Jurisdiction - Malaysia
Reports and Analysis
Malaysia – Overview Of Competition Law (Part 2).

14 March, 2014

 
 

Enforcement By MyCC

 

The Act is enforced by the MyCC whose members are appointed by the prime minister on the advice of the minister charged with the responsibility for domestic trade and consumer affairs. It is currently headed by a former judge of Malaysia’s highest court and comprised of representatives from both the public and private sectors who have experience in business, law, economics, public administration, competition law and consumer protection.

 

In addition to the powers under the Act, MyCC’s investigating officers have the powers of a police officer as provided for under the Criminal Procedure Code. MyCC may conduct any investigation, on its own accord, as it thinks expedient where it has reason to suspect that any enterprise has infringed or is infringing any prohibition under the Act. The minister charged with the responsibility for domestic trade and consumer affairs also has powers to direct MyCC to investigate any suspected infringement. MyCC may also conduct an investigation when it receives a complaint from a person or information from a participant in a cartel seeking benefits under the leniency regime. If MyCC decides not to investigate a complaint, it must inform the complainant of the decision and the reasons for the decision.

 

MyCC has a wide discretion on how it collects evidence and may direct a person to give MyCC access to his books, records, accounts and computerised data. However, these powers are subject to lawyer-client privilege and may, at the request of the person disclosing, be protected by confidentiality. As anti-competitive conduct is not a crime, there is no privilege against self-incrimination.

 

MyCC may, by written notice, require any person (not only those suspected of being in a cartel but also third parties) whom MyCC believes to be acquainted with the facts and circumstances of the case to produce relevant information or documents. MyCC may also require the person to provide a written explanation of such information or document. Where the person is not in custody of the document, he must, to the best of his knowledge and belief, identify the last person who had custody of the document and state where the document may be found. A person required to provide information has the responsibility to ensure that the information is true, accurate and complete and he must provide a declaration that he is not aware of any other information which would make the information untrue or misleading.

 

MyCC may search premises with a warrant issued by a magistrate, where there is reasonable cause to believe that the premises have been used for infringing the Act or there is relevant evidence of such infringement on the premises. The warrant may authorise MyCC officer named on the warrant to enter the premises at any time by day or night and by force, if necessary. During such searches, MyCC officers may seize any record, book, account, document, computerised data or other evidence of infringement.

 

The powers extend to the search of persons on the premises and there is no distinction in the powers for business or residential premises. Where it is impractical to seize the evidence, MyCC may seal the evidence to safeguard it. Attempts to break of tamper with the seal constitute an offence.

 

Where MyCC officer has reasonable cause to believe that any delay in obtaining a warrant would adversely affect the investigation or the evidence will be damaged or destroyed, he or she may enter the premises and exercise the above powers without a warrant.

 

Upon finding an infringement, MyCC must require that the infringement be ceased immediately, and may specify steps to be taken to achieve this or give any other appropriate direction.

 

Penalties

 

On finding an infringement under the Act, MyCC may impose a financial penalty of up to 10 per cent of the enterprise’s worldwide turnover of an enterprise over the period during which the infringement occurred ie. relating back to 1 January 2012, the date on which the Act came into force. Agreements which infringe the Act will be unenforceable as it is considered illegal under the Contracts Act 1950.

 

Due to the magnitude of the penalty, holding companies should be cautious as a parent company and its subsidiaries 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. As a result, a parent company and its subsidiaries can be held responsible and jointly and severally liable for the anti-competitive conduct committed only by the subsidiary even if the parent company did not participate in the infringement; and the turnover of both the parent company and subsidiary may be taken into account to determine the amount of penalty imposed.

 

MyCC may bring proceedings before the High Court against any person who fails to comply with its directions and the High Court shall make an order requiring the person to comply with the direction or decision. If there is a failure to pay a penalty within the specified period, the High Court shall, apart from ordering the person to pay the penalty, order the person to pay interest at the normal judgment rate running from the day following that on which the payment was due.

 

Appeal Process

 

A person aggrieved by the decision of MyCC may appeal to a specialist Competition Appeal Tribunal (“CAT”), which has exclusive jurisdiction to review any findings of infringement or non-infringement made by MyCC. CAT has the power to confirm or set aside MyCC’s decision from being appealed, or any part of it, and may:

 

  • Remit the matter to MyCC;
  • Impose or revoke, or vary the amount of, a financial penalty; and
  • Exercise MyCC’s powers to make decisions, give directions, or take such other appropriate actions.

