In Malaysia, the Competition Act 2010 (“Act”) sets out the competition law governing most companies and businesses. In essence, the Act prohibits:

• anti-competitive agreement which has the object (ie: aim) or effect of significantly restricting or distorting competition in any market for goods or services in Malaysia;

 

• any conduct by enterprises which amount to an abuse of a dominant position in any market for goods or services in Malaysia.

 

• Horizontal agreement

A horizontal agreement means an agreement between enterprises which operates at the same level in the production/distribution chain (ie: agreements between manufacturers, wholesalers or retailers in the same market). A horizontal agreement is deemed to have “object restrictions” which significantly distort competition if it engages in:

• price-fixing (ie: directly or indirectly fix a minimum sales price);
• sharing market or sources of supply;
• limiting or controlling:-

1. production (ie: competitors agreeing to set a quota on production);
2. market access (ie: competitors agreeing in the location of retail outlets or restricting access to the market by new entrants);

• technical development (ie: competitors agreeing not to introduce new products)

1. investment (ie: competitors agreeing not to add production capacity)

• performing “bid rigging” (ie: a commercial contract is promised to one party although it appears that several other parties also present a bid).

• Vertical agreement

A vertical agreement means an agreement between enterprises which operates at a different level in the supply chain (ie: agreements between supplier and distributor). Example of anti-competitive behaviours include:

• Price-fixing or resale price maintenance (ie: where the supplier imposes a fixed or minimum price that a distributor/retailer must re-sell)
• The supplier gives an exclusive geographical territory to a buyer which limits intra-brand competition (exclusive distribution agreement);
• The seller agrees to only sell to a distributor only for resale to a particular group of customers (exclusive customer allocation agreement);
• Payments made by suppliers to distributors to get access to their distribution network (up-front access payments).

The exclusive distribution agreement and exclusive customer allocation agreement may be regarded as anti-competitive if there is no inter-brand competition (competition from other brands) in the relevant market. Generally, anti-competitive agreements will not be considered ‘significant’ (hence will not be caught by the Act’) if:

(i)    The combined market share of the relevant market does not exceed 20% (for competitors);

(ii)    The party has less than 25% each in any relevant market (for non-competitors).

 

• Abuse of dominant position

The Act also forbids any conduct by enterprises which amount to an abuse of a dominant position. An enterprise is said to be dominant if it has market power above 60% in a relevant market. Examples of abuse of dominant position include:

1. directly or indirectly imposing an unfair purchase or selling price;
2. limiting or controlling production, market access, technical development or investment;

• refusing to supply to a particular group of enterprises;

1. any predatory behaviours towards competitors.

 

Penalties for breaching competition law:

• A body corporate which commits an offence under the Competition Act will attract a fine of up to RM5 million, while a second or subsequent offence will result in the imposition of a fine not exceeding RM10 million.
• For first time individual offender, this can result in fine not exceeding RM1 million or imprisonment for a term not exceeding five years or both. A second or subsequent offence will result in the imposition of a fine not exceeding RM2 million or a term of imprisonment not exceeding five years or both.

Conclusion:

It is prudent to review your contracts and business practices in the relevant markets regularly. You may want to renegotiate and remove anti-competitive provisions at the earliest opportunity to avoid heavy fines and penalties. Seek legal advice if you are in doubt of how your commercial activities may be affected by the Competition Act 2010.