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What is the general attitude of business and the authorities to competition compliance?
The Malaysian Competition Act 2010 (Competition Act) is enforced by the Malaysia Competition Commission (MyCC) and introduces competition law for all markets in Malaysia except for certain sectors that remain subject to sector regulation.
The MyCC has had an impressive track record since the Competition Act took effect. Although it remains a young agency, it has nevertheless demonstrated its willingness to pursue difficult theories of harm and to conduct complex economic analyses and gradually establishing itself as an active enforcement agency in the region.
The MyCC’s enforcement activities have focused on cartel conduct, particularly price-fixing in the context of trade associations. It is increasingly taking a stricter stance with a view to strengthening the deterrent effect of fines. In its most significant case to date, in February 2017 the MyCC proposed a decision against the General Insurance Association of Malaysia and 22 general insurers for alleged fixing of parts trade discounts and labour rates for workshops. The MyCC proposed a total penalty of approximately 213 million ringgit - its highest ever proposed fine.
Owing to the increased enforcement, awareness of competition law has likewise increased and it is becoming common for businesses to have compliance programmes in place. Businesses that do not have any compliance initiatives risk infringing the Competition Act and may be exposed to heavy fines based on their turnover over the entire period of infringement.
Government compliance programmes
Is there a government-approved standard for compliance programmes in your jurisdiction?
The MyCC’s Competition Act 2010 Compliance Guideline (Compliance Guideline) is a useful a reference for guidance on what a competition compliance programme may contain. However, the Compliance Guideline specifically states it is not intended to be a definitive or exhaustive guide. Businesses should obtain independent legal advice on compliance with the Competition Act.
The MyCC states in the Compliance Guideline that a compliance programme involves a review of all existing arrangements and practices and the implementation of an ongoing compliance programme specifically tailored to the needs of the business.
The Compliance Guideline has a checklist that summarises the Compliance Guideline into a ‘to do’ checklist with recommended reviews and actions to be taken. This checklist is not only useful to develop a competition law compliance programme but also for periodic audits and reviews to ensure that the compliance programme is robust.
The Compliance Guideline is available at MyCC’s website at: www.mycc.gov.my/sites/default/files/handbook/Compliance_Guidelines_MyCC.pdf.
Applicability of compliance programmes
Is the compliance guidance generally applicable or do best practice and obligations depend on a company’s size and the sector of the economy it operates in?
The MyCC explains in the Compliance Guidelines that compliance programmes differ from business to business and from industry to industry, depending on the competition law risks. The risk exposure may be greater in highly concentrated industries, for larger businesses with strong (or potentially dominant) positions or those businesses that are in regular contact with competitors.
There is no one-size-fits-all compliance programme. Each business must assess its own competition law risks and determine what is required to ensure compliance. In particular, businesses must review their current contractual and non-contractual arrangements and business practices to determine whether there are competition law concerns.
If the company has a competition compliance programme in place, does it have any effect on sanctions?
Yes. The MyCC has issued guidelines on financial penalties. In determining the amount of financial penalty to impose, the MyCC has indicated that it will take into account aggravating factors and mitigating factors. Mitigating factors include the existence of a compliance programme that is appropriate having regard to the nature and size of the business of the enterprise.
Implementing a competition compliance programme
Commitment to competition compliance
How does the company demonstrate its commitment to competition compliance?
It is imperative for businesses to obtain commitment to compliance from senior management. Management must understand the risks and buy into the need for compliance. To demonstrate a top-down approach to compliance, senior management should consistently emphasise its importance and implement sufficient compliance protocols to identify, assess, and manage risks, and to ensure that the compliance culture is communicated effectively to every level of the business.
What are the key features of a compliance programme regarding risk identification?
The MyCC’s Compliance Guideline states that for a business to identify competition law risks, all of the business agreements and conduct must be reviewed, including current contractual and non-contractual arrangements and business practices. Particular attention should be given to the following:
- Hardcore cartels: price fixing, market sharing, limiting production and bid rigging.
- Agreements with competitors: agreements such as information exchange agreements or joint purchasing or selling may have the effect of preventing, restricting or distorting competition.
