Malaysian competition law brief information

Competition Act Competition Act 20102010

(Information Sharing)(Information Sharing)

CONFIDENTIAL / All rights Reserved by Honda Malaysia Sdn. Bhd.

1.0 Objective

To provide information to Management & all related associates on the enforcement of the Competition Act 2010 effective January 2012.

2.0 Purpose

2.1 To raise awareness on what type of transactions are categorize as anti-competitive.

2.2 For Management to decide whether current business practice is in compliance with

Competition Act 2010.

2.3 To avoid infringement of the Competition Act 2010.

2.4 To avoid bad publicity if infringe the Competition Act 2010.

2.5 To safeguard the Shareholder’s interests.

Objective & Purpose

3.0 Target & Expectation

3.1 After the information sharing, there is a raise in awareness to self-check whether the acts or transactions are anti-competitive or otherwise.

3.2 The Management to adopt compliance program

3.3 The Management takes steps in identifying potential anti-competitive agreements or anti-competitive actions.


No. 報告　項目 Report Content 報告者 PIC

1 Background & Implementation of Competition Law

Siti Fairuz

2 Background of Competition Law in Malaysia Siti Fairuz

3 Overview of Malaysian Competition Act 2010 Siti Fairuz

4 Conclusion Siti Fairuz

Contents




Siti Fairuz




Contents


Background of Competition Law in ASEAN

MYANMAR

LAOS

THAILAND

CAMBODIA

VIETNAM

MALAYSIA

SINGAPORE

INDONESIA

PHILIPINES

BRUNEI

FACTS:

• The ASEAN have set the ambitious goal of creating a competitive market by 2015.

2. In the second half of 2010, the ASEAN Experts Group on Competition (AEGC) - have release Guidelines on Competition Policy – which target to ensure a more efficient & competitive market across ASEAN.

Competition Policy Guidelines

Competition Policy •Deals with all Gov policy•Promote comp. in market•Controlling anti-comp. •conduct

Competition Law •Ensures Gov policies are not thwarted by Private firms•Serves to promoteComp. culture ie by Firms becoming comp➝increase productivity & economic growth

Competition Law targets to promote economic growth

*source: ASEAN Competition Law, LexisNexis

MYANMARCompetition Law not yet implement

LAOSCompetition Law implement

THAILANDCompetition Law implement

CAMBODIACompetition Law not yet implement

VIETNAM Competition Law implement

MALAYSIACompetition Law implement

SINGAPORE Competition Law implement

INDONESIACompetition Law implement

PHILIPINESCompetition Law implement

BRUNEICompetition Law not yet implement

Malaysian Parliament approves the Competition Bill 6 May 2010

Implementation of Competition Law in ASEAN

*source: ASEAN Competition Law, LexisNexis



Siti Fairuz




Contents


Background of Competition Law in MalaysiaObjective :

1)Encourage growth of Firms efficiency & innovation

2)Prevent anti-competitive practices

Fair Trade Practices Policies (2005)

Private Firms Government Link Companies

Discussion by public & private sector since 1995 Implemented in 2005

Phase 1Phase 1

Only applied to private firms

2010-2011

2009-2010

2008-2009

2007-2008

30

25

20

15

10

5

Hong Kong Singapore

7

53 3

12 11 11 11

21 21 24

26

Malaysia

Parliament on 6/5/10 Passed:-

1)Malaysia Competition Act 2010

2) Malaysian Competition Commission

Private Firms

Government Link Companies

Source: PEMANDU.gov.my

Global Competitiveness Report 2010-2011

As PM:3/4/09

Phase 2Phase 2

Apply to all private firms & GLC


Prime Minister Clear Messages

①10th Malaysian Plan :” Healthy competition is needed to make the economy more efficient and dynamic. For this, the Comp. LawIs introduced to provide a regulatory framework against market manipulation and cartel practices that may effect market efficiency.”

② New Economic Model: “The new approach is private sectorled growth – to promote competitionacross & within sectors to revive private investments & market dynamism.

“Gov. will not seek to use its Regulatory powers to protect GLCs From competition by the private Sector. Instead Gov will encouragecompetition so that the public & private sectors will improve their efficiency & provide new valueadded service.:

①

②

*source: Book on New Economic Model for Malaysia, written by National Economic Advisory Council, 2010

Implementation of New Economic Model Strategies

1. Re-energizing private sector

3. Competitive domestic economy

4. Strengthen the public sector

5. Transparent & market friendly affirmative action

6. Building knowledge base infrastructure

7. Enhancing source of growth

8. Ensuring sustainability of growth

2. Developing quality workforce

Eight New Economic Model Strategies

*source: Book on New Economic Model for Malaysia, written by National Economic Advisory Council, 2010

By promoting competition through liberalization & deregulation

In a Nutshell…

*source: PEMANDU.gov.my

Competition Act 2010 enforcement is in Jan 2012



Siti Fairuz




Contents


Overview of Competition Act 2010Objective of the Act 1. Making markets works efficiently

2. Encouraging innovation & entrepreneurship3. Create a level playing field4. Promotes welfare of consumers with competitive prices & consumer choice

