Draft Guidelines
Dominant Position
Lessening Competition
Loopholes
The Malaysian Communications and Multimedia Act 1998 (CMA) addresses competition issues as they relate to the communications and multimedia industry. While it sets out broad competition principles, the act leaves the implementation of those principles to the recently established Malaysian Communications and Multimedia Commission.
Some of the CMA's competition rules are applicable to all licensees, while others are applicable only to licensees who the commission determines to be in a dominant position in a communications market.
Section 133 of the CMA prohibits all licensees from engaging in conduct that has the purpose of substantially lessening competition in a communications market. The act specifies types of prohibited conduct including (i) entering into an understanding, agreement or arrangement that provides for fixing rates, sharing markets, or boycotting a supplier or a competitor, and (ii) tying or linking the sale of a product or service to another product or service.
Under Section 139, the commission may direct a licensee in a dominant position to cease conduct that has or may have the effect of substantially lessening competition in any communications market. This section also gives the commission the authority to implement appropriate remedies.
The maximum penalty for violating the CMA's competition provisions is a fine of M$500,000 and/or five years' imprisonment, and a daily fine of M$1,000 for a continuing offence.
In August 1999 the Communications and Multimedia Commission issued draft competition guidelines that clarify provisions contained in the CMA, including (i) the meaning of 'substantial lessening of competition' and (ii) the test for determining whether a licensee has established a dominant position. The final guidelines have yet to be issued.
The commission has the authority to determination whether a licensee is in a dominant position in a communications market. It also has the authority to direct a licensee in a dominant position to cease any conduct that has or may have the effect of substantially lessening competition.
The commission's draft guidelines establish the following three-step process for determining dominance:
- define the context in which the commission is empowered to act. This involves considering the importance of the situation and whether the benefits of the commission's intervention will outweigh the costs;
- define the boundaries of the relevant communications market. This would include an examination of demand and supply, substitutes available, and the geographical market;
- assess the behavioral and structural features of the market.
The commission has adopted a broad definition of 'communications market' in the guidelines so as to be consistent with the convergence of the telecommunications, multimedia and information technology industries.
The CMA contains the following provisions relating to conduct that substantially lessens competition:
- Conduct that has the purpose of substantially lessening competition is prohibited;
- The commission may direct a licensee in a dominant position to terminate conduct that has or may have the effect of substantially lessening competition in any communications market; and
- The commission may authorize prohibited conduct if it is satisfied that such authorization is in the national interest.
Under the guidelines, the types of conduct that the commission would deem to substantially lessen competition include collusion, price fixing, boycotts, foreclosure and bundling. The scope given to 'competition' would extend beyond actual rivalry to potential rivalry taking into account the height of entry and exit barriers and the rate of change in technology.
The commission's draft guidelines provide that regardless of the implementing provisions it eventually adopts, the commission would have the authority not to apply those provision on a case-by-case basis if it is believes other factors are relevant. If the commission gives itself the authority to ignore the guidelines it finally adopts, players in the communications industry will never be certain that their actions are not anti-competitive and will not be questioned by the commission.
For further information on this topic please contact Julian Ding at Zaid Ibrahim & Co by telephone (+603 257 9999) or by fax (+603 254 4888) or by e-mail ([email protected]).
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