Enforcement proceedings in dominance in Malaysia

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The Competition Act is enforced by MyCC, a body corporate established under the Competition Commission Act 2010, comprising representatives from both the public and private sectors. Competition law in the communications and broadcast sector is enforced by the MCMC, while the Malaysian Aviation Commission and the Energy Commission oversee competition in the aviation and energy sectors respectively.

MyCC officers have all of the powers of investigation and enforcement under the Competition Act. They have the power to require any person to produce documents and information and to conduct unannounced searches (dawn raids). In addition, the Competition Act states that MyCC officers investigating the commission of an offence under the Competition Act shall have any or all of the powers of a police officer under the Criminal Procedure Code.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

Upon finding an infringement of the Chapter 2 prohibition, MyCC:

• must require that the infringement cease immediately;
• may specify steps that are required to be taken by the infringing enterprise, which appear to MyCC to be appropriate for bringing the infringement to an end;
• may impose a financial penalty of up to 10 per cent of the enterprise’s worldwide turnover over the period during which the infringement occurred; or
• may give any other direction it deems appropriate.

The highest fine imposed by MyCC thus far for infringement of the Chapter 2 prohibition is against MyEG Services Sdn Bhd (MyEG) where MyCC imposed a financial penalty of 2.27 million ringgit. On appeal, the Competition Appeal Tribunal imposed an additional daily penalty from June 2016 to December 2017, bringing the total financial penalty imposed on MyEG to 6.4 million ringgit. MyEG filed for judicial review of the Competition Appeal Tribunal’s decision, and in January 2019, the High Court dismissed MyEG’s judicial review application.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The Competition Act empowers MyCC to impose sanctions directly on the infringing enterprise without petitioning a court or other authority. Similarly, the Malaysian Aviation Commission and the MCMC are empowered to impose sanctions directly on the infringing enterprise under the Malaysian Aviation Commission Act and the Communications and Multimedia Act respectively.

What is the recent enforcement record in your jurisdiction?

In November 2013, MyCC proposed a 4.5 million ringgit fine on Megasteel for abusing its dominant position. MyCC alleged that Megasteel’s practice 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, making it a serious breach of competition law. In determining the basic amount of the proposed fine, 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. On 18 April 2016, MyCC finalised the decision and made a finding of non-infringement against Megasteel. In its final decision (after assessing submissions from Megasteel and further analysis), MyCC held that Megasteel did not infringe the Chapter 2 prohibition. MyCC held that owing to certain external factors the steel industry market is heavily distorted. Although Megasteel was the sole producer and supplier of hot-rolled coil, hot-rolled coil can be imported subject to certain conditions. Further, MyCC found that the downstream market has been liberalised and the competitors in the downstream market, including Megasteel, are competing in the market with competitive selling prices.

On 6 October 2015, MyCC issued a proposed decision against MyEG Services Sdn Bhd (MyEG) stating that the company had abused its dominant position in the provision and management of online foreign workers permit renewals by not ensuring a level playing field or by applying different conditions to equivalent transactions with other trading parties to the extent that it has harmed competition in the downstream market. In June 2016, MyCC issued its final decision and imposed a 2.272 million ringgit fine on MyEG. MyEG’s appeal to the Competition Appeal Tribunal was dismissed in December 2017 and the Tribunal imposed an additional daily penalty from June 2016 to December 2017, bringing the total financial penalty imposed on MyEG to just over 6.412 million ringgit.

In July 2018, MyCC issued a proposed decision against Dagang Net Technologies Sdn Bhd for allegedly abusing its position as a monopoly in the provision of trade facilitation services under the National Single Window, by refusing to supply electronic mailboxes to end users of the Sistem Maklumat Kastam (or Customs Information System) and also imposing barriers to entry to the extent of preventing competition. MyCC proposed imposing a financial penalty of almost 17.4 million ringgit.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

The Competition Act does not mention the consequence of infringement of the Chapter 2 prohibition on the validity of contracts. However, where the consideration for a contract is unlawful, the contract will be void and unenforceable under the Contracts Act 1950. Therefore, a contractual term that amounts to an abuse of dominance under the Competition Act will be rendered unenforceable by virtue of the Contracts Act 1950.

The precise consequences will depend on the specific facts of the case.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Any person who suffers loss or damage directly as a result of an infringement of the Chapter 2 prohibition may bring a private action against the infringing parties in the civil courts.

Such civil action may be initiated even if MyCC has not conducted or concluded an investigation into the alleged infringement. However, in practice, the evidential burden on private parties makes this unlikely unless MyCC’s investigation and adjudication process is slow.

MyCC has powers to give the infringing enterprise any direction it deems appropriate. This may include ordering a dominant firm to grant access (to infrastructure or technology), supply goods or services or conclude a contract. For example, in the MyCC Dominance Guidelines, MyCC indicates that the remedy for a refusal to supply that infringes the Chapter 2 prohibition is to direct the supplier to supply at a reasonable consideration.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Yes (see question 31). An aggrieved person may file a private action in court to claim for damages for losses suffered as a result of the infringement.

MyCC has no power to award damages to an aggrieved person.

To what court may authority decisions finding an abuse be appealed?

The decision of MyCC is appealable by any person who is aggrieved or whose interest is affected by that decision, to the Competition Appeal Tribunal. The Competition Appeal Tribunal’s decision is final and binding on the parties to the appeal. However, its decision, and any other administrative decision of MyCC, may be subject to judicial review by the High Court.