- Agreements with non-competitors: agreements with non-competitors such as suppliers or distributors may be anticompetitive if they contain anticompetitive restrictions, such as resale price maintenance or exclusivity provisions.
- Risks if business is dominant: if the business has a large share of any market it operates in, it may be dominant. Being dominant is not against the Competition Act. However, the business would need to be cautious with any conduct that might amount to an abuse of this dominance.
What are the key features of a compliance programme regarding risk assessment?
Once the business has identified its competition law risks, it will need to assess the seriousness of the risk. Risks can be categorised based on qualitative terms, for example, high to low risks. High-risk areas must be prioritised for immediate compliance measures. For businesses with various business streams, risk assessment may involve categorising each business stream based on revenue. Considering that the financial penalty under the Competition Act is calculated based on revenue, business streams with bigger revenue would require more effort from a compliance perspective.
If the business has strong market power, there would be greater risk exposure on its’ conduct and practices in the market.
What are the key features of a compliance programme regarding risk mitigation?
Risk mitigation to address competition law risks exposure may include:
- competition law compliance manual and checklists;
- competition law training for management and employees;
- obtaining legal advice on competition law issues affecting the business;
- appointment of a competition law compliance committee or person (or champion) in charge of competition law compliance;
- regular reports should be prepared for the board or senior management explaining how competition law compliance is being managed within the organisation; and
- carrying out regular audits to check compliance and identify any new risks.
Compliance programme review
What are the key features of a compliance programme regarding review?
Regular reviews must be carried out to ensure that the compliance programme is effective and is continually enhanced to take into account changes to the regulations and business practices of the organisation.
Apart from internal audit, the business may also consider appointing independent experts to audit internal competition law compliance processes and protocols.
Dealings with competitors
Arrangements to avoid
What types of arrangements should the company avoid entering into with its competitors?
Anticompetitive agreements are prohibited under chapter one of the Competition Act (Chapter One Prohibition). Section 4(1) of the Competition Act provides a horizontal or vertical agreement between enterprises is prohibited insofar as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services.
The Chapter One Prohibition is to a large extent similar to article 101 of the Treaty on the Functioning of the European Union. Section 4(2) of the Competition Act deems certain agreements between competing enterprises as having the object of significantly restricting competition. This means that the MyCC need not examine the anticompetitive effect of horizontal agreements that:
- fix a purchase or selling price or any other trading conditions;
- share markets or sources of supply;
- limit or control production, market outlets or market access, technical or technological development or investment; or
- constitute bid rigging.
What precautions can be taken to manage competition law risk when the company enters into an arrangement with a competitor?
The scope and nature of the agreement should not have any elements prohibited under section 4(2) of the Competition Act (see question 10) and businesses should obtain legal advice before entering into any form of agreement with a competitor.
In addition, businesses should have in place practical precautions, for example, rolling out a competition law compliance programme (with clear dos and don’ts) and providing adequate training and guidance for business teams that frequently interact with competitors.
What form must behaviour take to constitute a cartel?
The term ‘agreement’ is deliberately defined in a broad manner and includes any form of contract (written and oral), arrangement or understanding between enterprises, whether legally enforceable or not, and includes a decision by an association (such as trade and industry associations) and concerted practice.
The concept of ‘concerted practice’ is adopted from European case law and has been defined to mean any form of coordination between enterprises that knowingly substitutes practical cooperation between them for the risks of competition. This usually involves some form of informal cooperation or collusion where parties enter into an informal arrangement or understanding, and would include situations where enterprises mirror or follow the price that is set by another competitor without being unilateral and independent.
Since the Competition Act came into force, the MyCC has targeted cartel practices, mainly by trade associations such as the Cameron Highlands Floriculturists Association, Pan-Malaysia Lorry Owners Association, Sibu Confectionery and Bakery Association, as well as the ice manufacturers that were found to have fixed selling prices. There has been one market-sharing case, namely the MAS-AirAsia case, which involved a collaboration agreement entered into by Malaysia Airlines and AirAsia, which the MyCC found to have the object of market sharing resulting in the withdrawal of some routes on which both airlines competed.
Under what circumstances can cartels be exempted from sanctions?
