COMPETITION ACT 2010COMPETITION ACT 2010

MINISTRY OF DOMESTIC MINISTRY OF DOMESTIC TRADE CO-OPERATIVES & TRADE CO-OPERATIVES &

CONSUMERISMCONSUMERISM

Seminar on Competition Law 2010

30 September 2010

PICC, Putrajaya

SHILA DORAI RAJ

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• BACKGROUND

• THE COMPETITION ACT 2010

• INSTITUTIONAL ARRANGEMENTS

• THE WAY FORWARD

OVERVIEW OF OVERVIEW OF PRESENTATIONPRESENTATION

PART IPART I

HISTORICAL HISTORICAL BACKGROUNDBACKGROUND

MANDATEMANDATE

Mandate of Mandate of competitiocompetition policy & n policy &

lawlaw- Eighth Eighth Malaysia Malaysia

Plan (2001 Plan (2001 -2005)-2005)

- Ninth - Ninth Malaysia Malaysia

Plan (2006 Plan (2006 -2010)-2010)

Prevent firms from protecting

and expanding other than efficiency means

Prevent anti competitive practices –

collusion/cartel activities and

abuse of market power

• Fair Trade Practices Policy

• Competition Act

CLEAR MESSAGESCLEAR MESSAGES

Dato’ Seri Najib Tun Razak

•RMK10

•New Economic Model

•Strategic Reform Initiatives (SRIs)

CLEAR MESSAGESCLEAR MESSAGES 10th Malaysia Plan10th Malaysia Plan

““ Healthy competition is needed to make the economy more efficient and dynamic. Healthy competition is needed to make the economy more efficient and dynamic. For this, the Competition Law will be introduced to provide a regulatory framework For this, the Competition Law will be introduced to provide a regulatory framework against market manipulation and cartel practices that may affect market efficiency," against market manipulation and cartel practices that may affect market efficiency,"

New Economic ModelNew Economic Model

““the new approachthe new approach is private sector led growth – to promote competition across and is private sector led growth – to promote competition across and within sectors to revive private investment and market dynamism.”within sectors to revive private investment and market dynamism.”

““Government Government will not seek to use its regulatory powers to protect GLCs from will not seek to use its regulatory powers to protect GLCs from competitioncompetition by the private sector. Instead it will encourage competition from all by the private sector. Instead it will encourage competition from all quarters, secure in its belief that competition will only encourage firms in both the quarters, secure in its belief that competition will only encourage firms in both the public and private sectors to improve their efficiency and provide new value added public and private sectors to improve their efficiency and provide new value added services”services”

NEM’s 8 Strategies – one of which – “ creating a competitive domestic economy ”NEM’s 8 Strategies – one of which – “ creating a competitive domestic economy ”

What does this all mean? What does this all mean?

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PART IIPART II

THE PROHIBITIONSTHE PROHIBITIONS

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• TO PROMOTE ECONOMIC GROWTH

• PROMOTE AND PROTECT THE PROCESS OF COMPETITION

• PROTECT THE INTEREST OF CONSUMERS.

OOBJECTIVEBJECTIVE

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• APPLIES TO ALL COMMERCIAL ACTIVITY - Govt companies

- Public Authorities

• EXTRA TERRITORIAL APPLICATION

SSCOPE COPE

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PROHIBITIONS

ANTI-COMPETITIVE PRACTICES

ABUSE OF DOMINANT POSITION

ANTI – COMPETITIVE AGREEMENTS

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ANTI – COMPETIVE AGREEMENTS

OBJECT EFFECT

FIRST PROHIBITION

•Horizontal or vertical agreements•Between Enterprises

•Significantly preventing, restricting or distorting competition

Agreement between rival parties Agreement between rival parties in the in the same market selling same same market selling same productsproducts (anti-competitive (anti-competitive conduct between competitors)conduct between competitors)

e.g. fixing prices or other e.g. fixing prices or other trading trading conditions, conditions, allocate markets, allocate markets, market allocation, bid rigging.market allocation, bid rigging.

