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I Understand

The State of Competition Law in Malaysia in the Aftermath of the Covid-19 Pandemic

June 2023

By Alycia Chuah, Jackie Goh, Ryan Heng and Vivian Lim

While many businesses are grappling to stay solvent amidst the economic turbulence plaguing the nation in the aftermath of the Covid-19 outbreak, some are attempting to secure a bigger share of the market through anti-competitive practices. For the benefit of market competitors, this article examines the state of anti-trust laws in Malaysia.

The authors will first set out a brief overview of the competition law regime in Malaysia, before discussing recent notable decisions by relevant authorities and courts on anti-competitive practices. The article will end with brief look at possible amendments to the Competition Act 2010.

A. Competition Act 2010

The Competition Act 2010 (“CA 2010” or “the Act”) is the governing legislation in Malaysia regulating matters concerning anti-competitive practices by businesses. The CA 2010 aims to encourage efficiency, innovation, entrepreneurship, promote competitive price and product quality, and protect the interest of consumers by prohibiting the following anti-competitive practices:

    1. anti-competitive agreements (such as price fixing, cartels, bid rigging)1 ; and
    2. abuse of dominant position (such as predatory pricing, price discrimination, bundling, and tying)2.

The enforcement auhthority of the CA 2010 is the Malaysia Competition Commission (“MyCC”). MyCC is an independent body established under the Competition Commission Act 2010, and exists as an agency under the Ministry of Domestic Trade and Cost of Living. MyCC is vested with powers under CA 2010 to investigate into allegations of anti-competitive practices and if found to be in breach of CA 2010, penalise the infringers. MyCC is also empowered to issue guidelines to facilitate the implementation of the provisions of CA 2010.

Recent Competition Law Decisions in Malaysia

Case 1: Proposed Decision of MyCC against Five Feedmillers3

In August 2022, MyCC issued a proposed decision against five chicken feed millers for engaging in anti-competitive practices that led to a significant increase in the price of chicken meat. According to MyCC’s investigations, these feed millers entered into anti-competitive agreements and concerted practices to increase the price of poultry feed containing soybean meal and maize. By adjusting prices at the same rate, these companies restricted customers’ choices and potentially distorted competition in the poultry industry.

In the event that MyCC finds evidence of infringement on the part of the feed millers, MyCC is entitled to, among others:

    1. impose financial penalties of up to 10% of the companies’ worldwide turnover during the infringement period; and
    2. impose other appropriate directives from time to time.

However, a relief of liabilities may be granted if the companies involved in anti-competitive agreements can demonstrate significant technological, efficiency, or social benefits directly resulting from the agreement4. The CA 2010 also provides for a leniency regime5 where MyCC has the discretion to grant leniency to companies based on various factors such as the stage of the investigation, cooperation of the investigated company, the value-added of the information provided, and any benefits brought to the public.

Furthermore, MyCC has the power to enforce its decisions, and failure to comply may result in legal action against the companies involved6. If the affected companies are dissatisfied with the MyCC’s decision and wish to challenge the decision, they may appeal to the competition appeal tribunal7.

Case 2: Malaysian Airline System Bhd v Competition Commission & another appeal8

In August 2011, the Malaysian Airline System Berhad (“MAS”), AirAsia Berhad (“AirAsia”) and AirAsia X Sdn Bhd (“AirAsia X”) signed an agreement to pool their resources in providing air transportation services in Malaysia (“Collaboration Agreement”).

Following the execution of the Collaboration Agreement, a share swap exercise was carried out between MAS and AirAsia where Tune Air Sdn Bhd (AirAsia’s major shareholder) held 20.5% shareholding in MAS and Khazanah Nasional Bhd (MAS’ major shareholder) held a 10% shareholding in AirAsia.

The airlines applied to MyCC for an exemption of the Collaboration Agreement under the Competition Act 2010 in order for the airlines to utilise each other’s core competencies and to compete effectively as a Malaysian based airline against global competitors.

This arrangement between the airlines attracted many inquiries and complaints from the Federation of Malaysian Consumers Association on alleged price fixing and market sharing practice adopted via the collaboration arrangement between the airlines.

MyCC launched an investigation and subsequently made a final decision against the airlines for an infringement of Section 4 of CA 2010 due to findings on the conduct of sharing markets and joint management control between the airlines which provides access to each others information which are anti-competitive in nature and restricts a fair provision of air transport services within Malaysia. As a result, each of the airlines were imposed with a financial penalty of RM10 million.

The airlines filed an appeal against MyCC’s decision to the competition appeal tribunal (“CAT”) which allowed the appeal based on the majority grounds submitted by the airlines. However, upon the judicial review application filed by MyCC to the High Court, the High Court agreed with MyCC’s position and set aside the CAT’s decision, which reinstated the financial penalties imposed on the airlines. The airlines’ subsequent appeal to the Court of Appeal was successful as the Court of Appeal upheld the CAT’s decision and no penalties were to be imposed on the airlines.

