AN OVERVIEW OF THE COMPETITION ACT 2010

General:

The Competition Act 2010 (Act 712) ("the Act") was enacted in order to protect the interests of consumers by the promotion of competition and the prohibition of anti-competitive practices.

The Act is broken up into several parts as follows:

Part I -Preliminary (Section 1-Section 3)

This Part sets out the commencement date of the Act, and the definition and interpretation of terms used therein.

It also sets out the application of the Act, which is to any commercial activity within Malaysia and to any commercial activity outside Malaysia which has an effect on competition on any market in Malaysia.

For the purposes of the Act, the term "commercial activity" does not include:

  • any activity, directly or indirectly in the exercise of governmental authority;
  • any activity conducted based on the principle of solidarity; and
  • any activity for private consumption.

Part II - Anti Competitive Practices (Section 4-Section 13)

Prohibited anti-competitive practices as set out in this Part are:

Horizontal and vertical agreements Abuse of dominant position
Chapter, Sections

 Chapter 1, Sections 4-9 Chapter 2, Section 10
Prohibited practices A horizontal or vertical agreement which has the object or effect of significantly preventing, restricting or distorting competition.

In relation to a horizontal agreement, this includes agreement with the object of:

  1. fixing, directly or indirectly, a purchase or selling price or other trading conditions;
  2. sharing market or sources of supply;
  3. limiting or controlling production, market outlets or market access, technical or technological development, or investment; and
  4. performing an act of bid rigging.
 Any independent or collective conduct by an enterprise which amounts to an abuse of a dominant position in any market for goods or services.

Abuse of a dominant position may include:

  1. directly or indirectly imposing an unfair purchase or selling price or other unfair trading condition;
  2. limiting or controlling production, market outlet or market access, technical or technological development, or investment to the prejudice of consumers;
  3. refusing to supply to a particular enterprise or group or category of enterprise;
  4. applying different conditions to equivalent transactions with different trading parties, as would discourage new market entry/ expansion/ investment by an existing competitor, force an existing competitor from the market or serious injure it, or harm competition in any market (including any downstream or upstream market) in which the dominant enterprise is participating;
  5. making contracts subject to supplementary conditions which have no connection to the subject matter of the comtract;
  6. predatory behaviour towards competitors; or
  7. buying up a scarce supply of intermediate goods or resources required by a competitor, where there is no reasonable commercial justification for the dominant enterprise to do so.

However, a dominant enterprise is not prohibited from acting with reasonable commercial justification or responding with reasonable commercial justification to the market entry or conduct of a competitor.

Relief of liability Due to:
  1. significant identifiable technological, efficiency or social benefits arising directly from the agreement;
  2. benefits which could not reasonably be provided to the parties of the agreement without it having such anti competitive effect;
  3. the detrimental effect of the agreement is proportionate to the benefits provided; and
  4. the agreement does not allow the complete elimination of competition in respect of a substantial part of the goods and services.
Exemptions Enterprises may apply to the Competition Commission ("Commission") for individual or block exemptions, in respect of a particular agreement or a particular category of agreements, as may be applicable, to which the grounds for relief of liability as set out above apply.
Exclusions (Second Schedule of the Act) The prohibited anti-competitive practices set out in Part II of the Act shall not apply to:
  1. an agreement or conduct, to the extent that is undertaken in compliance with a legislative requirement;
  2. collective bargaining activities or collective agreements in respect of employment terms and conditions between employers and employee's representatives;
  3. an enterprise entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly in so far as such prohibitions would obstruct the tasks assigned to such enterprise.

*Note: Enterprise refers to a legal entity carrying out commercial activity. Where a subsidiary company does not enjoy real autonomy in determining its actions on the market, then it and its holding company are considered as a single enterprise.

Part II of the Act also provides that the Commission may conduct a market review either on its own initiative or upon the request of the Minister for Domestic Trade and Consumer Affairs, the findings of which review and recommendations thereof are to be published and made available to the public.