Agreements are prohibited only if they significantly prevent, restrict or distort competition in any market for goods or services in Malaysia. The MyCC has interpreted the term ‘significant’ to mean that the agreements must have more than a trivial impact. The impact would be assessed in relation to the identified relevant market. When defining the relevant market, the MyCC will identify close substitutes for the product under investigation in the relevant product market as well as the geographic market.
As a starting point, the MyCC’s Guidelines on Chapter 1 Prohibition provide that the MyCC will generally not consider agreements between competitors in the same market whose combined market shares do not exceed 20 per cent of the relevant market to have a ‘significant’ effect on competition, provided that such agreements are not hardcore cartels. Under certain circumstances, an agreement between competitors below the threshold may nonetheless have a significant anticompetitive effect and the MyCC reserves the ability to take enforcement action against the parties to such agreement.
When assessing whether an agreement has the object of restricting competition, the MyCC will not only examine the actual common intention of the parties but will assess the aims of the agreement taking into consideration the surrounding economic context. If the object of any agreement is highly likely to have a significant anticompetitive effect, then the MyCC may find the agreement to have an anticompetitive object. Once an anticompetitive object is shown, the MyCC does not need to examine the anticompetitive effect of the agreement. However, if the anticompetitive object is not found, the agreement may still infringe the Competition Act if there is an anticompetitive effect.
Horizontal agreements that raise competition issues can nevertheless be relieved from liability where the criteria in section 5 of the Competition Act are proven. In principle, no activity is precluded from the application of section 5, which allows parties to an agreement that restricts competition to defend the restriction based on pro-competitive grounds. However, in practice, it is unlikely for hardcore cartels to be able to satisfy the relief of liability criteria under section 5.
Section 5 provides that anticompetitive agreements may be relieved from liability where all of the following criteria are proven by the parties:
- there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;
- the benefits could not reasonably have been provided without the agreement having the anticompetitive effect;
- the detriment to competition is proportionate to the benefits provided; and
- the agreement does not eliminate competition in respect of a substantial part of the goods or services.
All four criteria must be met and the parties claiming this relief have the onus of proving that the benefits gained are passed on to the consumers.
Can the company exchange information with its competitors?
There is no express provision on ‘information exchange’ in the Competition Act. Information exchanges are assessed under section 4 in relation to anticompetitive agreements between enterprises (Chapter One Prohibition). The MyCC is likely to follow European cases on exchange of commercially sensitive information, including cases on the hub-and-spoke cartel where the parties to a cartel use a third party (for example, in a vertical agreement) as a conduit for exchanging such information.
The MyCC’s Guidelines on Chapter One Prohibition state that sharing of price information could fall within the conduct deemed to have the object of ‘significantly preventing, restricting or distorting competition in the market’ as stated in section 4(2). Whether non-price information-sharing significantly reduces competition needs to be assessed on a case-by-case basis. In general, the frequent exchange of confidential information in a market with few competitors is more likely to have a significant effect on competition. In addition, the exchange of information between competitors that is not provided to consumers is also likely to have a significant adverse effect on competition.
Cartel leniency programmes
Is a leniency programme available to companies or individuals who participate in a cartel in your jurisdiction?
The Competition Act empowers the MyCC to establish a leniency regime that provides for a reduction of up to a maximum of 100 per cent of any penalties, which would otherwise have been imposed (ie, full immunity). The leniency regime is only applicable for the admission of an infringement of a prohibition under section 4(2). See question 10. The leniency regime does not apply to cases of abuse of dominance.
Leniency granted would not protect the successful applicant from other legal consequences, such as private actions by aggrieved persons who have suffered loss or damage directly caused by an infringement.
The leniency regime is thus only available in cases where the enterprise has:
- admitted its involvement in an infringement of a prohibition under section 4(2); and
- provided information or other form of cooperation to the MyCC which significantly assisted, or is likely to significantly assist, in the identification or investigation of any finding of the infringement against any other enterprises.
Can the company apply for leniency for itself and its individual officers and employees?
No, as there is no liability for infringement of the Chapter One Prohibition on individual officers and employees. Nor are there criminal sanctions on individuals involved in anticompetitive practices. Note, however, that individuals can have personal liability for offences under the Competition Act (for example, obstructing investigations).
