COMPETITION ACT 2010 MINISTRY OF DOMESTIC TRADE CO-OPERATIVES & CONSUMERISM Seminar on Competition Law September 2010 PICC, Putrajaya SHILA DORAI RAJ

2 BACKGROUND THE COMPETITION ACT 2010 INSTITUTIONAL ARRANGEMENTS THE WAY FORWARD BACKGROUND THE COMPETITION ACT 2010 INSTITUTIONAL ARRANGEMENTS THE WAY FORWARD OVERVIEW OF PRESENTATION OVERVIEW OF PRESENTATION

PART I HISTORICAL BACKGROUND

MANDATE Mandate of competition policy & law - Eighth Malaysia Plan ( ) - Ninth Malaysia Plan ( ) 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 MESSAGES Dato’ Seri Najib Tun Razak RMK10 New Economic Model Strategic Reform Initiatives (SRIs)

CLEAR MESSAGES 10th Malaysia Plan 10th Malaysia Plan “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 against market manipulation and cartel practices that may affect market efficiency," New Economic Model New Economic Model “the new approach is private sector led growth – to promote competition across and within sectors to revive private investment and market dynamism.” “Government will not seek to use its regulatory powers to protect GLCs from competition 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 public and private sectors to improve their efficiency and provide new value added 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 II THE PROHIBITIONS

10 TO PROMOTE ECONOMIC GROWTH PROMOTE AND PROTECT THE PROCESS OF COMPETITION PROTECT THE INTEREST OF CONSUMERS. TO PROMOTE ECONOMIC GROWTH PROMOTE AND PROTECT THE PROCESS OF COMPETITION PROTECT THE INTEREST OF CONSUMERS. O BJECTIVE O BJECTIVE

11 APPLIES TO ALL COMMERCIAL ACTIVITY -Govt companies -Public Authorities EXTRA TERRITORIAL APPLICATION S COPE

12 P ROHIBITIONS ANTI-COMPETITIVE PRACTICES ABUSE OF DOMINANT POSITION ANTI – COMPETITIVE AGREEMENTS

13 ANTI – COMPETIVE AGREEMENTS OBJECT EFFECT F IRST P ROHIBITION Horizontal or vertical agreements Between Enterprises Significantly preventing, restricting or distorting competition

Agreement between rival parties in the same market selling same products (anti-competitive conduct between competitors) Agreement between rival parties in the same market selling same products (anti-competitive conduct between competitors) e.g. fixing prices or other trading conditions, allocate markets, market allocation, bid rigging. Horizontal agreements

Vertical agreements Agreement between two firms that are at different levels of production-supply chain. Example:- Agreement between two firms that are at different levels of production-supply chain. Example:- Agreement between Manufacturer and Wholesaler and Retailer Agreement between Manufacturer and Wholesaler and Retailer distributorship agreements distributorship agreements

What constitutes an agreement? contracts, understanding, whether or not legally enforceable contracts, understanding, whether or not legally enforceable “concerted practices” “concerted practices” Decision of associations Decision of associations

EXEMPTIONS Individual Individual Block Block

CRITERIA FOR EXEMPTION (FOR FIRST PROHIBITION) - significant identifiable technological, efficiency or social benefits - Benefits could not have been provided without anti-competitive effects - detrimental effect proportionate to benefits provided - detrimental effect proportionate to benefits provided - agreement does not eliminate - agreement does not eliminate competition completely competition completely

19 A BUSE O F D OMINANT P OSITION S ECOND P ROHIBITION 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 ADP Includes: Excessive purchase or selling price Refusal to deal Predatory Pricing Limit or control market access Tying and bundling P RACTICES I NDICATING ADP

EXEMPTIONS FOR SECOND PROHIBITION Reasonable commercial justification Reasonable commercial justification Reasonable commercial response to conduct of competitor Reasonable commercial response to conduct of competitor

EXCLUSIONS   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 III INSTITUTIONAL ARRANGEMENTS

24  Competition Commission  Competition Appeal Tribunal  Special Committee On Competition

25 POWERS OF THE COMMISSION  Investigation into suspected prohibitions  Issue guidelines, directions, interim measures  Grant exemptions – Block & Individual  Conduct hearings  Impose financial penalties  Conduct market review

26 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)

27 President and President and 7 to 20 Members 7 to 20 Members Term not exceeding 6 years. Term not exceeding 6 years. MEMBERSHIP OF THE COMPETITION APPEAL TRIBUNAL

28 MEMBERSHIP OF THE SPECIAL COMMITTEE ON COMPETITION Will consist of representatives from sector regulators - Competition Commission (chair) - Energy Commission - Multimedia and Communication Commission - Securities Commission - Bank Negara Others - Others

PART IV THE WAY FORWARD

30 Six Pest Control Companies fined total of S$262, by CCS for bid rigging and collusive tendering arrangements. Six Pest Control Companies fined total of S$262, by CCS for bid rigging and collusive tendering arrangements. Rice Noodle companies fined by China’s competition law enforcer between S$6,000 –S$20,000 for price cartel. Rice Noodle companies fined by China’s competition law enforcer between S$6,000 –S$20,000 for price cartel. 16 coach operators and their trade association fined S$1.69m for price fixing of Malaysia-Singapore coach tickets. 16 coach operators and their trade association fined S$1.69m for price fixing of Malaysia-Singapore coach tickets. Napp Pharm Holdings fined £3.2m for predatory discounting of drugs to govt hospitals. Napp Pharm Holdings fined £3.2m for predatory discounting of drugs to govt hospitals. CASES

CASES IN MALAYSIA?

32 Ministry of Domestic Trade, Co-operatives & Consumerism Please contact us for further details at: Mdm. Shila Dorai Raj