How does it work? The Act prohibits :-1. Anti-competitive agreements between enterprise 2. Abuse of dominant position

Scope of the Act:- a) Apply to:-

b) Does not apply to:

1. Covers enterprises (private or GLC) which engages in a commercial activity relating to goods & services.

2. Also applies to commercial activities outside Malaysia (which has effect in any market in Malaysia

1. Commercial activity regulated under the Communications & Multimedia Act 1998 & Energy Commission Act 2001

2. Any activity in the exercise of governmental authority 3. Any agreement or conduct complying with a legislative requirement 4. Collective bargaining activities

Why should comply? 1. Penalties capped at 10% of worldwide turnover of an enterprise over the period of infringement

2. Invalid agreements3. Exposure to private actions4. Bad publicity 5. Intrusive investigations

Exemptions? 1. Individual & block exemptions2. Leniency program provide for infringements of prohibitions on anti-competitive

agreement

Objective of the Competition Act:-1. Making markets works efficiently2. Encouraging innovation & entrepreneurship3. Create a level playing field4. Promotes welfare of consumers with competitive prices & consumer choice

To promote competition across and within sectors to encourage private investments and increase

market dynamism

Prohibits anti-competitive

agreements between enterprise

Prohibits abuse of dominant position

The Competition Law provides regulatory framework against market manipulation & cartel practices

Competition Law Act 2010

The enforcement of Competition Law Act 2010 ➝ January 2012:- ① Keep the markets open ② Keep local markets competitive CONFIDENTIAL / All rights Reserved by Honda Malaysia Sdn. Bhd.




market dynamism



First Prohibition



①

First Prohibition S.4(1) prohibits anti-competitive agreements that have the object or effect of significantly preventing, restricting or distorting competition.

Supplier Supplier Supplier

Wholesaler

Distributor

Customers

Horizontal Agreements

Vertical Agreements

KEY POINT: Horizontal and vertical agreement between enterprises are PROHIBITED if their OBJECT or EFFECT is to SIGNIFICANTLY PREVENT, RESTRICT, DISTORT COMPETITION

*source: S.4 of the Competition Act 2010


First Prohibition: Horizontal Agreements S.4(1) prohibits anti-competitive agreements that have the object or effect of significantly preventing, restricting or distorting competition.

Supplier Supplier Supplier

Horizontal Agreements

Key point: Horizontal agreements between enterprises which have the object to:- • Price fixing •Fix trading conditions •Limit or control production, market outlets, market access, development, technology, investments•Bid rigging

ARE PROHIBITED

Cartel activity Bid rigging Controlling market outlets

Examples of prohibited horizontal agreements

*source: Japan Free Trade Booklet, Japan Fair Trade Commission


First Prohibition: Vertical Agreements S.4(1) prohibits anti-competitive agreements that have the object or effect of significantly preventing, restricting or distorting competition.

Supplier

Wholesaler

Distributor

Customers

Vertical Agreements

Key point: Vertical agreements which are at different levels of suppliers who have the object such as:- •Resale price maintenance, fixed price •Exclusive territory •Exclusive purchase/supply @ tying •Non-compete

ARE PROHIBITED

Examples of prohibited vertical agreements

Fixed pricing

Exclusive territory & No discount

Exclusive supply

Tying purchase





market dynamism




Second Prohibition


②


Second Prohibition: Abuse dominant position Factors indicating dominance:

•Large market share •Market concentration •Barriers to entry & exit •Degree of buyer power

Not an offence to be dominant but if abuse the dominant position, it is an OFFENCE

Imposing unfair trading conditions

Examples of abuse of dominant position

Predatory behaviour

Controlling market outlets

Buying up scarce intermediate goods required by competitors without justifiable reasons Abuse bargaining position

Discrimination


Predatory behaviour

Controlling market outlets

Abuse bargaining position

WHAT IF THERE’S A INFRINGEMENT?

Competition Commission

If found infringe the Competition Act 2010: •Maximum penalty:10% worldwide turnover•Right of private actions for the aggrieved party

WHAT TO DO TO AVOID?

Steps to take: Before Act comes into force:-

① Advisable to have a compliance program② Review existing agreement.③ Amend current activities which are found to be anti-competitiveAfter Act comes into force:- ① Cease the infringing conduct immediately ② Ensure no document destruction ③ Conduct an internal investigation @ whistleblower④ Approach the Competition Commission for leniency

Stop anti-competitive acts

STEPS TO TAKE IF VIOLATION①

②

③



Siti Fairuz




Contents


Conclusions We do not want to be known for the wrong reasons :- to avoid reputational damage and

adverse publicity

To avoid being penalized

Top down approach in compliance :-

i. Top management (including board of directors) must show commitment to complying with the law

ii. Internal advocacy and education programmes to create awareness on competition related issues and compliance

iii. Regular evaluation of internal advocacy, education and compliance programmes to keep up with the latest development in the law.

Make compliance part of the Make compliance part of the Company’s business culture Company’s business culture

• From the top From the top

•Communicating down and to allCommunicating down and to all


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