On 17 December 2021, the Malaysia Competition Commission (the “MyCC”) imposed financial penalties ranging from RM250,172.25 to RM1,130,876.87 against three major Langkawi roll-on, roll-off (“ro-ro”) vessel operators, namely Langkawi Ro-Ro Ferry Services Sdn. Bhd. (“LRFS”), Langkawi Auto Express Sdn. Bhd (“LAE”) and Dibuk Cargo Services Sdn. Bhd. (“DCS”), and two related enterprises, namely Langkawi Ferry Services Sdn. Bhd. (“LFS”) and Dibuk Sdn. Bhd. “DSB”) (these five entities are hereafter collectively referred to as “the Parties”).

The Parties were found to have violated Section 4 of the Competition Act 2010 (“CA 2010”) by participating in agreements through two memoranda of understanding that had the object of significantly preventing, restricting, or distorting competition in relation to the market for the provision of vehicle transportation via ro-ro vessels in Langkawi (the “Infringing Agreements”) from 31 December 2017 to 14 September 2020 (the “Infringement Period”).
 
During the investigation process, the MyCC was able to retrieve copies of the Infringing Agreements which clearly demonstrated the Parties’ intention to fix and implement a standardised ticket fare for their ro-ro services between Langkawi and Kuala Perlis.
 
Legal and Economic Assessment by the MyCC
 
“Enterprise” and the Concept of Single Economic Unit
 
Section 4(1) of CA 2010 prohibits agreements between enterprises that have the object of significantly preventing, restricting, or distorting competition within Malaysia.
 
The MyCC held that each of the Parties fell within the definition of “enterprise” under CA 2010 as each of the Parties is carrying on commercial activities relating to, among other things, the provision of vehicle transportation via ro-ro vessels in Langkawi.
 
The MyCC further clarified that the concept of “single economic unit” (“SEU”) may encapsulate relationships other than a parent-subsidiary relationship that was prescribed in Section 2 of CA 2010. The MyCC expressed the view that the principle of a SEU under the said Section 2 is similar to the principle of a “single economic unit” under the European Union Competition Law.
 
In respect of DSB and DCS, the MyCC was satisfied that there were clear indications of economic, organisational, personal and legal linkages between the two entities as two individuals, namely Marzhuki and Ezreen, were directors and shareholders and had signing and decision-making powers as well as managerial and administrative roles in DSB and DCS. The MyCC was also satisfied from the evidence that DSB had the ability to, and did exercise decisive influence over DCS with regard to the latter’s conduct in the market. Hence, the MyCC found that on the balance of probabilities, DSB and DCS are a SEU for the purposes of the CA 2010, notwithstanding that DSB did not own any shares in DCS. In arriving at this decision, the MyCC relied on Case T-9/99 HFB Holding v Commission of the European Communities.
 
The MyCC referred to Case C-293/13 Fresh Del Monte Produce v European Commission as authority for the proposition that where there is a joint venture, both the parents of a joint venture may be found to form a SEU with the joint venture entity for the purposes of imputing liability. Based on evidence, LFS and DSB held 49% and 40% respectively of the issued shares of LAE. The MyCC was also satisfied on evidence that LFS and DSB exercised decisive influence over LAE’s management and daily operational affairs. Hence, the MyCC considered DSB, LFS and LAE as a SEU for the purposes of CA 2010 and imputed liability to LFS and DSB for the anti-competitive conduct of LAE.
 
Single Continuous Infringement
 
The MyCC confirmed that continuous conduct or a series of individual acts may constitute a single continuous infringement for the purpose of the Section 4 prohibition. Relying on the principles set out in Case T-147/09 Trelleborg Industrie SAS v European Commission, the MyCC found that the Parties were involved in a single continuous infringement for the duration of the Infringement Period, that is from the date the first Memorandum of Understanding was signed until the MyCC issued its Proposed Decision to the Parties on 14 September 2020.
 
Implementation of the Infringing Agreements
 
Although the Parties implemented the Infringing Agreements to a varying degree, the MyCC nevertheless opined that there was concurrence of wills between the Parties to enter into price-fixing agreements when they collectively signed the Infringing Agreements.
 
Section 3(4) Exceptions
 
The Parties sought to rely on two exceptions set out in CA 2010, namely Sections 3(4)(a) and 3(4)(b) to avoid liability for infringement. According to Section 3(4)(a), any activity in the exercise of governmental authority falls outside the scope of CA 2010, whilst Section 3(4)(b) excludes any activity conducted based on the principle of solidarity from the purview of CA 2010.
 
For Section 3(4)(a) to apply, the MyCC was of the view that the activity in question must be carried out directly or indirectly by a machinery of the Government of Malaysia having the power to carry out such activity (“Government Entities”). While there were meetings between LRFS and the relevant Government Entities (such as the Maritime Division of the Ministry of Transport) where the possibility of standardising ferry fares was raised, there was no conclusive decision issued by the Government Entities that authorised the Parties to enter into a price-fixing agreement. On that basis, the Section 3(4)(a) argument was rejected by the MyCC.
 
As regards Section 3(4)(b), the MyCC stated that an enterprise is said to be operating on the principle of solidarity when benefits are made available to individuals not in reference to their economic contributions but in accordance with their needs, an example of such being the pension scheme for public servants administered by the Public Service Department pursuant to Pensions Act 1980. Despite acknowledging that the services provided by the Parties are essential services, the MyCC found Section 3(4)(b) to be of little assistance to the Parties in the given situation.
 
The Decision
 
The MyCC concluded that the actions of the Parties were contrary to Section 4(1) read with Section 4(2) and Section 4(3) of the CA 2010.
 
The Parties were directed by the MyCC to undertake to:

The Financial Penalties
 
The financial penalties imposed on the Parties were as follows:

In imposing the total financial penalty of RM2,191,580.41 on the Parties, the MyCC took into consideration the impact of the economic situation arising due to the outbreak of the global Covid-19 pandemic and granted a 50% reduction of the amount of penalty that it would otherwise have imposed.
 
The MyCC also granted the Parties a moratorium of six months for the payment of the financial penalty and allowed the Parties to pay the respective sums by equal monthly instalments for up to six months commencing at the expiry of the moratorium period.
 
Conclusion
 
This decision represents a clear continuation of the efforts undertaken by the MyCC to tackle cartel cases. While the Langkawi ro-ro cartel is a relatively straightforward case, it is noteworthy as the MyCC applied the concept of “single economic unit” under the European Union Competition Law to impute liability on parent companies of a joint venture entity, and on an entity that exercised decisive influence over another entity notwithstanding that neither of these entities held shares in the other.
 
The MyCC’s decision can be accessed here.
 
Article by Tan Shi Wen (Partner) of the Competition Law Practice of Skrine.