Competition Act pushes for a level playing field for all parties, no matter big or small.
On Sept 6, 2013, the Malaysia Competition Commission (MyCC) imposed an RM20 million fine on Malaysia Airline (MAS) and AirAsia. The massive fine raised eyebrows and brought much-needed publicity to the competition laws in the country, and the Competition Act 2010 which MyCC was created to enforce.
In the MAS-AirAsia case, both airlines were slapped with a fine of RM10 million each for committing anti-competition practices via share-swap agreement in 2011, which saw both airlines sharing markets. Both MAS and AirAsia furiously challenged this decision and are waiting for their appeal to the Competition Appeals Tribunal. Nevertheless, the unprecedented fine, the first for MyCC, provided the competition laws of Malaysia the publicity it sorely needed.
The Competition Act 2010, which came into force in January 2012, was introduced to promote economic development by protecting the competition process. The ultimate beneficiary of the Act are the consumers – both individuals and businesses. The Act expressly prohibits anti-competition practices and collusions such as price fixing, market sharing, bid rigging, limiting or controlling production as well as abusing one’s dominant position in the market.
In an interview with Business Circle, MyCC’s Director of Enforcement Iskandar Ismail (pic) admitted that despite the obvious benefits of having competition laws, it was definitely a hard pill to swallow for many businesses, especially small and medium enterprises (SMEs).
“They argue that the Act should not apply to SMEs at all because they are too small to impact competition in the marketplace. However, let’s not forget that SMEs form more than 90% of Malaysian businesses and collectively, they can do considerable damage if they wanted to.”
For example, he pointed to the 2013 case where 26 ice manufacturers in Klang Valley formed a cartel to increase the price of edible tube ice by 50 sen and block ice by RM2.50 per block, effective January 2014. The sharp rise in the price of ice has far-reaching consequences, affecting the price of iced drinks to the price of fish in the market.
“We discovered this infringement when we came across an advertisement announcing the price increase on Dec 24, 2013, and investigations revealed that they had met up and decided to raise the price of ice collectively,” said Iskandar.
“The commission found that 25 out of the 26 companies investigated had infringed Section 4(2)(a) of the Act by entering into an agreement to fix, directly or indirectly, the selling price of edible tube ice and the price of block ice within Malaysia. They were fined in total RM252,250.”
It was the same story with 14 members of the Sibu Confectionery and Bakery Association (SCBA) who were fined a total RM247,730 for their involvement in fixing the price increase of between 10% and 15% for confectionery and bakery products in Sibu, Sarawak, in December 2013.
Other cases involving SMEs include price-fixing arrangements by the barber associations, coffee shop associations and the association for matrimonial services.
Iskandar added that SMEs failed to see that the Act can be used by them to compete against larger corporations. The Act expressly prevents these corporations from abusing their dominant position.
This includes imposing unfair conditions that take away the freedom of choice or make it difficult for others to operate by exerting their leading position or influence in the market. Also, forcing others to re-sell a product at a certain price or in the case of bundling, agreeing to supply items a company needs only if it agrees to purchase another product that it doesn’t need, is illegal.
Dominant players, said Iskandar, include monopolies and concessionaires. However, for monopolies created by Government through concession, the Act only comes into play when the concessionaires use their dominant position in a secondary business or market.
This is what happened in the MyEG case. MyEG is the concessionaire for the provision and management of online Foreign Workers Permit Renewal applications. But it abused its dominant position when it entered the secondary market by selling the mandatory insurance policies required for its online permit renewal process. Selling insurance is not part of the concession granted by the Government.
“Being an agent for RHB insurance, MyEG imposed a condition which required companies that did not buy the mandatory insurance from RHB to scan and download the policies for each worker. If you had 300 workers, this requirement becomes cumbersome,” he explained.
Iskandar said in this case, MyEG had harmed the level of competition in the selling of the mandatory insurance policies by imposing different conditions to equivalent transactions. In its Oct 6, 2015, proposed decision, the commission imposed a fine of RM307,200 and an additional penalty of RM15,000 for each day that MyEG fails to comply.
MyCC is a very powerful entity. It is the only commission in the country with the powers to investigate, prosecute, adjudicate and impose financial penalties. It is divided into two, namely the commission officers and its employees headed by the Chief Executive Officer Dato’ Abu Samah Shabudin, and members of the commission, headed by the Chairman of the Commission, former Chief Judge of Malaya Tan Sri Siti Norma Yaakob.
Commission officers conduct investigations into any offence or infringement of competition laws in Malaysia. They can either launch an investigation on their own if they have reasons to believe that an infringement has been committed, be directed by the minister to investigate any suspected infringements or offences under the Act, or act upon a complaint. “We have an online form on the website for anyone who want to lodge a complaint,” says Iskandar.
These officers have all or any of the powers of a police officer in relation to police investigations in cases where items can be seized, as provided for under the Criminal Procedure Code.
“Our investigations are very much complaint-based; once received, we would screen to see if it is an anti-competition matter. It is then assessed by the complaint assessment review team, which will then decide if an investigation is necessary.
“Findings of the investigation would then be presented before the commission, which will decide if there was indeed an infringement. The commission would make a proposed decision based on the facts of the investigation,” added Iskandar.
The affected company will have 30 days (from the date of receipt of MyCC’s proposed decision) to respond to the commission, either in writing or orally. The final decision will be made after the commission has considered the representations from the affected companies as well as all available information and evidence.
Decisions can be a directive to remove the infringement or a fine or both. The MyCC is allowed under the law to impose a financial penalty of up to 10% of the worldwide turnover of each enterprise.
The avenue for appeal is available via the Competition Appeal Tribunal presided by its president Datuk Hasnah Mohammed Hashim. The first appeal before the tribunal was the case of MAS and AirAsia, said Iskandar, who added that the matter was still pending.