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
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
• 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.”
Will only be concerned on abusive behaviour of such monopolistic powers
Abuse of dominant position
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)
DOMINANCE
• Dominance = Market power
• Factors indicating dominance:
– Large market share
– Barriers to entry
– Statutory Monopolies
• No prohibition of becoming Dominant
Exclusionary vs Exploitative Type
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 competitors
Predatory pricing
(g): Buying up a scarce supply of intermediate goods or resources
required by a competitor
Market foreclosure /
exclusion
Market Foreclosure
CASE
Maintain or strengthen pre-existing market power
in supply market for CPU for domestic PC markets
Transmeta
AMD Japan
Intel
(USA)
Intel Japan
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
Rivals’ market share:
24% (2002)  11% (2003)
Intel Japan’s market share:
76% (2002)  83% (2003)
Manufacturer market for PCs in Japan
Mitsubishi
Toshiba
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
Competition law eco system in Malaysia
Inter regulatory
working
committees
Section 39 Competition
Commission Act
• Special Committee with
regulators
• Malaysian authorities &
sector regulators
• MACC??
• International authorities
Commission
may appoint
to carry out
its functions
Agents,
consultants,
advisers
Section 17(2)(d)
Competition
Commission Act
Competition
Appeal
Tribunal
Interworking
Decision
Appeal
Competition
Commission
Working Committees can be
formed under Section 14
Competition Commission Act
Enterprises
Decision
Complaint
Enterprise/
Consumer
Enterprises
Appeal
Private
action
Decision
Court
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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
Complaints and Investigation
• 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”
Investigation Processes
Complaints
Closure – inform
complainant
Suspected infringement
of Chapter 1 or 2
Power to accept
undertaking 2
Market Review
Investigation
Interim Measures 1
Proposed decision by
the Commission
Written representation
or oral hearing
Leniency regime 3
Competition
Commission
Competition Appeal
Tribunal
PROCESS
Finding of an
Infringement 4
Competition Appeal Tribunal
Decision- FINAL
Finding of noninfringement
High Court
Order –
directing party
to comply
Penalties
PENALTIES
SECTION 4 AND 10
Maximum 10 % of
WORLDWIDE TURNOVER
OFFENDERS
ENTERPRISE
(any
ENTERPRISEISE
entity)
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PENALTIES FOR OTHER OFFENCES
OTHER TYPES OF PENALTIES
FIRST OFFENCE
RM 5 MILLION
BODY CORPORATE
SUBSEQUENT OFFENCE
RM10 MILLION
FIRST OFFENCE
RM 1 M OR 5 YRS IMPRISONMENT
SUBSEQUENT OFFENCE
RM 2 M OR 5 YEARS IMPRISONMENT
NOT A BODY
CORPORATE
Other Issues
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
Thank You
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