This country-specific Q&A provides an overview to cartels laws and regulations that may occur in Malaysia.
This Q&A is part of the global guide to Cartels. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/cartels/
What is the relevant legislative framework?
Generally, anti-competitive behavior in Malaysia is governed by the Malaysian Competition Act 2010 (‘CA’) which applies to all commercial activities in Malaysia or any commercial activity transacted outside Malaysia but has an effect on competition in any market in Malaysia save for those licensed commercial activities regulated under 4 industry sectors which have been excluded by the CA, namely telecommunication, energy, oil and gas (upstream activities) and aviation, all of these sectors are being governed by their respective governing legislation and licensees therein being regulated or controlled by their respective regulators.
The CA is centred around 2 key prohibitions, being:
- Anti-competitive agreements (‘Chapter 1 Prohibition’); and
- Abuse of dominant position in the market (‘Chapter 2 Prohibition’).
Chapter 1 Prohibition are contained in Section 4 of the CA which prohibits any horizontal or vertical agreement between enterprises that has the ‘object’ or ‘effect’ of an agreement which significantly prevents, restricts or distorts competition in the market. Furthermore, if a horizontal agreement has any of the following objects namely to:-
(a) fix, directly or indirectly, a purchase or selling price or any other trading conditions;
(b) share market or sources of supply;
(c) limit or control-
ii. market outlets or market access;
iii. technical or technological development; or
iv. investment or
(d) perform an act of bid rigging,
then such an agreement is deemed to have the object of significantly preventing, restricting or distorting competition (also known as ‘per se’ prohibition). Therefore, cartel activities fall under Chapter 1 Prohibition.
An enterprise which is a party to an agreement may relieve its liability for the infringement of the prohibition under Section 4 of the CA based on the following reasons:
(a) there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;
(b) the benefits could not reasonably have been provided by the parties to the agreement without the agreement having the effect of preventing, restricting or distorting competition;
(c) the detrimental effect of the agreement on competition is proportionate to the benefits provided; and
(d) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.
To establish an infringement, does there need to have been an effect on the market?
As briefly introduced earlier, Chapter 1 Prohibition are contained in Section 4 of the CA which prohibits any horizontal or vertical agreement between enterprises that has the ‘object’ or ‘effect’ of an agreement which significantly prevents, restricts or distorts competition in the market and further provides for certain ‘per se’ prohibitions. Hence, in order for the Malaysia Competition Commission (‘MyCC’) to establish an infringement, there is a need to asses that whether the said agreement has the ‘effect’ of significantly preventing, restricting or distorting competition save and unless the said offence falls under the ‘per se’ prohibition.
Does the law apply to conduct that occurs outside the jurisdiction?
As mentioned in the answer to Question 1.1, the CA applies to any commercial activity transacted outside Malaysia which has an effect on competition in any market in Malaysia.
Which authorities can investigate cartels?
The regulator of competition law in Malaysia is the MyCC. The MyCC is an independent body corporate established under the Competition Commission Act 2010 with the main role to protect the competitive process for the benefit of consumers and businesses by enforcing the Act.
Competition law in the communications sector is enforced by the Malaysian Communications and Multimedia Commission (‘MCMC’), while the Energy Commission oversees competition in the energy and gas sectors. The Malaysian Aviation Commission (‘Mavcom’) oversees competition in the aviation service sector.
What are the key steps in a cartel investigation?
Under the CA, the MyCC may on its own initiative, conduct any investigation which the MyCC thinks expedient where the MyCC has reason to suspect that any enterprise has infringed or is infringing any prohibition under the CA or any person has committed or is committing any offence under the CA. Further, the MyCC may also conduct an investigation on any enterprise, agreement or conduct that has infringed or is infringing any prohibition under the CA or any person who has committed or is committing any offence under the CA upon receipt of a complaint by a person.
Following from a complaint being made to the MyCC, the MyCC may make inquiries on the complainant for the purpose of deciding whether the MyCC should, in its discretion, investigate the matter. In the event the MyCC decides not to investigate such complaint, it will inform the complainant of such decision and the reasons for the decision.
In the event that the MyCC decides to pursue with the investigation, the MyCC has all the investigative powers as further explained below. After the completion of the investigation, the MyCC may propose to make a decision to the effect that a Chapter 1 Prohibition has been or is being infringed (provided that the MyCC is satisfied that such an infringement has arisen). Thereafter, an enterprise alleged to be infringing the Chapter 1 Prohibition may inform the MyCC that it wishes to make an oral representation and the MyCC shall, before taking any relevant decision, convene a session for the oral representation to be held. Notwithstanding the request for oral representations to be made, the MyCC may at any time conduct hearing for the purpose of determining whether an enterprise has infringed or is infringing Chapter 1 Prohibition.
