualify under a leniency regime, the entity must:

 

(a) admit to an infringement of the prohibition against horizontal agreements; and

(b) provide “significant assistance” to the MyCC.

 

However, the Draft Leniency Guidelines do not state what constitutes “significant assistance”, and merely states that the MyCC will consider each case on its specific circumstance.

 

Similar to the leniency regime in Singapore, the Draft Leniency Guidelines provide that a marker may be granted to a potential leniency applicant so as to preserve its priority for leniency. However, the marker is valid only for 30 days, following which the entity concerned will lose its priority position. In essence, an organisation wanting to benefit from leniency must fulfil the conditions listed in the above paragraph within 30. However, unlike other leniency regimes, the Draft Leniency Guidelines do not state if immunity will only be granted to the first leniency applicant.

 

A third interesting point to note from the Draft Leniency Guidelines is that while the MyCC requires the leniency applicant to preserve the confidentiality of the application, the MyCC is not similarly bound. Suffice to say, pursuant to Section 21(2) of the Act, the MyCC may disclose the identity of the leniency applicant and / or the fact of the leniency application if, inter alia, “the disclosure is necessary for the performance of the function or powers of the MyCC”, or “disclosure is made in connection with an investigation”. Given that leniency applications are generally highly sensitive and coordinated across multiple jurisdictions, such disclosure by the MyCC could possibly have an impact on potential leniency applications made in other jurisdictions. This is especially so given that in today’s context, organisations generally have a presence in a number of different countries.

 

Finally, it is also worth noting that according to the Draft Leniency Guidelines, the leniency remains conditional until the MyCC has made an infringement decision. Further, the leniency applicant is required to provide to the MyCC “information or other cooperation that will provide significant benefit to any investigation” before the MyCC will grant a conditional leniency.

 

Concluding Words

 

Given that the Draft Financial Penalties Guidelines and the Draft Leniency Guidelines will be the first set of guidelines relating to the amount of fines that the MyCC can impose, it is important that organisations review the draft guidelines carefully, and make submissions to the MyCC on the above pointers to ensure that there will be little ambiguity when the guidelines are finalised.

 

Finally, and as a matter of caution, notwithstanding the Draft Leniency Guidelines, it is important that organisations comply with the provisions of the Act to avoid the possibility of the imposition of any financial sanctions.

 

Rajah & Tann

 

For further information, please contact:

 

Dominique Lombardi, Partner, Rajah & Tann

dominique.lombardi@rajahtann.com

 

Kala Anandarajah, Partner, Rajah & Tann 

kala.anandarajah@rajahtann.com

 

Tanya Tang, Rajah & Tann 

tanya.tang@rajahtann.com

 

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