An extract from The Dominance and Monopolies Review - 7th edition
Market definition and market power
Section 2 of the CA 2010 defines 'market' as a market in or in any part of Malaysia, and when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services. Defining a 'relevant market' means identifying all the close substitutes for the product under investigation.
Section 10 of the CA 2010 does not prohibit an enterprise from being dominant in a relevant market so long as the enterprise does not abuse its dominant position.
The MyCC adopts a two-stage test in determining if an enterprise has infringed Section 10 of the CA 2010:
- whether the enterprise being complained about is dominant in a relevant market in Malaysia; and
- if the enterprise is dominant, whether the enterprise is abusing that dominant position.
A 'dominant position' is defined as a situation in which one or more enterprises possess such significant power in a market to adjust prices or outputs or trading terms without effective constraint from competitors or potential competitors.
In general, the MyCC will consider a market share of above 60 per cent to be indicative of dominance. However, the fact that the market share of any enterprise is above or below any particular level shall not in itself be conclusive of dominance.
The Guidelines on Abuse of Dominance clearly point out that dominance is not simply a conduct by a single enterprise, but can also include conduct of enterprises exercising significant market power together (i.e., 'collective dominance'). The MyCC will look at each case on its merits but, in general, an infringement finding may be made if two or more separate enterprises, which have significant market power, act similarly in a market and that conduct excludes equally efficient competitors.
In assessing whether an enterprise is dominant, first the relevant market must be defined in accordance with the MyCC's Guidelines on Market Definition. This involves determining both:
- the relevant product market; and
- the relevant geographic market.
In identifying the relevant market, the MyCC has said that it will employ the hypothetical monopolist test (HMT), and will rely on economic evidence in defining the relevant market, such as:
- market research surveys; and
- interviews with:
- industry associations;
- the initial complainant;
- competitors; and
In practice, we have not seen significant evidence of an economic approach as the only infringement finding for abuse of dominance made by the MyCC involved a monopoly concessionaire.Aviation service sector
Apart from issuing the Guidelines on Abuse of Dominant Position, the MAVCOM has also issued the Aviation Service Market Definition, which adopts the same principles applied by the MyCC in defining a market.Communications and multimedia sector
In its Guideline on Dominant Position in a Communications Market, the MCMC outlines the general approach in identifying whether a licensee is dominant. This includes defining the boundaries of the relevant communications market and determining whether the licensee is in a dominant position in the relevant market.
The MCMC's approach to market definition is similar to the MyCC's in that it applies the HMT in identifying the relevant market. The Communications and Multimedia Act 1998 (CMA 1998) empowers the MCMC to pre-define markets for purposes of making a determination of dominance under Section 137 of the CMA 1998. There are currently 26 pre-determined markets, according to the 'Market Definition Analysis – Definition of Communications Market in Malaysia' dated 24 September 2014. The finding of a market does not pre-empt a finding of dominance, and instead, it identifies the boundaries of the field of rivalry that exists in the communications sector. In some markets, effective competitive constraints may exist and no dominance finding will need to be made. In other markets, effective competitive constraints may be dormant or inhibited and a finding of dominance may be made.
When analysing market share data, the MCMC will consider the current market share of the licensee against market shares of its competitors and the changes in the licensees' market shares over time. A market share of more than 40 per cent will be considered a high market share. However, this does not preclude a licensee with a market share of less than 40 per cent from being found to be dominant if it is not subject to effective competitive constraints.
The MCMC will consider certain key factors in determining whether a licensee is in a dominant position in the market. The non-exhaustive list is as follows:
- the structure of the market and the nature of competition in that market, including market shares;
- barriers to entry and expansion;
- the countervailing power of buyers; and
- the nature and effectiveness of economic regulation (if any).
The Guidelines on Competition for the Malaysian Gas Market in relation to Market Definition, Anti-Competitive Agreements and Abuse of Dominant Position (the Gas Market Guidelines) issued pursuant to Section 37C of the GSA 1993 employs the MyCC's approach of applying the HMT in identifying the relevant market. The EC considers a market share of above 60 per cent as a strong indication of a dominant position in the relevant market and it is unlikely that an entity will be individually dominant if its market share is below 40 per cent. However, market share is said to not be the sole indicator of dominance.