 

CAT’s decision is final and binding on the parties to the appeal. Nonetheless, CAT’s decision, and any other administrative decision of MyCC, may be subject to judicial review by the High Court.

 

Undertaking

 

MyCC may accept an undertaking from an enterprise to do or refrain from doing anything as the MyCC considers appropriate. Where MyCC accepts an undertaking, MyCC shall close the investigation without any finding of infringement and it shall not impose a penalty on the enterprise. Any undertaking accepted by MyCC will be made publicly available for inspection by the public and can be enforced in the High Court. Offering a suitable undertaking is particularly useful to avoid a finding of infringement, which can trigger follow-on civil actions. However, MyCC is unlikely to accept undertakings in cartel cases, particularly where MyCC has a strong case and uses it to send a message to the market that hard-core cartels will not be tolerated.

 

Private Action

 

The Act specifically allows persons who have suffered loss or damage directly as a result of an infringement under the Act a right of action in civil proceedings in a court even if the plaintiff has not dealt directly with the infringing enterprise. This right is not contingent on a finding of infringement by MyCC, although such a finding would greatly aid the claimant in proving an infringement.

 

Market Investigations

 

MyCC has the power to conduct market reviews, and had conducted two such reviews in relation to the practice of price fixing by professional and the domestic broiler market. While the outcome did not lead to allegations of infringement, the latter review showed MyCC’s application of economics in the context of competition law.

 

Recent Developments

 

MyCC had investigated a few price-fixing since the Act came into force on 1 January 2012. The first one involved members of the Cameron Highlands Floriculturist Association (“CHFA”) who increased the prices of flowers by 10%. MyCC has recently also issued a proposed interim measures against the Pan-Malaysia Lorry Owners Association (“PLOA”) for agreeing to fix an increase of transportation charges by 15%. MyCC however did not impose financial penalties on the CHFA and PLOA required these associations to desist from acting in accordance with the decision of the respective associations. More recently, MyCC has proposed financial penalties amounting to RM283,600 on 26 ice manufacturers found to have come into an agreement to price-fix the selling price of edible tube ice and block ice. The proposed financial penalties on individual ice manufacturers range from RM1,200 to RM106,000. MyCC has also investigated on alleged cartel behaviour following announcements of price hikes in stationery supplies.

 

In 2013, MyCC proposed its first financial penalty of RM10 million each on Malaysia Airlines and AirAsia for entering into a collaboration agreement which MyCC alleged had the object of market sharing resulting in the withdrawal of some routes on which both airlines competed. This matter is pending proceeding and since the collaboration agreement was entered into by the parties pre-Act, the proposed financial penalties were calculated based on the 4 months commencing immediately after the Act came into effect up to the time that the two airlines terminated the collaboration agreement and were adjusted based on mitigating factors taken into account by MyCC such as cooperativeness in providing data and information and the voluntary action taken by the parties to amend the agreement to remove offending clauses.

 

MyCC has also issued its first proposed decision for abuse of a dominant position in 2013 where it proposed a RM4.5 million financial penalty on a producer of long steel, Megasteel Steel Sdn. Bhd. (“Megasteel”) for margin squeeze.  Based on the investigations carried out, Megasteel is the only domestic manufacturer of hot rolled coil in Malaysia and is also involved in the production of cold rolled coil for the downstream cold rolled coil market. MyCC alleges that Megasteel’s conduct of charging or imposing a price for its hot rolled coil is disproportionate to the artificially low selling price of its cold rolled coil and amounts to a margin squeeze that has the effect of preventing competition in the downstream market.

 

In determining the basic amount of the proposed financial penalty, MyCC said that it took into account the nature of the product, the structure of the market, the market share of the enterprise, entry barriers and the effects of Megasteel’s margin squeeze on its downstream competitors as well as the seriousness of the infringement.

 

In the initial two years of the Act coming into operation, MyCC has quickly upped the ante on enforcement showing that it clearly means business. Enterprises which have entered contracts, including those which were signed prior to the enforcement of the Act will need to review and remove restrictions on competition or face the risk of financial penalties of up to 10% of worldwide turnover for the entire duration of the infringement, not to mention civil liability from any follow-on actions. 

 

Related: Overview Of Competition Law (Part 1)

 

Zicolaw Logo-Pantone

 

For further information, please contact:

 

Sharon Tan, Partner, ZICOLaw

[email protected]

 

ZICOlaw Competition & Antitrust Practice Profile in Malaysia

 

Competition & Antitrust Law Firms in Malaysia

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