Following from the abovementioned procedures, the MyCC will either issue a finding of non-infringement or finding of an infringement.
What are the key investigative powers that are available to the relevant authorities?
The MyCC is granted wide investigative and enforcement powers for any infringement or offences committed under the CA. The CA expressly provides that the MyCC officer investigating any commission of an offence under the CA shall have all or any of the powers of a police officer in relation to police investigation in seizable cases. Further to the police-like investigative powers, the MyCC also has the power to require the provision of information, retention of documents as well as the access to records, books, accounts, or other things for the purpose of carrying out any of the MyCC’s functions or powers under the CA.
On what grounds can legal privilege be invoked to withhold the production of certain documents in the context of a request by the relevant authorities?
Legal privilege protects communications between a solicitor and his client that have been created for the purpose of obtaining legal advice and/or in connection with existing or contemplated litigation. The MyCC cannot require a person to produce documents that benefit from such legal privilege. The legal privilege is expressly provided for in Section 22 of the CA. However, the phrase advocate and solicitor is not defined in the CA and hence, such interpretation may be taken from the Interpretation Acts 1948 and 1967 (‘IA’) where advocate is defined as a person entitled to practise as an advocate or as an advocate and solicitor under the law in force in any part of Malaysia. Based on the literal reading of the definition under the IA read together with Section 22 of the CA, legal privilege does not apply to communications between an in-house counsel and his or her employer and it is unclear whether communications between practising Malaysian advocate and solicitor and foreign lawyers (practising lawyers and internal legal advisors) (‘Foreign Lawyers’) is privileged. However, there is a case in which the High Court judge ruled that legal privilege should be attached to communications between in-house legal counsel and his or her employer as well as communications between practising Malaysian advocate and solicitor and Foreign Lawyers.
What are the conditions for a granting of full immunity? What evidence does the applicant need to provide? Is a formal admission required?
The CA provides for a leniency regime where an enterprise which admits its involvement in any infringement of the per se violations, and provided information or other form of co-operation that would “significantly” assist the MyCC in the identification or investigation of any finding of an infringement, may obtain immunity or a reduction of up to 100% of any penalties which would have otherwise been imposed. What would be considered as “significant” assistance will be determined by the MyCC on the specific circumstances of the case under consideration.
Under the current ‘Guidelines on Leniency Regime’ issued by the MyCC, an enterprise would not qualify for a 100% reduction in financial penalties if the enterprise is the one that initiates the cartel or it has taken any steps to coerce another enterprise to take part in the cartel activity. Provided that the enterprise does not fall in the category as aforementioned, the enterprise may apply to for the 100% reduction in financial penalties. The policy of the MyCC is to grant a 100% reduction in the financial penalty that would otherwise be imposed on the successful leniency applicant (for the first applicant) where:
(a) The applicant has admitted its involvement in a cartel; and
(b) The applicant offers to provide information or other form of co-operation about the same cartel in which the MyCC has no knowledge,
In addition to the above express condition, the MyCC also stated that it reserves the right to give reduction up to 100% in other circumstances that it considers appropriate.
Please note however that the leniency regime does not protect the successful applicant from other legal consequences such as civil proceedings commenced by an aggrieved person who has suffered loss or damage directly caused by the infringement.
What level of leniency, if any, is available to subsequent applicants and what are the eligibility conditions?
The amount of a reduction given will depend generally on the stage of the investigation, the nature and the ‘value-added’ of the information and other co-operation to be provided by the applicant which has already been received by the MyCC. In other words, the MyCC may take into consideration any circumstances including the time the enterprise came forward to the MyCC about an infringement, the stage in the investigation, if any, the information or other form of co-operation to be provided and the information already in possession of the MyCC.
Are markers available and, if so, in what circumstances?
According to the ‘Guidelines on Leniency Regime’ issued by the MyCC, markers are available to the second, third or subsequent leniency applicants as the situation warrants and the penalty to be imposed shall take into account the priority of the markers. Applicants wishing to apply for leniency may contact the Leniency Hotline telephone number which is posted on the MyCC’s website at www.mycc.gov.my and a Leniency Officer will attend to the matter. The marker essentially records the priority, the date and time and matter for which an enterprise intends to submit an application for leniency and contains a stipulation of the date by which the enterprise must complete its application. In such a manner, an enterprise with a marker with an earlier date and time is given priority over another enterprise with a marker with a later date and time for the same matter provided the first enterprise submits its application by the date stipulated. A marker is valid for 30 days from the date it is granted and in the event the recipient of the marker fails to complete its application by the end of the specified period (or such extended period at the discretion of the MyCC), the enterprise will lose its priority position. Following from such loss of priority, the enterprise may still obtain a new marker if it wishes to continue to make a leniency application.
