World-wide enforcement –
More than 130 countries already have competition laws
Highest individual
UK fine to date
GBP122 million
in Aug 2008
(BA, fuel surcharges)
Highest EU
cartel fine to date
EURO 1.4 billion
in 2008
(Car Glass manufacturer)
Microsoft
fined for bundling
EURO 497 million
in Mar 2004 and further
EURO 899 million
for not paying earlier
fine in Feb 2008
INTEL fine on
abuse of dominance
EURO 1.06 billion
on May 2009
Largest recent
US cartel fine
USD 700 million
in 2005/06
(DRAM semiconductor
memory products)
Back home in Malaysia
MALAYSIA BOLEH !
Back home in Malaysia
Part II: The Prohibitions
What does the Competition Act do?
Anti-competitive agreements
such as price-fixing, market
sharing, bid-rigging, limiting or
controlling production
Abuse of a dominant position
such as unfair pricing,
tying/bundling, refusal to deal,
predatory pricing
S.3 – Scope of Application
Importance
Functionality approach - “commercial activities”
Private or Public authority when carrying out “commercial activity”
Ownership or Status irrelevant
Effect on competition in any market in Malaysia -
extra territorial application
Definition of "commercial activity"
S3 - Definition of commercial activity
"negative listing" approach – wide
coverage (maximise scope)
• government authority
• principle of solidarity
• purchase of goods not for an
economic activity
• Facts/
Circumstances
based
• Ownership/
Entity irrelevant
Definition of "commercial activity"
FACTORS TO CONSIDER
Need to adopt
functional approach
(especially relevant
for public entities)
Offering goods or
services on a given
market is a
commercial activity
Activities that are
not commercial
Consider
activities
individually
Especially
when there are
other producer/
competitor
offering the
same goods or
services
Exercise powers
of a government
authority
Consider the following:
DBKL may:
• Have powers to adopt bye laws specifying
where car can and cannot park
• Own land in which it operates
commercially as a car park
• Normal postal services offered by
Pos Malaysia
• Pos Laju services offered by Pos Malaysia
• Pos Malaysia selling general insurance
ECJ in Wouters v Algemene Raad van
Neferlandsche held:
“do not apply to activity, which by its nature
…does not belong to the sphere of economic
activity…or which is connected with the
exercise of the powers of a public authority”
Felda Global : History and equity structure
eg of commercial activity of a GLC
FELDA
(Established 1956)
Government agency:
Social responsibilities
100%
Koperasi
Permodalan
Felda
Felda Global Ventures
Holdings Sdn Bhd
Company:
Commercial activities
(International)
49%
51%
Felda Holdings Bhd
(Incorporated 1995)
Company:
Commercial activities
(Malaysia)
Definition of "enterprise"
• “enterprise” - any entity carrying on commercial activities relating to
goods or services, and for the purposes of this Act, a parent and
subsidiary company shall be regarded as a single enterprise if, despite
their separate legal entity, they form a single economic unit within which
the subsidiaries do not enjoy real autonomy in determining their actions
on the market;
• Single economic entity doctrine - ECJ in Viho vs Commission (1996)
• Why definition important?
- immunity from competition law - considered to be internal arrangement
- penalty computation
Definition of "market"
“market” means a market in Malaysia or in
any part of Malaysia, and when used in
relation to any goods or services, includes a
market for those goods or services and other
goods or services that are substitutable for,
or otherwise competitive with, the firstmentioned goods or services
What is the relevant market?
Market definition test
Hypothetical monopolist test - would customers
substitute to other products or to other suppliers
elsewhere if producers of a product were to raise
prices by 5 to 10 per cent (would there be competitive
constraint - profitability)
Market definition test
"Small but S ignificant N on-transitory
Increase in P rice"
Prohibitions regime
Market
Behaviour
Section 4
Prohibition
Anti – competitive
agreements
Section 10
Prohibition
Abuse of dominant
position
Mergers
and
Acquisition
S4 Prohibitions - Anti – competitive agreements
•Section 4 of the Competition Act 2010 (Act 712) (“Act”) prohibits
horizontal agreements and vertical agreements between enterprises
where such agreements have the object or effect of significantly
preventing, restricting or distorting competition in any market for goods
or services
Section 4
Prohibition
Horizontal or
vertical
agreements
Object or
effect
Significant
prevention,
restriction or
distortion of
competition
Definition of ‘agreements’
• Need not be in the form of formal agreement
– Contracts, understanding, whether or not
legally enforceable
– “concerted practices” or "gentleman's
handshake"
– Decision of associations
Meaning of concerted practice
ICI vs Commission
(usually referred to as Dyestuffs case) (1972)
"a form of coordination between undertakings which, without having
reached the stage where an agreement properly so-called has been
concluded, knowingly substitutes practical cooperation between them
for the risks of competition"
Main elements:
1. Mental consensus - direct or indirect contact/conduct
2. Factual based (similar behaviour/circumstantial evidence)
3. Differentiate with independent parallel behaviour/oligopoly defence
Consider the following:
(a) Fixing of prices by companies. “Coincidently” identical price increase,
decision to increase made during similar timing and same modus operandi
(b) Golf Gathering among competitors. Casual discussion about future prices,
output but no agreements were reached.