Horizontal agreementsHorizontal agreements

Vertical agreementsVertical agreements

Agreement Agreement between two firms between two firms that are at different levelsthat are at different levels of of production-supply chain. production-supply chain. Example:- Example:-

Agreement between Agreement between Manufacturer and Wholesaler Manufacturer and Wholesaler and Retailer and Retailer

distributorship agreementsdistributorship agreements

What constitutes an What constitutes an agreement?agreement?

contracts, understanding, contracts, understanding, whether whether or not legally enforceableor not legally enforceable

““concerted practices” concerted practices” Decision of associationsDecision of associations

EXEMPTIONSEXEMPTIONS

IndividualIndividual

BlockBlock

CRITERIA FOR CRITERIA FOR EXEMPTION (FOR FIRST EXEMPTION (FOR FIRST

PROHIBITION)PROHIBITION)- - significant identifiable significant identifiable

technological,technological, efficiency or social efficiency or social benefitsbenefits

- - BenefitsBenefits could not have been could not have been provided provided without anti-without anti-competitive effects competitive effects

- detrimental effect - detrimental effect proportionate proportionate to to benefits provided benefits provided

- agreement - agreement does not eliminate does not eliminate

competition completely competition completely

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ABUSE OF DOMINANT POSITION

SECOND PROHIBITION

Factors indicating dominance: • large market share• barriers to entry • countervailing buyer power

Factors indicating dominance: • large market share• barriers to entry • countervailing buyer power

Not an offence to be dominant

Practices indicating ADPPractices indicating ADP

Includes:

Excessive purchase or selling price

Refusal to deal Predatory Pricing Limit or control market access Tying and bundling

PRACTICES INDICATING ADP

EXEMPTIONS FOR EXEMPTIONS FOR SECOND PROHIBITIONSECOND PROHIBITION

Reasonable commercial justificationReasonable commercial justification

Reasonable commercial response to Reasonable commercial response to conduct of competitorconduct of competitor

EXCLUSIONSEXCLUSIONS Sector under Communication and

Multimedia Act 1998 Sector under Energy Commission Act

2001

Agreement Fulfilling Legal Requirement Collective Bargaining Agreements Services of General Economic Interest

PART IIIPART III

INSTITUTIONAL INSTITUTIONAL ARRANGEMENTSARRANGEMENTS

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Competition CommissionCompetition Commission

Competition Appeal TribunalCompetition Appeal Tribunal

Special Committee On CompetitionSpecial Committee On Competition

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POWERS OF THE POWERS OF THE COMMISSIONCOMMISSION

Investigation into suspected prohibitionsInvestigation into suspected prohibitions Issue guidelines, directions, interim Issue guidelines, directions, interim measuresmeasures Grant exemptions – Block & IndividualGrant exemptions – Block & Individual Conduct hearingsConduct hearings Impose financial penalties Impose financial penalties Conduct market reviewConduct market review

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MEMBERSHIP OF THE COMMISSION

Appointed by the Prime Minister upon recommendation by the Minister

8 to 10 members, including the Chairman, from public and private

sectors.

Term not exceeding 3 years

Eligible for reappointment(maximum 2 consecutive terms)

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President andPresident and

7 to 20 Members7 to 20 Members

Term not exceeding 6 years.Term not exceeding 6 years.

MEMBERSHIP OF THE COMPETITION APPEAL TRIBUNAL

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MEMBERSHIP OF THE SPECIAL COMMITTEE ON COMPETITION

Will consist of representatives from sector Will consist of representatives from sector

regulatorsregulators

- Competition Commission (chair)- Competition Commission (chair)- Energy Commission- Energy Commission- Multimedia and Communication - Multimedia and Communication CommissionCommission- Securities Commission- Securities Commission- Bank NegaraBank Negara - Others Others

PART IVPART IV

THE WAY FORWARDTHE WAY FORWARD

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Six Pest Control Companies Six Pest Control Companies fined total fined total of of S$262,759.66S$262,759.66 by CCS for by CCS for bid rigging bid rigging and and collusive tenderingcollusive tendering arrangements. arrangements.

Rice Noodle companies Rice Noodle companies fined by fined by China’s competition law enforcer between China’s competition law enforcer between S$6,000 –S$20,000 S$6,000 –S$20,000 for for price cartelprice cartel. .

16 coach operators and their trade 16 coach operators and their trade associationassociation fined fined S$1.69mS$1.69m for for price price fixing fixing of Malaysia-Singapore coach tickets.of Malaysia-Singapore coach tickets.

Napp Pharm Holdings Napp Pharm Holdings fined fined £3.2m £3.2m for for predatory discounting predatory discounting of drugs to govt of drugs to govt hospitals.hospitals.

CASES

CASES IN MALAYSIA?

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Ministry of Domestic Trade, Co-operatives & ConsumerismMinistry of Domestic Trade, Co-operatives & ConsumerismPlease contact us for further details at:Please contact us for further details at:03-88826206 - Mdm. Shila Dorai Raj 03-88826206 - Mdm. Shila Dorai Raj

shila@kpdnkk.gov.my