Can the company reserve a place in line before a formal leniency application is ready?
The leniency regime permits different percentages of reductions to be made available to an enterprise. This would depend on whether the enterprise was the first to bring the suspected infringement to the attention of the MyCC, as well as on the stage in the investigation at which it admits its involvement in the infringement. Given the illicit nature of cartels, the leniency regime is designed to encourage cartelists to race to be the ‘first in’ to supply as much information as possible in order to expedite the MyCC’s investigation.
An infringing enterprise that is second in line may still benefit from the leniency regime. However, the percentage of reduction would largely depend on the stage in the investigation at which it admits its involvement in the infringement and the value of the incremental information or other cooperation it is able to provide. Such percentage of reduction is expected to be commensurate with the additional information and assistance such enterprise is able to provide to the MyCC.
The MyCC’s Guidelines on Leniency Regime provide guidance on the reduction of financial penalties, the procedure for making a leniency application and the grant of leniency. In relation to the methods of contacting the MyCC for leniency matters, the Guidelines state that the MyCC has appointed an official to serve as the leniency officer to facilitate the handling of inquiries about the availability of leniency. Any person or enterprise wishing to apply for leniency should call the leniency hotline telephone number on the MyCC’s website. No other person at the MyCC should be contacted unless the MyCC directs otherwise.
If, upon request, the leniency officer advises that leniency is available in respect of a situation, the potential applicant may ask for a marker in order to preserve its priority in receiving leniency while an application is being prepared. A marker is valid for 30 days from the date on which it is granted. If the recipient of a marker fails to complete its applications by the end of the specified period, the enterprise will lose its priority position.
If the company blows the whistle on other cartels, can it get any benefit?
The Guidelines on Leniency Regime provide that the leniency regime may be available in the case of any enterprise that has provided information or other forms of cooperation to the MyCC that has significantly assisted or is likely to assist in the identification or investigation of any finding of an infringement of any prohibition by any other enterprises. Further, the Guidelines provide that an applicant may provide information relating to a different cartel.
Dealing with commercial partners (suppliers and customers)
What types of vertical arrangements between the company and its suppliers or customers are subject to competition enforcement?
In examining restrictions in vertical agreements, the MyCC broadly divides these into price restrictions and non-price restrictions.
Generally, the MyCC will take a strong stance against vertical price restraints, in particular, resale price maintenance and minimum price restraints, which it considers anticompetitive by object. Other forms of resale price maintenance, including maximum pricing and recommended retail pricing, that serve as a focal point for downstream collusion, will also be considered anticompetitive. The concern is that the downstream resellers or retailers do not compete on price. The prohibition on price restraints is likely to include any restriction on components of pricing (for example, margins, bonuses, rebates and discounts), even though these are not explicitly mentioned in the context of vertical price restraints.
Non-price restraints, such as exclusivity and single branding restrictions, are not considered anticompetitive by object and the MyCC will assess the effects on competition. Competition issues may arise if there is foreclosure or no effective competition from other brands (ie, inter-brand competition).
Would the regulatory authority consider the above vertical arrangements per se illegal? If not, how do they analyse and decide on these arrangements?
The Chapter One Prohibition states that a horizontal or vertical agreement between enterprises is prohibited insofar as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services.
The term ‘object’ is not defined in the Competition Act. According to the MyCC’s Guidelines on Chapter One Prohibition, the MyCC in general will not just examine the actual common intentions of the parties to an agreement, but also assess the aims pursued by the agreement in the light of the agreement’s economic context. If the object of an agreement is highly likely to have a significant anticompetitive effect, then the MyCC may find the agreement to have an anticompetitive object.
If an anticompetitive object is shown, then the MyCC does not need to examine the anticompetitive effect of the agreement, and thus can make a finding of infringement even before the anticompetitive effect manifests. However, if an anticompetitive object is not found, the agreement may still breach the Competition Act if there is an anticompetitive effect.
In determining whether the impact of an agreement on the market is likely to be significant, the MyCC has indicated in its Guidelines on Chapter One Prohibition that:
- for anticompetitive agreements between competitors, a combined market share of less than 20 per cent is unlikely to significantly affect competition; and
- for anticompetitive agreements between non-competitors, if the buyer and seller individually has less than 25 per cent market share, this is unlikely to significantly affect competition in the market.