Aggrieved with the decision of the Court of Appeal, MyCC applied for leave to appeal to the Federal Court. The leave application was unanimously dismissed by the Federal Court on, among others, the following grounds:

    1. As a quasi-judicial body, MyCC’s core principle was to assist the CAT to investigate and adjudicate competition matters and does not have the power to challenge the decision of CAT as MyCC is not an aggrieved party to the decisions of CAT. In any event, MyCC does not have locus to file a judicial review following the Malaysian Aviation Commission (MAVCOM) Act which came into force on 1 March 2016 and took over jurisdiction from MyCC in regulating economic and competition matters within the civil aviation industry;
    2. The agreement was executed and the purported infringement occurred prior to the coming into force of the CA 2010 on 1 January 2012 which does not have any express retrospective provision applicable to the agreement; and
    3. The implementation of the Collaboration Agreement was conditioned upon MyCC’s approval to exempt the collaboration arrangement from the Act and assuming that the collaboration arrangement had infringed Section 4, the Court of Appeal’s finding was that it would be exempted from liability under Section 5 as it yielded a net economic benefit to consumers.

Despite the turbulence of this case which commenced from MyCC all the way to the apex court of the country, the matter was dismissed with costs of RM30,000 awarded to the respective airlines and the financial penalty was overturned as MyCC did not meet the threshold for leave to appeal further.

Case 3: MyEG Services Bhd & Anor v Competition Commission & Anor9

This is a High Court’s decision concerning the judicial review of CAT’s decision in affirming MyCC’s finding that MyEG Services Berhad (“MyEG”) had infringed the prohibition on the abuse of dominant position pursuant to Section 10(2)(d)(iii) of the CA 2010.

MyEG was involved in the provision and management of the renewal of temporary foreign workers’ permits known as Pas Lawatan Kerja Sementara (“PLKS”) which would be processed online through MyEG only. To fulfil the requirement of a PLKS renewal, several conditions must be satisfied including the purchase of three mandatory insurance policies for foreign workers. MyEG Commerce subsequently entered into an agency agreement with RHB Insurance Berhad (“RHB Insurance”) to act as MyEG Commerce’s agent to transact, among others, the mandatory insurances where a commission was paid by RHB Insurance to MyEG Commerce for every transaction.

MyCC received complaints that MyEG as the sole provider for the renewal of PLKS had abused its dominant position to “force” employers to purchase the mandatory insurances through MyEG Commerce. Upon investigation, MyCC made a final decision that MyEG had abused its dominant position by infringing Section 10(2)(d)(iii) of the Act. MyEG appealed to the CAT which affirmed MyCC’s final decision and imposed a daily penalty of RM7,500.00 on MyEG from the date of MyCC’s final decision to the date of the CAT’s decision.

Aggrieved by the CAT’s decision, MyEG filed a judicial review application to quash the CAT’s decision and declare it as null and void. In ascertaining whether there was infringement of Section 10(2)(d)(iii) of the Act, the High Court was satisfied that the elements of infringement have been established against MyEG.

Among the questions considered by the High Court was whether the acts of MyEG had ‘harmed competition’ in the market which they were participating. The High Court found that the automatic verification for MyEG related insurance companies and the requirement of additional steps for verification for non-MyEG insurance companies was the fact that harmed the competition. The conduct of MyEG of using its dominance in the upstream market to induce end users to use its services in the downstream market had put all other agents and insurance companies at a competitive disadvantage. This was supported by the fact that the commission earned by MyEG for the sale of the mandatory insurances had increased tremendously during the relevant period.

Given the above, the High Court found no merit in the judicial review application and dismissed the same with costs. MyEG’s subsequent appeal to the Court of Appeal and leave application to appeal to the Federal Court were also unsuccessful.

C. Possible Amendment to the CA 2010 – Introduction of a Merger Control Regime

Currently, anti-competitive mergers or acquisition exercises are not regulated under the CA 2010. The major negative effects of unregulated mergers include:

  1. market monopolisation: unregulated mergers result in market concentration and lead to the creation of monopolies in the long run;
  2. reduction of competition: due to the exit of a competitor/market player from the market; and
  3. increase in the cost of living: mergers may increase the price of goods or services in the market, leading to a reduction in purchasing power and an increase in the cost of living of consumers.

MyCC has in its Consultation Paper on the Proposed Amendments to the Competition Act 2010 dated 25 April 2022 (“Consultation Paper”) proposed an amendment to the CA 2010 to enable MyCC to investigate and take actions on anti-competitive mergers in Malaysia, but not for industries regulated under certain players such as Bank Negara Malaysia, Securities Commission Malaysia, and the Communications and Multimedia Commission (MCMC).

The proposed Merger Control Regime encompasses the following key features10:

The Prohibition – The Merger Control Regime aims to prohibit mergers or anticipated mergers transacted within and outside Malaysia which, if consummated, may result in a substantial lessening of competition (“SLC”) within any market for goods or services.

