COMPETITION LAW : IMPACT ON BUSINESS AND LEGAL PRACTICE TAN SRI DATO’ SERI SITI NORMA YAAKOB CHAIRMAN, MALAYSIA COMPETITION COMMISSIO N 4 July 2013

An Act to provide for the establishment of the Competition Commission, to set out the powers and functions of such Commission, and to provide for matters connected therewith or incidental thereto. Came into force on 1 April 2011 COMPETITION COMMISSION ACT 2010 (ACT 713) 2

MALAYSIA COMPETITION COMMISSION (MyCC) 3 S. 16: An independent body established under the Competition Commission Act 2010 to enforce the Competition Act Main roles include: Advocacy Investigation & Enforcement Market review Exemption Compliance & Leniency

Overview of Competition Law 4

COMPETITION ACT 2010 (ACT 712) protecting the process of competition An Act to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected therewith Came into force on 1 January

SCOPE OF LAW all commercial activities, both within and outside Malaysi Applies to all commercial activities, both within and outside Malaysia which has an effect on competition in any market in Malaysia 6

SCOPE OF LAW (ACTIVITIES NOT INCLUDED) 1.Any activity, directly or indirectly in the exercise of governmental authority; 2.Any activity conducted based on the principle of solidarity; and 3.Any purchase of goods or services not for the purposes of offering goods and services as part of an economic activity “Commercial activity” means any activity of commercial nature but does not include:- 7

SCOPE OF LAW (EXCLUSION) Commercial activities regulated under:  Communications and Multimedia Act 1998 [Act 588]  Energy Commission Act 2001 [Act 610] Agreement or conduct that comply with any legislative requirement Collective bargaining activities in respect of employment terms & conditions Services of general economic interest or having the character of a revenue-producing monopoly 8

ANTI- COMPETITIVE PRACTICES ANTI- COMPETITIVE AGREEMENTS ABUSE OF DOMINANT POSITION MAIN PROHIBITIONS 9

Exemptions a)Significant identifiable technological, efficiency or social benefits b)Benefits could not be provided without the anti-competitive agreement c)The detrimental effect of the agreement is proportionate to the benefits d)Competition is not eliminated completely 10

11 Impact of Law on Business

OVERVIEW OF BUSINESSES IN MALAYSIA Enterprise means any entity carrying on commercial activities relating to goods and services for the purpose of the Malaysia Competition Act As at 2011, Malaysia has approximately 46,629 companies 12

IMPLEMENTATION OF THE COMPETITION LAW IN ASEAN COUNTRIES Implemented Indonesia Singapore Thailand VietnamMalaysia Yet to implement By 2015 Myanmar Lao PDR Brunei Cambodia Philippines 13

Section 4 (1) of the Competition Act 2010 A HORIZONTAL or VERTICAL AGREEMENT between ENTERPRISES is prohibited insofar as the agreement has the OBJECT or EFFECT of SIGNIFICANTLY preventing, restricting or distorting competition in any MARKET for goods or services. ANTI-COMPETITIVE AGREEMENTS 14

ANTI-COMPETITIVE AGREEMENTS HORIZONTAL AGREEMENTS Agreement between enterprises each of which operate at the same level in the production or distribution chain PRODUCTION LEVEL e.g., between chicken producers between sugar manufacturers DISTRIBUTION CHAIN e.g., between retailers between wholesalers 15

ANTI-COMPETITIVE AGREEMENTS VERTICAL AGREEMENTS Agreement between enterprises each of which operate at a different level in the production or distribution chain VERTICAL AGREEMENT 16

ANTI- COMPETITIVE AGREEMENTS Price- fixing Limiting or Controlling Bid Rigging Market Sharing 17 Example: The Federal Court ordered Malaysia Airlines Cargo Sdn Bhd to pay A$6 million plus costs for price fixing as part of a cartel following action by the ACCC, bringing the total penalties ordered against the alleged international cartel to A$58 million. (Source: ACCC v Malaysian Airline System Berhad & anor)

Competition Act 2010, Section 10 An enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services. 18 ABUSE OF DOMINANT POSITION

“Dominant Position” A situation in which one or more enterprises possess such significant market power to adjust prices, outputs or trading terms without effective constraint from competitors 19 Example: The European Commission had adopted a Decision stating that Microsoft had infringed Article 82 EC by committing abuses of a dominant position because it had engaged in two kinds of abusive conduct, … The European Commission imposed a fine of €497 million on Microsoft, as well as corrective action to be taken within a certain period of time, subject to a complex verification mechanism. (Source: T-201/04 Microsoft v Commission, judgment of 17 September 2007) Note: 60% market share indicative of dominance

ABUSE OF DOMINANT POSITION Unfair purchase or selling prices or unfair trading conditions Limiting or Controlling Refusing to supply Applying different conditions Predatory behaviour 20

ABUSE OF DOMINANT POSITION (continued) Reasonable Commercial Justification Conduct defined as ABUSE and prohibited may be allowed if there are reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor. 21

22 Impact of Law on Legal Practice

WHAT SHOULD THE LEGAL PROFESSION DO? 23 Enhance knowledge of Competition Act Develop understanding as regards the legal & the economic principles of Competition Law Understand types of agreements that are prohibited Develop knowledge on compliance to adequately advise client

24 Challenges

Developing knowledge & capacity building With globalisation, need to review existing rules & regulations that may have impact on competition process Timely to review its business model Ensure profession remains relevant & effectively compete in global marketplace 25 CHALLENGES

26 Responsibilities of Companies

Review all existing agreements & practices Ensure all new agreements are negotiated & concluded on terms that comply with Competition Law Ensure robust Competition Law compliance policies are put in place: Training staff on the Dos and Don’ts Code of conduct i.e. provide reporting channel from employee to senior management, initiate an incentive scheme to encourage employee compliance 27 INTRODUCE COMPLIANCE PROGRAMMES 1

28 KNOW THE LAW 2 Educating employees about competition law The rationale of competition law How competitive markets benefit society Which types of conduct that are prohibited How the legal prohibitions apply to the activities of your company Make known the consequences of such conduct to the employee if discovered

29 SELF ASSESSMENT 3 Assess the specific commercial activities engaged in by the company with reference to the prohibited conduct Establish periodic competition audit of your company Discuss among the senior management on the course of action (to comply) if the company is found to be in breach of Competition Act

Increases choice – by stimulating a broader range of products & services Ensures value for money – by ensuring firms compete on price & quality Stimulates innovation & productivity – by motivating firms to create new products & reduce costs in order to win customers Supports economic growth – by promoting choice, value, innovation and productivity 30 BENEFITS OF COMPETITION

“Sword” & “Shield” Approach How to make use of competition law as a “sword” to attack the anti-competitive or potentially anti- competitive practices of your market rivals How to make use of the same law to “shield” yourself against allegations of anti-competitive behaviour “Re‐educate” yourself of your business contracts Agreements and practices & assess their possible or potential anti-competitive effects 31 CONCLUSION

CRYSTAL CLEAR MESSAGE "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…" YAB Dato’ Seri Najib Tun Razak, Prime Minister of Malaysia in tabling the 10th Malaysia Plan 32