While the Guidelines explicitly indicate safe harbours for non-price restraints for enterprises that are below 25 per cent of their relevant market, this is not similarly provided for in the section of the Guidelines relating to price restraints. In the Guidelines, the MyCC has also emphasised that it will take a strong stance against minimum resale price maintenance and find it anticompetitive, and as such the safe harbour may not apply to price restraints.
No vertical agreements are per se unlawful. Any agreement that is prohibited under section 4 may be relieved of liability if the parties to the agreement can show that there are pro-competitive benefits brought about by the restrictions that outweigh the detriments (see question 21).
Under what circumstances can vertical arrangements be exempted from sanctions?
Where an agreement infringes section 4, the parties may justify their conduct by proving the pro-competitive benefits in section 5.
No vertical agreements are per se unlawful. Any agreement that is prohibited under section 4 may be relieved of liability if the parties to the agreement can show that there are pro-competitive benefits brought about by the restrictions that outweigh the detriments. The parties claiming relief must prove that:
- there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;
- the benefits could not reasonably have been provided by the parties to the agreement without the agreement having the effect of preventing, restricting or distorting competition;
- the detrimental effect of the agreement on competition is proportionate to the benefits provided; and
- the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.
Parties must also prove that these benefits are passed on to consumers.
How to behave as a market dominant player
Determining dominant market position
Which factors does your jurisdiction apply to determine if the company holds a dominant market position?
Dominance is defined as a situation in which one or more enterprises possess such significant power in a market as to be able to adjust prices or outputs or trading terms without effective constraint from competitors or potential competitors. The MyCC considers that the ability of an enterprise to price well above the competitive level for a sustained period or the ability to actually drive an equally efficient competitor out of business as evidence that the enterprise is dominant.
Other factors such as barriers to entry and countervailing buyer power may also be used in the assessment of dominance. Further information is set out in the MyCC’s Guidelines on Dominance (Guidelines on Chapter Two Prohibition).
Section 10(4) of the Competition Act specifically provides that market share alone is not determinative of a dominant position. Nonetheless, according to the Guidelines on Chapter Two Prohibition, the MyCC will generally consider a market share that exceeds 60 per cent of the relevant market to be indicative of dominance. However, given the text of section 10(4), there may well be findings of dominance below this threshold. The Guidelines on Chapter Two Prohibition indicate, for example, that a new product with patented features may be considered dominant even though its market share is only 20 to 30 per cent of the market, but rapidly growing as consumers switch to this product.
Abuse of dominance
If the company holds a dominant market position, what forms of behaviour constitute abuse of market dominance? Describe any recent cases.
The concept of abuse is not specifically defined in the Competition Act. However, section 10(2) of the Competition Act provides a non-exhaustive list of conduct that may constitute abuse of a dominant position:
- directly or indirectly imposing an unfair purchase or selling price or other unfair trading condition on any supplier or customer;
- limiting or controlling production, market outlets or market access, technical or technological development or investment, to the prejudice of consumers;
- refusing to supply to a particular enterprise or group or category of enterprises;
- discriminating by applying different conditions to equivalent transactions with other trading parties;
- forcing conditions in a contract that have no connection with the subject matter;
- predatory behaviour towards competitors; and
- buying up a scarce supply of resources where there is no reasonable commercial justification.
The prohibition on abuse of dominance covers both exploitative practices (for example, unfair prices or trading terms) and exclusionary conduct (for example, predatory conduct, refusal to supply or exclusive dealing).
According to the Guidelines on Chapter Two Prohibition, the MyCC is only concerned with exploitative or excessive pricing if there is unlikely to be competition in the market to constrain the dominant enterprise. Exclusionary conduct is conduct that prevents equally efficient competitors from competing and will be assessed in terms of its effects on the competitive process and not its effects on competitors. So, even if an enterprise is dominant it should not be stopped from engaging in competitive conduct that benefits consumers even if inefficient competitors are harmed.
The MyCC will use an effects-based approach as used elsewhere in assessing a potential abuse of a dominant position. By adopting this approach, the MyCC will ensure that conduct that benefits consumers will not be prohibited and therefore ensure that enterprises have the incentives to compete on merits.