Horizontal agreement
Manufacturer A
Horizontal
Agreement
Manufacturer B
Distributor A
Horizontal
Agreement
Distributor B
• Traditionally, competition policy regards horizontal agreements as
being more objectionable as these agreements are made between
competitors.
• Some horizontal agreements are considered Hard Core and are
absolutely prohibited (S4(2)).
Vertical agreement
Manufacturer
Vertical Agreement
Wholesaler
Vertical Agreement
Retailer
Meaning of 'object' or 'effect'
'Object' Type of Agreement
Types of agreement the anti-competitiveness of which can
be determined simply from their object
– deemed to have the purpose of restraining competition
– unnecessary to prove agreement would have an anti
competitive effect
– subjective intention irrelevant
Benefits for MyCC:
(a) Certainty of activities
(b) Need not prove agreement has an adverse economic effects (demonstrate
extensive empirical evidence)
(c) Focus on proving existence of an agreement (resources)
Meaning of 'object' or 'effect'
'Effect' Type of Agreement
Where it is not possible to say that the object of an
agreement is to restrict competition, it is then necessary to
conduct an extensive analysis of its effect on competition in
the market before it can be found to infringe section 4 CA
2010
Factors to consider in conducting analysis:
(a)Determine type of agreement
(b)Define the relevant market - product and geographical market
(c)Determine whether access to the market was impeded
(d)Determine whether agreement contributor to the foreclosure effect
Stay Away !!!!
The Object Box
Horizontal agreements:
•to fix prices
•to limit/share markets
•to limit sales/production
•to bid rig
•to exchange current or future price information
•collective exclusive dealing
•perform group boycott
Vertical agreements:
•to fix resale prices to wholesalers/distributors/retailers
Vertical Restraints...mostly requires effect
type analysis
Resale price
maintenance
(RPM)
Exclusive
distribution
Selective
distribution
4/13/2015
• A producer / manufacturer’s contractual requirement that its product
be retailed at a fixed or minimum price to consumers
• Specification of a maximum price and/or recommended resale price (RRP)
is “usually OK” unless the specified price has the effect of fixing the retail
terms of sale or dampening retail price competition.
• A manufacturer supplies its (branded) product to only one distributor
or wholesaler or retailer in a particular territory or geographical area
• It may have the effect of preventing “downstream” market entry and
“intra – brand” competition
• A manufacturer supplies its (branded) product to a limited number of
dealers who are contractually restricted from selling other brands
• It may foreclose a market to inter – brand competition at the retail level
Market behaviour prohibitions
Price cartel
Entrepreneur A
Entrepreneur B
Entrepreneur C
Entrepreneur D
Decision of
selling price
among
competitors
Users and
Consumers
Case – Price cartel
Discussion of Express Bus Agencies Association
(EBAA) case
3 November 2009 (CCS 500/003/08)
• Minimum selling prices
• Fuel and insurance surcharge
• 16 coach operators and EBAA fined a total of
SGD1.69 million for price fixing
Case – Price fixing
• JJB Sports Plc vs Office of Fair Trading –
Competition Appeal Tribunal CAT 17 2004)
- Concerning price fixing of England and Manchester
United F.C. football jersey by retailers (Umbro
Holdings Limited, Manchester United Plc, Allsports
Limited, JJB Sports Plc)
- Retail price of football jersey increased by £20
(detrimental to consumers)
Total fine imposed:
£ 14.92 million
Case – Market Allocation
Palmer vs BRG of Georgia Inc. 498 U.S 4 (1990)
 Agreement between competitors (BRG and HBJ): BRG given exclusive license to market HBJ’s trade name
 HBJ will not compete with BRG in Georgia, USA
 BRG not to compete with HBJ outside Georgia, USA
 Market allocation of territory and consumers
 Agreement not to compete disrupts competitive process
resulting in increased of fees from USD$ 150 to USD$400
per course
Cases – Anti–competitive agreements
Competition Commission of Singapore
• Sixteen employment agencies in Singapore have been fined
S$152,563 for price fixing (discovered through media reports). They
were charged with attempting to collectively raise the monthly
salaries of new Indonesian maids — from S$380 to S$450 (1 Oct 2011)
• Proposed infringement decision against 11 modeling agencies for
coordinating and collectively raising rates for a wide range of
modeling services in Singapore (18 May 2011)
People’s Republic of China National Development and
Reform Commission (30 March 2010)
• Fines ranging from RMB30,000 (RM14,130) to RMB100,000
(RM47,100) imposed on 21 rice noodle producers for price fixing
• Some received leniency protection
Case - Bid rigging
Paramount Bed Case Japan
Paramount Bed Company
(Main Manufacturer)
• Supplies medical beds
• Predetermined order/
receiver
• Order price instruction
(Control)
Dealer
Purchases
medical beds by
bidding/
tendering
process
Dealer
Tokyo
Metropolitan
Government
Dealer
• Takes order at
instructed price
• Entrepreneur
other than
predetermined
order/receiver
bids at high price