ROKIAH ALAVI International Islamic University Malaysia and Consultant for Consumer International Malaysia Crew International Conference,18-19 November,2014, Bangkok, Thailand Reflections on the CREW Methodology and Uptake in Other Countries/Sectors: MALAYSIA

Competition Policy in Malaysia Competition Act enacted in 2010 and enforced in 2012 – still at infancy stage. Provisions – anti-competitive behaviour of vertical and horizontal agreements and abuse of dominance. The key objective is to promote economic development by regulating market structure and behaviour of market players – process of competition. Consumers welfare – indirect outcome – complemented by Consumer’s Protection Act Merger Controls, Energy Sector and Telecommunication Sector not included in the Act 1

Issues in the Implementation of CA Introduction of CA – will have significant impact on the way businesses are conducted. Businesses are still unaware of the law and what constitutes anti-competitive behaviour – especially the SMEs - need to educate the public – both businesses and consumers. Media plays an important role in reporting anti-competitive cases – should take advocacy role as well Enforcement – challenging to ensure effectiveness of the law. Transparency on the cases that have been taken action by MyCC - why the decision was taken and how the Commission is enforcing the law – need to made available to the public. Monitoring and evaluation – output-based vs impact-based. 2

Many anti-competitive activities in the economy are the result of the government’s policies itself:  price-control (the case of hyper-market discounted price for price-controlled items)  Subsidy (case of subsidy for paddy farmers)  Creation of champions through mergers and take-overs (plantation, mobile phone service and financial sector)  Licensing (case of taxi permits, Mega steel, Astro, Telekom, Cahaya Mata cement company) Hence, the enforcement of competition policy becomes difficult and politically sensitive. Issues in the Implementation of CA 3

Lack of data and resources:  the authority needs to have a clear understanding on how the market works, what is the fundamental forces underlying firm’s conduct and what are the effects of competition law on the economy.  this requires substantial data and rigorous economic analysis  Challenge: lack of data, resources, expertise Issues in the Implementation of CA 4

Safety Transparency (information) Implementation and actions Monitoring & evaluation (impact-based vs output-based) There is hardly any studies/economic analysis on the impact of anti- competitive practices in Malaysia – mostly legal analysis and market review. Hence, replicating CREW project is highly relevant and necessary for Malaysia. Comments on Crew Project – 5

Sectors that have possibility for replicating CREW Project in Malaysia 1. Automotive Sector  There are many anti-competitive activities in this sector:  Approved Permit – APs are given to specific firms (to create Bumiputera entrepreneurs) to import CBUs. Distributors then obtain supply for these firms, including manufacturers/assemblers like Honda, Toyota.  Excise duty exemption – based on local content of the car –the higher local content the higher is duty exemption. This means Proton and Perodua get higher duty exemption.  National Auto Policy (NAP) - The excise duty exemption will only be given to locally assembled or completely-knocked-down (CKD) hybrid and electric cars. Out of the seven EEV or hybrid players in Malaysia, only one player benefits from the new policy and that is DRB-Hicom Bhd. Before 2014 – all (EEVs) hybrids and EVs were exempted from import duties and get a 50% exemption from excise duties. Excise duty ranges from 80% to 105%, import duties are at around 30%.  Such discriminatory practices – competitive harm effect – consumers have to pay more 6

Sectors that have possibility for replicating CREW Project 2. Pharmaceutical Industry -  Predatory practices by large chain pharmacies – drug suppliers give huge discount for bulk purchase  Drug companies also give big discount for clinics  Community pharmacies are worse off – have difficulty to compete.  Hence – there is competitive harm in the pharmaceutical industry – especially for small independent pharmacies  Chain pharmacy do not open their branches in remote areas or where the size of the market is small – affect the consumers 7

Sectors that have possibility for replicating CREW Project 3. Banking Sector  Adjustment of the base lending rates between financial institutions and the margin of financing - set almost simultaneously.  Possibility of parallel behaviour  Fees on transactions determined by the Association of Banks – possibility of the fees being fixed though collusion among the banks.  Similar behaviour can be found in the insurance sector as well.  Consumers are worse off – have to incur high financial transaction costs 8

Sectors that have possibility for replicating CREW Project 4. Cement Industry  Good case of implicit collusion or concerted practice.  There are currently five players: Lafarge (controlled 40 per cent of the domestic cement market), YTL Cement (29 per cent), CIMA (16 per cent), Tasek (9 per cent) and Holcim (the balance).  In 2008 and when Lafarge Malayan Cement Bhd announced that it would raise the price of cement in 2008, other players follow suit.  The mutual interdependence between firms in the oligopolistic market creates market power that could have anti-competitive effect.  Challenge: difficult to prove that there is concerted practice. 9

Operational Issues 10 CREW project – comprehensive and has several stages of implementation. Would require legal and economics expertise. Time consuming – time-frame of the research. Impact-based approach would be politically sensitive for anti-competitive practices that arise from government policies.