Under what circumstances can abusing market dominance be exempted from sanctions or excluded from enforcement?
In contrast to the prohibition on anti-competitive agreements (similar to article 101 of the Treaty on the Functioning of the European Union), the prohibition on abuse of dominance does not allow a defence based on efficiency gains. There is also no power to grant an exemption from abuse of dominance.
However, similar to the position in the EU, a dominant enterprise can protect its own commercial interest in the face of competition from existing competitors and new entrants. Section 10(3) of the Competition Act allows a dominant enterprise to take any step that has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor. For example, a dominant enterprise may meet a competitor’s price even though the price may be below cost (in the short term).
Competition compliance in mergers and acquisitions
Competition authority approval
Does the company need to obtain approval from the competition authority for mergers and acquisitions? Is it mandatory or voluntary to obtain approval before completion?
There is no merger control regime under the Competition Act. The Malaysian Aviation Commission Act 2015 (Malaysian Aviation Commission Act) is the first legislation in Malaysia to introduce a voluntary merger control regime in addition to prohibiting anticompetitive agreements and abuse of dominance in the Malaysian aviation services market. Subject to certain exemptions and exclusions, the Malaysian Aviation Commission Act prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition in any aviation service market in Malaysia or any part of Malaysia.
Merger parties may notify their anticipated mergers to the Malaysian Aviation Commission (MAVCOM) or to apply for a decision as to whether the anticipated merger will infringe the prohibition against anticompetitive mergers.
The Guidelines on Notification and Application Procedures state that merger situations should be notified if the merger parties anticipate that the merger may have the effect of substantially lessening competition within any Malaysian aviation service market. MAVCOM is more likely to investigate a merger situation if:
- the combined turnover of the merger parties in Malaysia in the financial year preceding the transaction is at least 50 million ringgit; or
- the combined worldwide turnover of the merger parties in the financial year preceding the transaction is at least 500 million ringgit .
In any case, MAVCOM has the power to investigate an anticipated merger or a merger where there is reason to suspect that it has resulted, or may be expected to result, in a substantial lessening of competition in any aviation service market even where the above turnover thresholds are not met.
How long does it normally take to obtain approval?
MAVCOM’s Guidelines state that the duration for the assessment of an application will be determined on a case-by-case basis depending on factors such as the complexity of the issues and the timeliness and the completeness of the information provided by the enterprises.
If the company obtains approval, does it mean the authority has confirmed the terms in the documents will be considered compliant with competition law?
Any decision from MAVCOM that the merger is not anticompetitive under the Malaysian Aviation Commission Act cannot be read as approval of all the terms of the agreement between the parties.
In addition, a non-infringement decision with regard to an anticipated merger may be limited to a period specified by MAVCOM. In such situation, a non-infringement decision for an anticipated merger would only be valid for a specified period and if the merger parties decide to proceed with the anticipated merger, it must be carried out within the specified period.
Failure to file
What are the consequences for failure to file, delay in filing and incomplete filing? Have there been any recent cases?
An anticipated merger or merger that was not notified to MAVCOM that raises competition law concerns under the Malaysian Aviation Commission Act may pose an infringement risk to the merger parties. Upon a determination by MAVCOM that an anticipated merger or merger infringes the prohibition against anticompetitive mergers, MAVCOM may require the merger to be dissolved or modified, and impose financial penalties on the merger parties.
The Guidelines state that MAVCOM may refuse to accept an application if it is:
- not accompanied by the relevant supporting documents;
- not made in the form determined by MAVCOM; or
- not made in accordance with any provision of the Malaysian Aviation Commission Act, any applicable regulations, guidelines or application requirements determined by MAVCOM.
MAVCOM may also consider an application to be incomplete until the payment of any applicable fee as prescribed by the relevant regulations is made.
Investigation and settlement
Under which circumstances would the company and its officers or employees need separate legal representation? Do the authorities require separate legal representation during certain types of investigations?
The Competition Act does not provide for mandatory separate legal representation for certain types of investigations.
