July 12, 2010
We are pleased to provide this global competition law update (Malaysia) from our friends at the leading Singapore firm Rajah & Tann.
Global Competition Law Update (Malaysia) – Competition Act to Come into Force in 18 Months
Overview
The Malaysia Competition Act 2010 (Act 712) and the Malaysia Competition Commission Act 2010 (Act 713) which were passed by Malaysia’s House of Representatives, the ‘Dewan Rakyat’, earlier this year have been gazetted on 10 June 2010.
The Minister for Domestic Trade, Cooperatives and Consumerism indicated that the Competition Commission will be established in the next 18 months and the substantive provisions of the Competition Act will come into effect on 1 January 2012.
This effectively gives businesses active in Malaysia only 18 months to ensure that their agreements and business practices comply with the Competition Act.
Main Prohibitions under the Competition Act
The Competition Act prohibits both anti-competitive agreements and abuses of dominance.
From 1 January 2012, horizontal and vertical agreements between enterprises which have the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services will be prohibited.
This means that undertakings which are parties to agreements which have the object or effect of: (a) fixing prices or other trading terms; (b) sharing markets or sources of supply; (c) limiting or controlling production, market outlets or access, technical or technological development, or investments; or (d) bid rigging will risk violating the Competition Act.
Similarly, dominant undertakings will be prohibited from, inter alia: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions on any supplier or customer; (b) limiting or controlling production, market outlets or market access, technical or technological development, or investment to the prejudice of consumers; (c) refusing to supply to a particular enterprise or group or category of enterprises; (d) discriminating between their customers based on non-objective criteria, etc.
An infringement of these prohibitions carries a severe penalty of up to 10% of the worldwide turnover of the undertaking over the entire period of infringement.
For an overview of the Competition Act and the Competition Commission Act, kindly refer to our previous updates on this topic, accessible at:
Malaysia – The Latest Asian Country To Introduce Competition Laws
Malaysia’s Competition Bills Passed
How Shall Undertakings Get Prepared?
In view of the severe consequences attached to a violation of the prohibition of anti-competitive agreements and abuse of dominance under the Competition Act, it is critical that businesses active in Malaysia prepare themselves for the coming into force of the Competition Act, starting now.
This can be achieved by undertaking the following: (a) familiarise yourself with the Competition Act and its implications: it is a must for businesses to understand what the prohibitions in the Competition Act cover in practice and how this applies to their specific businesses; (b) review all current agreements and practices in order to determine whether they are compliant with the Competition Act; if not, consider what amendments should be made to the agreements or conduct in order to ensure that they comply with the Competition Act; (c) train employees: it is important that everyone in the undertaking, from management level and downwards be taught the Do’s and Dont’s under the Competition Act. This should generally be organised and monitored by your Legal team; and (d) be committed to ensuring compliance in every business deal you undertake. Draft and circulate Competition Law Compliance Manuals tailored to your businesses throughout your organisation.
Concluding Words
Whilst the Competition Commission will certainly issue guidelines to explain in detail how it will interpret and apply the Competition Act, it is important that businesses, as of now, start ensuring that they will not be at risk of infringing the law when the Competition Act comes into force.
Undertakings doing business in Malaysia should take advantage of this brief 18-month period before the laws kick-in to ensure that they will not risk being taken to task by the Competition Commission for infringing the new laws.
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