Market behaviour prohibitions – Bid rigging 6 pest control companies implicated for bid rigging First CCS case, 2 October 2007 Colluded to submit tender for termite treatment project Submitted cover bids / pricing Total penalties imposed: SGD 262,759.66

Case - Bid rigging “Bid rigging activities resulted in increase of 36% of tender value” Study on bid rigging activities in the construction industry by Gregory Werden of the Antitrust Unit, Department of Justice, USA (2004)

Straits Times 2 August 2007

The Business Times, 6 August 2008

Relief and Exemptions for First Prohibition Need to satisfy 4 conditions : –Identifiable Benefits –Benefits could not have been provided without the ‘anti competitive agreement’ –Detrimental effect proportionate to the benefits provided and –Does not eliminate competition Hard core infringements such as price fixing and bid rigging unlikely to be exempted

Relief and Exemptions for First Prohibition Consider the following: (a)Control/limit of supply of plastic bags by hypermarkets every Saturdays (b) Agreements between banks to share information on credit rating and the refusal to offer services to loan defaulters/ dishonoured cheques (c) Agreement between members of a Gun Association to limit/refuse supply of inferior air guns made from China (d) Decision to fix prices to its retailers to enhance branding

Prohibitions regime (Second Prohibition) Market Behaviour Section 4 Prohibition Anti – competitive agreements Section 10 Prohibition Abuse of dominant position Section 10 Prohibition Abuse of dominant position

Abuse of dominant position S10(1) prohibits conduct which amounts to an abuse of the firm’s dominant position in any market -It’s ok to be in a dominant position, but illegal if/when that position is abused -Dominance arising out of efficiency should be encouraged Will only be concerned on abusive behaviour of such monopolistic powers Being dominant is NOT illegal Verizon Communications In., Petitioner vs Law Offices of Curtis V. Trinko, LLP (2004) 540 U.S. 398: “ The opportunity to charge monopoly prices at least for a short period is what attracts "business acumen" in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anti-competitive conduct. ”

Abuse of dominant position DOMINANCE Dominance = Market power Factors indicating dominance: –Large market share –Barriers to entry –Statutory Monopolies No prohibition of becoming Dominant SUBSTANTIAL MARKET POWER A firm cannot be dominant unless it has “ substantial market power ” (UK OFT) A firm has substantial market power when it can: – Raise prices consistently & profitably above competitive levels (power over price); and – Take action to exclude rivals from the market or deter them from entering the market (power to exclude)

Section 10(2)Examples (a): Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions on suppliers or customers Excessive pricing / raising rival’s cost (b): Limiting or restricting production, market outlets or access, technical or technological development or investment to the prejudice of consumers Market foreclosure / exclusion (c): Refusing to supply to a particular enterprise or group or category of enterprises Refusal to supply, refusal to deal (d): Applying dissimilar conditions to equivalent transactions with other trading parties Price discrimination, discounts, rebates, and price (or margin) squeeze (e): Making the conclusion of contracts subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject matter of the contracts Tying (f): Predatory behaviour towards competitorsPredatory pricing (g): Buying up a scarce supply of intermediate goods or resources required by a competitor Market foreclosure / exclusion Exclusionary vs Exploitative Type

AMD Japan Transmeta Intel Japan Mitsubishi Toshiba CASE Exclude rival CPU suppliers by giving rebates if domestic PC makers meet conditions that it buys 90% to 100% of its supply of CPUs from Intel Japan, or doesn ’ t use rivals ’ CPUs for its popular PC products from May 2002 Maintain or strengthen pre-existing market power in supply market for CPU for domestic PC markets Rivals ’ market share: 24% (2002)  11% (2003) Intel Japan ’ s market share: 76% (2002)  83% (2003) Manufacturer market for PCs in Japan Whollyownedsubsidiary Intel (USA) Market Foreclosure

Excessive/Predatory Pricing Napp Pharmaceuticals Holdings Ltd v Director General of Fair Trading (IR) (2002) CAT 1000/1/1/01, Major supplier of drugs to the government hospital and other parts of UK Predatory discounting of drugs (selling below cost) to government hospitals and charged excessive prices to other customers (less or no competitor) Prices of drugs raised by more than 100%

Tying/Market Foreclosure/Refusal to Supply Microsoft v Commission (2007) Microsoft was found to have abused its dominant position based on: -Tying of its media player with its OS (client pc market) - Refusal to supply interoperability information (work group server market) Microsoft were fined EURO 497,000,000

General Exclusions Commercial activity under –Energy Commission Act 2001 –Communications and Multimedia Act 1998 General exclusion –Compliance with LEGISLATIVE requirement –Employee Collective agreements –Services of “general economic interest”

Part III – Malaysian Competition Commission

16 Competition law eco system in Malaysia Competition Commission Working Committees can be formed under Section 14 Competition Commission Act Competition Appeal Tribunal Court Enterprise/ Consumer Agents, consultants, advisers Section 17(2)(d) Competition Commission Act Enterprises Decision Appeal Decision Private action Decision Commission may appoint to carry out its functions Enterprises Complaint Special Committee with regulators Malaysian authorities & sector regulators MACC?? International authorities Inter regulatory working committees Section 39 Competition Commission Act Appeal Inter- working

Guidelines and Competition Champion Commission has power to publish Guidelines to clarify and supplement the Competition Act –Procedure –Definition of Market –Leniency etc. Commission –To advise Government on all matters concerning competition –To conduct market review on competition issues in any market and make recommendations to the Government

Complaints and Investigation Any victim of anti-competitive behavior can complain to the Commission Minister can direct MyCC to conduct investigation Commission has very wide powers –Raids (with or without warrant) –Seizure of documents OFFENCE (distinct from INFRINGEMENT): –Obstruction –“tipping off” is an offence –Threats and reprisals are offences – includes cancellation of orders or refusal to trade

Very broad powers Commission officers have powers of police officers May RETAIN (not merely make copies) documents and records May seal premises and seize all things “other than the necessary clothing” Complaints and Investigation

Suspected infringement of Chapter 1 or 2 Complaints Proposed decision by the Commission Written representation or oral hearing Leniency regime 3 High Court Order – directing party to comply Power to accept undertaking 2 Investigation Interim Measures 1 Finding of an Infringement 4 Finding of non- infringement Competition Appeal Tribunal Decision- FINAL Market Review Competition Commission Competition Appeal Tribunal Investigation Processes Closure – inform complainant PROCESS

Penalties Maximum 10 % of WORLDWIDE TURNOVER ENTERPRISE (any entity) 21 PENALTIES SECTION 4 AND 10 OFFENDERS ENTERPRISEISE

OTHER TYPES OF PENALTIES FIRST OFFENCE RM 5 MILLION SUBSEQUENT OFFENCE RM10 MILLION FIRST OFFENCE RM 1 M OR 5 YRS IMPRISONMENT SUBSEQUENT OFFENCE RM 2 M OR 5 YEARS IMPRISONMENT PENALTIES FOR OTHER OFFENCES BODY CORPORATE NOT A BODY CORPORATE

Other Issues 1. Right of Private Action Stand Alone rather than mere follow on Advocacy needs of judges Friends of the court Experiences of other jurisdiction 2. Leniency provision under Section 41 Competition Act 2010  Mechanism for application  Application of leniency plus  Application of leniency where cartel has been discovered in other jurisdiction Application of leniency under civil action Other Issues

24 Thank You