It must be noted that by virtue of the definition of an ‘enterprise’ under the Competition Act, competition law infringements can only be pursued against business entities and not individuals. However, where an officer or employee is being simultaneously investigated for a separate offence, for example, bribery, it is advisable that such person be represented separately.
For what types of infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?
A dawn raid may be launched for any alleged infringement under the Competition Act. However, dawn raids are not frequently resorted to by the MyCC.
The MyCC may search premises with a warrant issued by a magistrate, where there is reasonable cause to believe that any premises have been used for infringing the Competition Act or there is relevant evidence of it on such premises. The warrant may authorise the MyCC officer named in the warrant to enter the premises at any time by day or night and by force if necessary. During such searches, the 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, the MyCC may seal the evidence to safeguard it. Attempts to break or tamper with the seal constitute an offence.
Where the 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.
In addition to powers under the Competition Act, the MyCC investigating officers have the powers of a police officer as provided for under the Criminal Procedure Code.
What are the company’s rights and obligations during a dawn raid?
It is a criminal offence to obstruct the MyCC’s investigations that can be punished with imprisonment, monetary fines or both. It is also a criminal offence to destroy, falsify, or conceal documents to provide false or misleading information to the MyCC officers.
The Competition Act does not expressly set out any rights and obligations during a dawn raid. That said, since dawn raids are to be carried out in accordance with the provisions of the Criminal Procedure Code, the usual rights of a person subject to search and seizure under the Criminal Procedure Code would apply to dawn raids as well, including the safeguards on search of persons and rights of a person under arrest.
Is there any mechanism to settle, or to make commitments to regulators, during an investigation?
The MyCC may accept an undertaking from an enterprise to do, or refrain from doing, anything the MyCC considers appropriate. Where the MyCC believes that it has a strong case, it is unlikely to accept an undertaking. Conversely where an undertaking enables the MyCC to bring about a quick and effective remedy without lengthy legal proceedings, this may be seen as a more effective use of the MyCC’s resources, which can then be channelled into other infringement cases.
Where the MyCC accepts an undertaking, it shall close the investigation without any finding of infringement and it shall not impose a penalty on the enterprise. Any undertaking accepted by the MyCC will be made publicly available and can be enforced in the High Court. Offering a suitable undertaking is particularly useful to avoid a finding of infringement.
In a price-fixing case involving the Pan-Malaysia Lorry Owners Association, the MyCC did not propose financial penalties but instead issued proposed interim measures and accepted an undertaking from the association and related lorry enterprises that they would not engage in any future anticompetitive conduct such as price fixing, and would cease and desist from increasing the transportation charges of up to 15 per cent after the MyCC stated that this action constitutes price fixing.
In October 2015, the MyCC accepted undertakings from the Malaysia Heavy Construction Equipment Owner’s Association (MHCEOA), in relation to machinery leasing charges. The MHCEOA made an announcement that was reported in a Chinese daily newspaper that the costs for leasing of machinery will increase by 15 per cent. In addition, the constitution of the MHCEOA contained a clause that states that the MHCEOA will draw up guidelines for hiring fees and tender of contracts by members. The MyCC found that the announcement by the MHCEOA of its decision to increase the machinery rental charges may infringe Chapter One of the Competition Act. Further, the MyCC found that the drawing up of guidelines to set hiring fees may similarly infringe Chapter One of the Competition Act. The MyCC did not impose financial penalties but instead accepted undertakings from MHCEOA, which include to refrain from making similar press announcements and to remove the impugned clause from its constitution.
What weight will the authorities place on companies implementing or amending a compliance programme in settlement negotiations?
The MyCC may take into account the implementation of a compliance programme as a mitigating factor in assessing the appropriate financial penalty (see question 4).
Are corporate monitorships used in your jurisdiction?
There is no provision for corporate monitorships under the Competition Act.
Statements of facts
Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class actions or representative claims?
There is no provision in the Competition Act for the automatic admissibility of such evidence. The test for whether evidence is admissible in court proceedings for private damages is ‘relevance’. Relevancy of evidence is a question of fact and the general rule is that all relevant evidence is prima facie admissible.
Invoking legal privilege
Can the company or an individual invoke legal privilege or privilege against self-incrimination in an investigation?
