In a decision made on 26 July 2021 (the “Decision”), the Malaysia Competition Commission (the “Commission” or “MyCC”) imposed financial penalties ranging from RM26,363.03 to RM336,369.13 against seven warehouse operators, namely SAL Agencies Sdn Bhd, WCS Warehousing Sdn Bhd, Regional Synergy (M) Sdn Bhd, Intrexim Sdn Bhd, Pioneerpac Sdn Bhd, Prima Warehousing Sdn Bhd and Interocean Warehousing Services Sdn Bhd (the “Operators”).
 
The Operators are said to have infringed the section 4 prohibition of the Competition Act 2010 (the “CA 2010”) by participating in an agreement which has, as its object, the prevention, restriction, or distortion of competition in relation to the market of the provision of handling services of long length and heavy lift of import and export cargo in Port Klang, Malaysia from 22 May 2017 until 9 January 2020 (the “Infringing Agreement”.)
 
The Cartel in Detail
 
Based on evidence gathered, the Commission concluded that the Operators knew each other and were in constant communication with one another. The Operators exchanged opinions and recommendations on a variety of topics, including pricing charges for warehouse-related services, as well as warehouse activities such as unstuffing, stuffing, and consignee disputes.¹
 
The WhatsApp Messages
 
During the Commission’s raids on the Operators, it was discovered that they had formed a WhatsApp Group and started discussions on fixing surcharges despite acknowledging that they were all competitors in the warehouse services market.² Screenshots of the WhatsApp Group chat logs showed that the Operators had attempted to fix and standardise the rates for handling services for long length at RM350.00 per handling. The effective date for the implementation of the agreed rates was also set to begin on 1 June 2017.³
 
The Surcharge Memorandum
 
The same raids also unearthed the Operators’ cartel agreement in the form of a document called ‘Surcharge Memorandum’ dated 22 May 2017 (the “Surcharge Memorandum”). The Operators had placed their signatures and company stamps on the Surcharge Memorandum and agreed to circulate the same to their respective customers. In the Surcharge Memorandum, the Operators came to an understanding to charge the agreed-upon prices from 1 June 2017.⁴
 
Meetings between the Operators
 
An invitation was also issued by the Port Klang Authority (“PKA”) to the Operators for a meeting on 29 September 2017 to discuss the charges. Three meetings were subsequently held on 29 September 2017, 6 November 2017, and 10 January 2018 (the “Meetings”) between the Operators and PKA to discuss the implementation of surcharges and to discuss issues relating to less container load.⁵
 
Legal and Economic Assessment by the Commission
 
No public distancing
 
Counsel for the Operators submitted that a number of the Operators had refunded excess payments upon the “reversal of PKA’s approval”, and were no longer parties to the Infringing Agreement.
 
The Commission was of the view that the conduct and behaviour of the Operators amounted to participation in an agreement. Despite the fact that a few of the Operators had refunded the excess payments, nonetheless, the act of refunding by itself does not amount to public distancing and does not exonerate the enterprises from liability for breaching the competition law.
 
The Commission opined that for an enterprise to publicly distance itself from an anti-competitive agreement, the enterprise must express firmly and unequivocally to the other cartel members its intention to distance itself from the anti-competitive conduct.⁶
 
Single Continuous Infringement
 
With regards to the Meetings held between the Operators and PKA, the Commission considered each of the series of discussions as constituting a single continuous infringement. The series of discussions were all in pursuit of a common objective, namely, to distort the normal movement of rates for the handling services of long length and heavy lift of import and export cargo in Port Klang, Malaysia.⁷
 
Object of fixing rates
 
The Commission’s investigation also revealed that the Operators had entered into an agreement vide the issuance of the Surcharge Memorandum that has the object of fixing rates for the handling services of long length and heavy lift of import and export cargo in Port Klang.⁸
 
The Relevant Law
 
The salient provisions of the CA 2010 in relation to prohibited horizontal and vertical agreements are as follows:
 
Section 4 (1) – 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.
 
Section 4 (2)(a) – Without prejudice to the generality of subsection (1), a horizontal agreement between enterprises that has the object of price fixing is deemed to have the object of significantly preventing, restricting, or distorting competition in any market for goods or services.
 
Section 4 (3) – Any enterprise which is a party to an agreement which is prohibited under subsection (1) shall be liable for infringement of the prohibition.
 
The Decision
 
The Commission concluded that the actions of the Operators were, without a doubt, a violation of Section 4(1) read with section 4(2) and section 4(3) of the CA 2010.⁹
 
The Commission directed the Operators to undertake as follows:

The Financial Penalties
 
The total penalty imposed on the Operators amounted to RM1,043,012.52, being an amount which does not exceed the limit of 10% of their total worldwide turnover permitted under sections 40(1)(c) and 40(4) of the CA 2010. The Commission, in determining the penalty, evaluated the impact of the current economic situation together with the presence of mitigating and aggravating factors in the case.¹¹ For example, the Commission considered, inter alia, aggravating factors such as the seriousness of the infringement, the duration of the infringement, and whether a party can be said to have played the role of facilitator of the cartel.¹²
 
Conclusion
 
The decision in this case is a reflection of the MyCC’s tough stance with regard to cartels. According to statements made by the Chief Executive Officer of the MyCC, “cartel is the supreme evil of competition law”¹³ and the MyCC is constantly trying to combat such issues in Malaysia.
 
The MyCC’s Decision can be accessed here.
 
Article by Tan Shi Wen (Partner) of the Competition Law Practice of Skrine.
 

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