‘Merger’ – For the purposes of the merger control regime, a merger occurs (and may be subject to the section 10A prohibition) in the four circumstances stipulated in section 10B:

  1. two or more previously independent enterprises combine into one single enterprise and cease to exist as separate legal entities;
  2. the acquisition of direct or indirect control of the whole or part of one or more enterprises;
  3. the acquisition of assets of one enterprise by another enterprise results in the acquiring enterprise replacing or substantially replacing the enterprise whose assets are being acquired, in the business or the part concerned of the business, in which the acquired enterprise was engaged immediately before the acquisition; or
  4. the creation of a joint venture to perform, on a lasting basis, all the functions of an autonomous economic entity.

A Hyrbid Regime –The merger control regime would be a hybrid regime as oppose to a voluntary regime whereby the new regime:

  1. makes it mandatory to notify the MyCC of mergers or anticipated mergers which exceed the threshold to be prescribed by the MyCC (“Applicable Threshold”). Failure to notify the mergers to the MyCC where notification is mandatory would result in merger violation, upon which a penalty up to 10% of the value of the merger or anticipated merger transaction would be imposed; and
  2. allows mergers or anticipated mergers which do not exceed the Applicable Threshold to provide voluntarily notification to the MyCC.

The proposed merger control regime would be suspensory in nature, in that parties to any anticipated mergers which are notified to the MyCC are prohibited from implementing all or any part of the merger before the MyCC’s clearance. A breach of this requirement will render the merger void.

Period of Review – Under the Merger Control Regime, MyCC is required to provide its decision on the merger or anticipated merger wihtin a period of 120 working days from the date when MyCC accepts that the notification as complete. An anticipated merger is deemed approved if the MyCC has not made any decision on the anticipated merger upon the expiry of the merger review period.

Commitment – Where a merger or anticipated merger may substantially lessen the competition in the market, the merger parties involved may at any time before the MyCC makes its decision on the merger or anticipated merger, offer a commitment to the MyCC to remedy, mitigate or prevent the effect caused by the merger or anticipated merger so that the MyCC can give a clearance decision for the merger or anticipated merger. The offer of a commitment results in a suspension of the merger review period for up to 60 working days to enable the MyCC to review the commitment offer.

Where a commitment offer has been accepted by the MyCC, it shall issue a clearance decision and make a finding that the anticipated merger or merger does not infringe the CA 2010. 

Investigative Powers – MyCC is also empowered under the Merger Control Regime to investigate mergers or anticipated mergers which are not notified to the MyCC for infringement of the CA 2010 upon receipt of a complaint or a direction from the Minister of Dmoestic Trade and Consumer Affiars. If the MyCC finds that merger violation has been committed, the MyCC may impose a financial penalty on the merger parties or give any directions to the parties to remedy the violation.

The proposed amendment to the CA 2010 highlighted above represents only a fraction of the amendments proposed by the MyCC in the Consultaion Paper. These amendments are slated to be tabled before the Malaysian Parliament in October 2022. However, in October 2022 the Malaysian Parliament was dissolved to make way for the Malaysian General Elections of November 2022 and the subsequent formation of a new government. As of the date of this article, there has been no draft amendment bill made available to the public.

D. Conclusion 

The above decisions of MyCC, CAT and the Courts, as well as the proposed amendment to the CA 2010 on the introduction of robust and comprehensive merger control regime shows a increase in vigilance and enforcement by the relevant authorties in combating anti-competitive practices in Malaysia. Threre is thus an increasing need for businesses and commercial parties to ensure compliance with competition laws. Businesses will need to regularly review their commercial practices with their business partners and within their economic sector to ensure they do not fall foul of the provisions of the CA 2010. 

Further, in the event the Merger Control Regime as proposed by MyCC’s Consultation Paper comes into force, businesses will need to ensure their mergers, joint ventures, and acquisition exercises remain compliant with the regime.

This material is for general information only and is not intended to provide legal advice. If you have any queries regarding the above, please feel free to contact us at insights@chooi.com.my.

  1. Section 4 of the Competition Act 2010
  2. Section 10 of the Competition Act 2010
  3. MyCC, News Release, MyCC Issues Proposed Decision Against Five Feedmillers Kuala Lumpur, 5 August 2022. Accesible at:  https://www.mycc.gov.my/sites/default/files/pdf/decision/NEWS%20RELEASE%20-%20MyCC%20PROVISONALLY%20FINDS%20ILLEGAL%20CARTEL%20OF%20CHICKEN%20FEED.pdf
  4. Section 5 of the Competition Act 2010
  5. Section 41 of of the Competition Act 2010
  6. Section 42 of of the Competition Act 2010
  7. Seciton 52 of of the Competition Act 2010
  8. [2022] 2 MLJ 767; [2022] 1 CLJ 856
  9. [2020] 3 CLJ 363
  10. Ibid, pages 21 to 22.