Part III - Investigation and Enforcement (Section 14-Section 34)

The Commission may conduct an investigation where it has reason to suspect that that any enterprise has infringed or is infringing any prohibition under the Act. In the course of such investigation, the Commission has the power:

  • by notice in writing, to require any person whom it believes to be acquainted with the facts and circumstances of the matter to provide or produce any information or document which is relevant to the investigation, and to make a statement in relation to the same;
  • to enter premises to search for and seize documents, with and without warrant;
  • to require access to records and computerised data; and
  • to retain documents.

Part IV - Decision by the Commission (Section 35-Section 43)

Pending completion of the investigation, the Commission may give such interim directions as it considers appropriate, if it deems that there is or there is likely to be an infringement and it is situation in which it is necessary to act urgently to prevent irreparable damage and to protect the public interest.

Once the investigation has been completed, if the Commission decides that there has been an infringement of one or more of the prohibitions in Part II, the Commission will forward a written notice to the relevant enterprise, informing them of such decision, of the proposed penalties to be applied, and of their option to make written or oral submissions to the Commission.

Notwithstanding the enterprise may exercise its option to make oral submissions to the Commission, the Commission may also conduct a hearing in order to determine whether there has been an infringement of a prohibition under Part II of the Act.

If the Commission finds that there has been no infringement, it shall so inform the affected party(ies) of its decision and the reasons therefor. If the Commission finds that there has been an infringement, it shall require the immediate ceasing of the agreement, and may specify the appropriate steps to be taken by the infringing enterprise to cease such practice or impose a financial penalty or give any other decision deemed appropriate. The Commission may bring proceedings before the High Court in the event of non-compliance with its directions.

This Part also sets out provisions for a leniency regime, where the penalty imposed on an enterprise which has admitted its involvement of a prohibition in respect of a horizontal agreement and has provided information or cooperation to the Commission which has or is likely to significantly assist the Commission in its investigation on other enterprise, may be reduced by up to 100%.

Part V - Competition Appeal Tribunal (Section 44-Section 60)

This Part provides for the establishment of a Competition Appeal Tribunal, which shall have exclusive, final and binding jurisdiction to review any interim decision and finding of infringement or non-infringement of the Commission. The Competition Appeal Tribunal may confirm or set aside the relevant decision or any part of the same, and may:

  • remit the same to the Commission;
  • impose, revoke, or vary the amount of financial penalty;
  • give directions or take such steps as the Commission could have given or taken; or
  • make any other decision which the Commission could have made.

Part VI - General (Section 61-Section)

This Part sets out the general penalty for an offence[1] committed under the Act for which no penalty has been expressly provided, which is:

for a body corporate, a fine not exceeding RM5,000,000.00, and for a second or subsequent offence, a fine not exceeding RM10,000,000.00; or

for person who is not a body corporate, a fine not exceeding RM1,000,000.00 or imprisonment for a term not exceeding 5 years or both, and for a second and subsequent offence, a fine not exceeding RM2,000,000.00 or imprisonment for a term not exceeding 5 years or both.

It also provides for an officer of a body corporate which has committed an offence under the Act to be charged jointly and severally in the same proceedings as the body corporate, and if the body corporate is found to have committed the offence, the office would also be deemed to have done the same unless it was done without his consent, knowledge or connivance and he had taken all reasonable precautions and exercised due diligence to prevent the commission of the same.

Also, if a person is liable for any punishment or penalty for his act, omission, neglect or default, he will be liable for the same punishment or penalty for the act, omission, neglect or default of his employee or agent, acting in, and committed on his behalf.

Further, any person who suffers damage or loss as a result of an infringement of a prohibition shall have a right of private action in civil court against the enterprise committing the infringement.

This Part also sets out the Minister's power to prescribe compoundable offences and to make regulations, as well as the Commission's power to issue guidelines.

[1]The Act, however, does not make clear as to what constitutes an "offence", and whether the general penalty clause would be applicable for an infringement of a prohibition.

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