What is required of immunity/leniency applicants in terms of ongoing cooperation with the relevant authorities?
The ‘Guidelines on Leniency Regime’ do not specify the requirement of ongoing cooperation with the MyCC. However, in considering a leniency application, the MyCC will exercise its judgment on whether the applicant is likely to provide information or other co-operation that will provide significant benefit to any investigation by the MyCC. In this regard, the MyCC will consider the stage of its investigation and the additional benefit of the information and other co-operation to be provided by the applicant. As an example given in the ‘Guidelines on Leniency Regime’, if an applicant is proposing to provide information or co-operation about a cartel of which the MyCC is unaware or has little information, the MyCC would be more favourably disposed to granting a (conditional) leniency. The grant of a conditional leniency shall include the following standard conditions:
(a) Admission of involvement in any infringement of the per se violations, and provided information or other form of co-operation that would “significantly” assist the MyCC in the identification or investigation of any finding of an infringement;
(b) Cease and desists from engaging in such activities;
(c) Provision of full and truthful disclosure of its participation in the cartel;
(d) Provision of continuing co-operation (if requested);
(e) Provision of the relevant documents;
(f) Confirmation that the applicant has not harassed or intimidated others to participate in the cartel;
(g) Undertaking not to disclose to any anyone without the permission of the MyCC, about any aspect of the grant of leniency including the fact that it has applied for leniency and the grant of leniency or its terms;
(h) The MyCC may upon notice to the applicant, withdraw the conditional grant of leniency if the applicant does not fulfil each and every one of the conditions of the conditional grant of leniency.
Please note that in all leniency applications, the applicants are required to enter into a written conditional leniency agreement with the MyCC which contains all the conditions that the applicant is required to satisfy in order to receive (unconditional) leniency.
Does the grant of immunity/leniency extend to immunity from criminal prosecution (if any) for current/former employees and directors?
There is no criminal prosecution to current/former employees and directors in respect of an infringement of either a Chapter 1 Prohibition or a Chapter 2 Prohibition. There is only a financial penalty imposed on the infringing enterprise. However, criminal prosecution may be brought against a current/former employee and director if the said employee and director fails to disclose or omits to give any relevant information or evidence or document, or provides any information, evidence or document that he knows or has reason to believe is false or misleading, in response to a direction issued by the MyCC. The leniency regime provided under the CA does not extend to this offence by the said employee or director.
Is there an ‘amnesty plus’ programme?
Currently, the MyCC does not adopt an ‘amnesty plus’ programme but conceptually, the MyCC may offer a reduction to the applicant who failed to secure a 100% reduction in financial penalties if the said applicant is able to provide information of other cartel conduct.
Does the investigating authority have the ability to enter into a settlement agreement or plea bargain and, if so, what is the process for doing so?
No, the CA currently does not expressly provide for a settlement agreement or plea bargain. However, under the CA as a form of settlement, the MyCC may, subject to the conditions that the MyCC may impose, accept from an enterprise an undertaking to do or refrain from doing anything as the MyCC considers appropriate. In the event that the MyCC accepts such an undertaking, the MyCC shall, in relation to an infringement, close the investigation without making any finding of infringement and shall not impose a penalty on the enterprise.
What are the key pros and cons for a party that is considering entering into settlement?
As mentioned above, there is no specific provision settlement agreement or plea bargain under the CA. In terms of offering an undertaking, offering a suitable undertaking is particularly useful to avoid a finding of infringement, which can trigger massive financial penalties and/or follow-on civil actions.
What is the nature and extent of any cooperation with other investigating authorities, including from other jurisdictions?
Under the Competition Commission Act 2010, the Minister of Domestic Trade, Co-operatives and Consumerism may direct the MyCC regarding interworking arrangements between the MyCC and any other authority in Malaysia or in a foreign jurisdiction or any international organisation and determine the arrangements for such interworking or membership of international organisations. As an example, the Central Bank of Malaysia and the MyCC has signed a memorandum of understanding on 5th June 2014 to formalise the intent of the Central Bank and the MyCC to collaborate and cooperate in areas of common regulatory objectives in order to facilitate the efficient implementation of the CA and its intended objectives to promote and protect the process of competition, while ensuring that the overall stability of the financial sector is preserved.
Insofar as the cooperation with other investigating authorities from other jurisdictions in the investigation of cartel activities is concerned, we are thus far unaware of any such cooperation having been used for any particular case, although there would be no legal impediment to MyCC entering into any such cooperation arrangements if they deem fit. However, decisions from other investigating authorities (especially the European Competition Commission) may be used as a reference in any investigation by the MyCC.
What are the potential civil and criminal sanctions if cartel activity is established?
