Promoting Competition

STAR, 12 June 2010

THE Competition Bill 2010, which was passed last month and expected to be implemented by mid- or end of 2011, is aimed at creating a better business environment and to check against anti-competitive practices.

The bill, once gazetted, will be known as the Competition Act 2010.

The bill describes the “process of competition” as encouraging efficiency, innovation and entrepreneurship, which promotes competitive prices, improvement in the quality of products and services and wider choices for consumers.

“In order to achieve these benefits, it is the purpose of this legislation to prohibit anti-competitive conduct,” it says in the bill.

In a newspaper report last month, Faizah Jamaludin, a partner at the law firm Skrine & Co, wrote: “The implementation of the Competition Act 2010 will bring Malaysia in line with over 100 jurisdictions worldwide, including its Asean neighbours Indonesia, Singapore, Thailand and Vietnam.

“The Competition Act seeks to promote and protect the process of competition by changing the behaviour of businesses. It will regulate not just monopolies and cartels, but all types of businesses from multinationals to the small and medium enterprises and “mom and pop” shops.

“Hypermarkets, airlines, newspapers, banks, insurance companies, private hospitals, accounting, engineering and legal firms, to name a few, will all be governed by the Act. Government-linked companies (GLCs) are not exempted and are similarly subject to the provisions of the Act,” she wrote.

The bill seeks to introduce prohibitions on anti-competitive conduct and practices.

“The object of the Act is to promote economic development by protecting the process of competition, and thereby protecting the interest of consumers,” the bill states.

The Act makes provision for the introduction of competition law by introducing two main prohibitions. The first is in respect of agreements or concerted practices between enterprises or association of enterprises, which have the effect of significantly preventing, restricting or distorting competition in Malaysia.

The second is the prohibition of the abuse by an enterprise or enterprises of a dominant position in Malaysia.

It defines the term “dominant position” as a situation where “one or more enterprises possess such significant power in a market to adjust prices or outputs or trading terms, without effective constraint from competitors or potential competitors.”

Here, the Act considers a parent company and its subsidiaries as a single enterprise where, despite their legal separation, they form a single economic unit within which subsidiaries do not enjoy real autonomy in determining their actions in the market.

The act will apply to any commercial activity, both within and outside Malaysia. In relation to the application of the act outside Malaysia, it applies to any commercial activity transacted outside the country which has an effect on competition in any market in the country.

The Act will be enforced in Malaysia by the Malaysian Competition Commission (MCC), which has been given considerable powers of investigation and enforcement, such as entering and searching premises and require the production of all documents and information including computerised data.

Interference with the MCC’s powers and investigations is an offence which carries a fine of up to RM5mil for the first offence and RM10mil for the second and subsequent offences.

Faizah also wrote that directors, CEOs, COOs and managers would be personally liable for their company’s offences unless they proved that the offence was committed without their knowledge, consent or connivance, and that they had taken all reasonable precautions and exercised due diligence to prevent the commission of such offences.

“They will also be liable for the offences of their employees, agents and agent’s employees committed in the course of employment,” she was quoted in the news report.

Competition Commission Bill

The Competition Commission Bill has also been passed to provide for the creation of a commission to control monopoly activities and will be the authority to take action against the companies involved in the activities.

According to reports, the Competition Commission Bill 2010 seeks to provide for the establishment of the Competition Commission and to provide for its functions and powers.

Once approved, it will impose a duty on the commission to furnish certain returns, reports, accounts and information to the minister or any public authority.

The commission will consist of a chairman, four members representing the government, and between three and five other members with experience related to business, industry, commerce, law, economics, public administration and consumer protection.

Its functions include advising the minister or any public or regulatory body on matters concerning competition.

In a news report in April, Domestic Trade, Co-operatives and Consumerism Minister Datuk Ismail Sabri Yaakob said both the Competition Bill 2010 and Competition Commission Bill 2010 was passed to show that the Government was serious in creating a healthy business environment.

“Before, there was no control over monopolies and cartels, but now there are laws for such things,’’ he was quoted as saying.

Consumer Protection (Amendment) Bill

According to the parliament website, the Consumer Protection (Amendment) Bill 2010 is scheduled to be tabled for its second and third reading.

This bill has several changes and seeks to amend its predecessor, the Consumer Protection Act 1999.