On April 21, 2010, the Parliament of Malaysia approved two bills, the Competition Commission Bill 2010 and the Competition Bill 2010 (the Bills). When implemented, the Bills will establish the first comprehensive competition law and competition enforcement agency in Malaysia. The Competition Bill prohibits cartels and abuses of a dominant market position, but does not create a merger control regime. Violations are punishable by fines, as well as imprisonment for individual violators. The Competition Bill also creates a private right of action for those injured by violations. The Bills establish a Competition Commission with broad investigative and enforcement powers, as well as a Competition Appeals Tribunal (CAT) to hear all appeals of Commission decisions. The Minister of Ministry of Domestic Trade and Consumer Affairs has indicated that the new law will be implemented by the end of 2011.

Summary of the Malaysia Legislation

The Bills are detailed and, although without merger control, will establish a robust competition law regime, procedures, and enforcement authority for Malaysia. The Bills are summarized below.

Chapter 1 of the Competition Bill prohibits horizontal and vertical agreements that have the object or effect of significantly preventing, restricting or distorting competition in any market. Agreements to fix prices, allocate markets, restrict output, or rig bids are deemed to significantly harm competition. Article 41 provides for a leniency regime, with a reduction of up to 100% of penalties, for enterprises that admit an anticompetitive agreement and provide cooperation to the Commission that significantly assists in the identification or investigation of a violation by other enterprises. Liability for anticompetitive agreements may be relieved for various specified reasons, including that the detrimental effect of the agreement on competition is proportionate to the benefits provided. Parties may seek individual exemptions from the Commission for particular agreements. The Commission may also establish block exemptions for agreements that exempt particular categories of agreements.

Chapter 2 of the Competition Bill prohibits enterprises from independently or collectively abusing a dominant position in any market. Such abuses may include imposing unfair prices or trading conditions; limiting or controlling production, market access, technical development or investment, all to the prejudice of consumers; refusals to supply a particular enterprise or group or category of enterprises; discriminating in trading conditions to an extent that may discourage market entry or expansion, forcing from the market or otherwise seriously damage an equally efficient competitor, or harm competition in any upstream or downstream market; imposing conditions to a contract that have no connection with the subject matter of the contract; engaging in any predatory behavior towards competitors; and buying up scarce supplies of intermediate goods without reasonable commercial justification. Market shares are not conclusively determinative of whether an enterprise holds a dominant position.

The Commission Bill provides that the Commission will consist of persons appointed by the Prime Minister: a Chairman; four members representing the Government of Malaysia, one of whom is to be a representative of the Ministry of Domestic Trade and Consumer Affairs; and not less than three but not more than five other members with experience and knowledge in matters related to business, industry, commerce, law, economics, public administration, competition, consumer protection or other suitable qualification as the Minister of Domestic Trade and Consumer Affairs may determine.

Under the Competition Bill, the Commission is granted extensive investigative powers. The Commission is authorized to conduct investigations, either on its own initiative or on the basis of complaints it receives. Commission officers are empowered to have all powers that police officers have in connection with police investigations under the Criminal Procedure Code. The Commission may require persons it believes has relevant knowledge to provide information or documents, or to make a statement to the Commission. Magistrates may issue search warrants to Commission officers to enter premises, if there is reasonable cause to believe that the premises have been used for an infringement or there is evidence on the premises necessary to a Commission investigation. If a Commission officer believes that the delay involved in obtaining a search warrant would adversely affect an investigation or that evidence might be destroyed or removed, the officer may enter the premises and exercise all powers the officer would have had if a search warrant had been issued. The Commission may take and retain original documents, but must provide certified copies of such documents to the persons providing them. The law provides, however, that no person shall be required to produce or disclose privileged communications with a professional legal advisor that would be protected from disclosure under the Evidence Act. Obstruction or interference with Commission investigations constitute separate offenses.

The Commission is also empowered to conduct market reviews to study the structure of a given market, the conduct of enterprises in the market and any other relevant matters. Upon conclusion of a market review, the Commission shall publish a report of its findings and recommendations. The law also authorizes the Minister of Domestic Trade and Consumer Affairs to make regulations and empowers the Commission to issue and publish guidelines.

The Commission may render decisions of infringement or non-infringement, and is also authorized to take interim measures to prohibit any agreement or conduct that is suspected of constituting an unlawful anticompetitive agreement or an abuse of a dominant market position, where such direction is urgently needed to prevent serious and irreparable damage or protect the public interest. The Commission may, in its discretion and subject to any conditions it may impose, accept undertakings from enterprises to do or refrain from conduct, and thereby close an investigation without making a finding of infringement or imposing a penalty. The Commission may enforce its directions and decisions by initiating proceedings before the High Court against any person failing to comply. The general penalty for violation of the law, for which no penalty is expressly provided, include fines for companies of up to five million ringgit (approx. US$1.5 million) and, for second or subsequent offenses, fines not exceeding ten million ringgit (approx. US$3 million). Individuals may be fine up to one million ringgit (approx. US$320,000) or imprisonment for up to five years or both. For second and subsequent offenses, individuals may be fine up to two million ringgit or imprisonment for up to five years or both. Officers of corporations that have violated the law may be charged as individual violators in the same proceedings, unless he proves that the offense was committed without his knowledge or consent and that he had taken all reasonable precautions and exercised due diligence to prevent the commission of the offense.

Article 64 of the Competition Bill creates a private right of action, under which any person that suffers loss or damage directly as a result of a violation of the anticompetitive agreement or abuse of dominance provisions may institute civil court proceedings. Such actions may be brought by such a person regardless of whether the plaintiff dealt directly or indirectly with the enterprise that violated the law.

Part V of the Competition Bill establishes a Competition Appeal Tribunal (CAT), consisting of a President and between seven and twenty other members appointed by the Prime Minister. The CAT shall have exclusive jurisdiction to review any decisions made by the Commission, including interim measures, findings of non-infringement, and findings of infringement. Decisions of the CAT are by majority vote. The CAT may remit a matter to the Commission, impose, revoke or vary the amount of a financial penalty, or make any decision, give any direction or take any other action that the Commission itself could have made, given or taken.

Malaysia’s enactment of the Bills is consistent with the goal of establishment of competition policies by all ten members of the Association of Southeast Asian National (ASEAN) by 2015, as set forth in the ASEAN Economic Community Blueprint.