Yes, the MyCC’s investigation powers are subject to lawyer-client privilege and may, at the request of the person disclosing, be protected by confidentiality.
As anticompetitive conduct is not a criminal offence, there is no privilege against self-incrimination.
What confidentiality protection is afforded to the company or individual involved in competition investigations?
The Competition Act prohibits the disclosure or use of confidential information with respect to a particular enterprise or the affairs of an individual obtained by virtue of the Competition Act. ‘Confidential information’ is defined as trade, business or industrial information that belongs to any person, that has economic value and is not generally available to or known by others.
However, the MyCC is authorised to make disclosures to other competition authorities in conjunction with their investigations and where necessary for the performance of the MyCC’s functions.
Refusal to cooperate
What are the penalties for refusing to cooperate with the authorities in an investigation?
The MyCC may, by written notice, require any person whom the MyCC believes to be acquainted with the facts and circumstances of the case to assist in investigations.
A person required to provide information has a responsibility to ensure that the information is true, accurate and complete, and such person must provide a declaration that he or she is not aware of any other information that would make the information untrue or misleading. In addition, the Competition Act prohibits any person from obstructing investigations including refusing any officer of the MyCC access to any premises that the officer is entitled to have or seeking to prevent the execution of any duty imposed or power under the Competition Act. Failure to comply with these provisions is punishable as a criminal offence with fines up to 5 million ringgit or imprisonment for a term up to five years or both.
Is there a duty to notify the regulator of competition infringements?
There is no statutory duty to notify the regulator of competition infringements. The MyCC, however, encourages complaints and has issued its Guidelines on Complaint Procedures to assist complainants. Complaints must be made in the prescribed form, providing information about the complainant, the parties complained of, a description of the alleged infringing activity and include other relevant information or supporting documents. Anonymous complaints are possible but discouraged, as the MyCC will not be able to seek clarification or further information from the complainant. A number of the MyCC investigations have been commenced following complaints.
What are the limitation periods for competition infringements?
The Competition Act does not stipulate any period of limitation for investigating anticompetitive agreements or abuse of dominance.
The limitation period for a private action for competition law infringements under the Competition Act is six years from the date the cause of action accrued. The limitation period is postponed if the:
- cause of action is based on the infringing enterprise’s fraud;
- right of action is concealed by the infringing enterprise’s fraud; and
- action is for relief from the consequences of a mistake.
Are there any other regulated anticompetitive practices not mentioned above? Provide details.
The Competition Act introduced general competition law for all markets in Malaysia except those carved out for sector regulators under the Communications and Multimedia Act 1998 in relation to the network communications and broadcasting sectors, the Energy Commission Act 2001 in relation to the energy sector and the Malaysian Aviation Commission Act 2015 in relation to the aviation services sector. Activities regulated under the Petroleum Development Act 1974 and the Petroleum Regulations 1974, in relation to upstream operations comprising the activities of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia, are also excluded from the application of the Competition Act.
In addition, the Postal Services Act 2012 introduced general competition law applicable to the postal market, which is also under the purview of the Malaysian Communications and Multimedia Commission. The Gas Supply (Amendment) Act 2016 also introduced general competition law provisions to the Gas Supply Act 1993, which is applicable to the Malaysian gas market. Following the amendment to the Gas Supply Act 1993, the Energy Commission has published Guidelines on Competition for the Malaysian Gas Market in relation to Market Definition, Anti-Competitive Agreements and Abuse of a Dominant Position.
Are there any proposals for competition law reform in your jurisdiction? If yes, what effects will it have on the company’s compliance?
The MyCC has an impressive track record, where it has investigated and taken enforcement action against cases involving cartel conduct, anticompetitive vertical agreements and abuse of dominance.
Based on media reports, the MyCC has identified the pharmaceutical sector as a priority sector. In addition, the MyCC has indicated that it will focus on the logistics, transportation, financial, consumer services and various fast-moving consumer goods sectors.
Updates and trends
Updates and trends
Updates and trends
In April 2017, Datuk Che Mohamad Zulkifly Jusoh was appointed as the new Chairman of the MyCC replacing Tan Sri Dato’ Seri Siti Norma Yaakob. It remains to be seen whether this change in leadership will result in increased enforcement action by the MyCC.