Introduction to Competition Law in Malaysia

28 November 2024

1. The Fangs of Competition Law and the Spirit

The Competition Act, in force since 1 January 2012, provides the statutory fangs for competition law in Malaysia. The presupposition of competition law is that competition encourages efficiency, innovation and entrepreneurship, leading to a better deal for consumers. As a corollary, competition law in Malaysia aims to promote economic development by encouraging competition.
 
In an appeal against the decision of the Malaysia Competition Commission (“MyCC”), the Competition Appeal Tribunal (“CAT”) stated that the spirit of the Competition Act is to ensure healthy market competition.¹ Therefore, per the CAT, it should be less preoccupied with legal submissions and more focused on the economic and commercial arguments, in accordance with the spirit of the Competition Act.²

2. The Bodies for Enforcement and Review

The MyCC, has the power to, among others:

1. conduct a market review to determine whether any feature(s) of the market prevents, restricts or distorts market competition (section 11);
2. conduct any investigation where there are reason to suspect, or act upon complaints of, infringements against and offences under the Competition Act (sections 14 and 15);
3. require provision of information by anyone the MyCC believes to be acquainted with the material information (section 18); and
4. undertake interim measures, publish a proposed decision and conduct hearings on the infringements (sections 35, 36 and 38).

1. interim measures (section 35);
2. findings of non-infringement (section 39); and
3. findings of infringement (section 40).

3. The Limbs of Competition Law

There are currently two limbs of anti-competitive conduct in Malaysia, namely:

1. prohibition against anti-competitive agreements (section 4); and
2. prohibition against abuse of a dominant position (section 10).

The First Limb: Anti-competitive Agreements

Section 4(1) prohibits agreements –horizontal or vertical– that has the object or effect of significantly preventing, restricting or distorting market competition. Price-fixing, market-sharing, limiting production and bid-rigging are prohibited pursuant to sections 4(2)(a), 4(2)(b), 4(2)(c) and (4)(2)(d) respectively.
 
The Guidelines on Chapter 1 Prohibition, Anti-competitive Agreements set out a non-exhaustive list of factors and contexts that the MyCC may consider in deciding whether an agreement is anti-competitive.
 
The MyCC investigations on anti-competitive agreements has led to imposition of penalties such as in the following instances:

1. Price-Fixing (2020) – Penalty of around RM173.66 million on the General Insurance Association of Malaysia (PIAM) and its 22 member insurers for price-fixing through parts trade discounts and labour charges. However, the penalty was set aside by CAT;
2. Bid-Rigging (2022) – Penalty of around RM1.55 million on eight bidder enterprises for IT projects for the National Academy of Arts, Culture, and Heritage (ASWARA). However, some portions of the penalty were reduced by CAT; and
3. Market-Sharing (2014) – Penalty of RM10 million each on Malaysian Airlines and AirAsia for agreement for market-sharing of air transport services. However, the penalty was set aside by the Court of Appeal.

The Second Limb: Abuse of a Dominant Position

Section 10 prohibits enterprises from abusing their dominance in a relevant market through practices such as price discrimination, exclusive dealings, predatory pricing and conducts provided by section 10(2). However, section 10(3) provides that said conducts may be allowed with a reasonable commercial justification.
 
A dominant position is where one or more enterprises have such significant market power to adjust prices, outputs or trading terms without effective constraint from competitors. The Guidelines on Chapter 2 Prohibition, Abuse of Dominant Position set out the relevant factors which the MyCC may consider in determining dominance, the abuse of it, and the acceptable justifications.
 
Instances where the MyCC has acted against an abuse of dominance include:

1. Harming of Competition (2016) – Penalty of around RM2.27 million with a daily penalty of RM7,500.00 on My EG. Services Berhad (MyEG) for harming competition per section 10(d)(iii). Penalty increased to around RM9.34 million due to the prolonged infringement period.
2. Restrictive Clauses (2019) – Penalty of around RM86.77 million with a daily penalty of RM15,000.00 on Grab Inc., GrabCar Sdn. Bhd. and MyTeksi Sdn. Bhd. (Grab) for the clauses preventing the advertising of Grab’s competitors. However, the High Court quashed the penalty.
3. Exclusive Dealings (2021) – Cease and desist order and a penalty of around RM10.3 million on Dagang Net Technologies Sdn Bhd. (Dagang Net) for its exclusive dealings as the sole service provider of trade facilitation services in the relevant market.

The Impending Third Limb: Merger Control

Although the details and timeframe of the implementation of the merger control framework is still unclear, what is known from the MyCC’s Consultation Paper on the Proposed Amendments to the Competition Act 2010 (Act 712) and a supplementary document, Salient Points of the Proposed Amendments to the Competition Act 2010 (Act 712), is that, upon receipt of a merger notification, the MyCC can:

1. approve the merger without conditions;
2. approve the merger with conditions; or
3. reject the merger.