The MyCC is allowed under the CA to impose a financial penalty of up to 10% of the worldwide turnover of each enterprise over the period during which an infringement occured. Currently, an infringement under Chapter 1 Prohibition (i.e. cartel activity) has no criminal sanctions.
What factors are taken into account when the fine is set? In practice, what is the maximum level of fines that has been imposed in the case of recent domestic and international cartels?
The MyCC has issued a ‘Guidelines on Financial Penalties’ and in imposing the financial penalty, the MyCC has the objectives of reflecting the seriousness of the infringement and deterring anticompetitive practices leading to an infringement of a prohibition under the CA.
In determining the amount of financial penalty to impose, the MyCC has in the said guidelines indicated that it will take into account some or all of the following factors:
(a) seriousness (gravity) of the infringement;
(b) turnover of the market involved;
(c) duration of the infringement;
(d) impact of the infringement;
(e) degree of fault (negligence or intention);
(f) role of the enterprise in the infringement;
(h) existence of a compliance programme; and
(i) level of financial penalties imposed in similar cases.
The MyCC has further indicated in the said guidelines that it will take into account aggravating factors, mitigating factors and the grant of leniency.
The aggravating factors may include but not limited to:
(a) the role of the enterprise as an instigator or leader or having engaged in coercive behaviour with others;
(b) obstruction of or lack of cooperation in the investigation;
(c) the enterprise has a record of committing similar infringements or other infringements under the Competition Act (recidivism);
(d) continuance of the infringement after the start of investigation; and
(e) involvement of board members or senior management in the infringement.
Meanwhile, the following non-exhaustive list of mitigating factors may also be taken into consideration:
(a) low degree of fault;
(b) relatively minor role in the infringement especially if involvement is secured by threats or coercion;
(c) cooperation by the enterprise in the investigation;
(d) existence of a corporate compliance programme that is appropriate having regard to the nature and size of the business of the enterprise; and
(e) any compensation made to victims of the infringements.
If the enterprise has received leniency, then the amount of the financial penalty as determined by the factors above, including any reduction to comply with the legal maximum requirement, will be reduced by the amount stipulated in the grant of leniency.
The maximum level of fines that the MyCC has imposed on cartels to-date is a 213.45 million ringgit penalty against the General Insurance Association of Malaysia (‘PIAM’) and 22 of its members in relation to an alleged anticompetitive agreement to fix trade discount rates for parts of certain vehicle makes, and labour hourly rates for workshops under the PIAM Approved Repairers Scheme.
Are parent companies presumed to be jointly and severally liable with an infringing subsidiary?
Parent companies are not presumed to be jointly and severally liable with an infringing subsidiary. However if the parent company and its subsidiaries form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their actions on the market, the parent company and its subsidiary may be considered as a single enterprise or a single entity under the CA and therefore subject to the penalties jointly and severalty as such. In such a case the revenue of the parent company will be taken into account for the purpose of the maximum penalty mentioned above.
Are private actions and/or class actions available for infringement of the cartel rules?
Yes, any individual who suffers loss or damage directly as a result of a Chapter 1 Prohibition may bring a private action against the infringing enterprise in the civil courts regardless of whether such individual has dealt directly or indirectly with the said enterprise. The aggrieved individual may initiate such a civil action even if the MyCC has not conducted or concluded an investigation into the alleged infringement.
Class actions are generally known as representative actions in Malaysia and there is no express prohibition in the CA that prohibits such an action to be brought against the infringing enterprise. The applicable rule for a representative action in Malaysia is Order 15 rule 12 of the Rules of Court 2012. The said Order 15 rule 12 provides that:
‘Where numerous persons have the same interest in any proceedings, the proceedings can be commenced and (unless the court orders otherwise) continued by any one or more claimants, otherwise known as “representative proceedings”’.
In interpreting the abovementioned rule, the Courts in Malaysia has adopted the test enunciated in English cases Duke of Bedford v Ellis and others  AC 1 and Smith and Others v Cardiff Corporation  2 All ER 1373 where it was held that the following three conditions must be shown to bring a representative action:
(a) The plaintiff and those represented by it are members of a class and that these members of the class had common interest;
(b) The plaintiff and those it represents have a common grievance; and
(c) The relief sought is in its nature beneficial to them all.
Therefore, a group of individuals may bring a class action against the infringing enterprise provided that they can satisfy the abovementioned conditions.
What type of damages can be recovered by claimants and how are they quantified?
The CA does not provide for the type of damages that can be recovered by individuals under a private action and there are no such cases as of today. However, considering that this is a civil action, the damages to be recovered are likely to fall under general tort law being a breach of a statutory duty. The individual seeking to recover damages needs to prove causation between the infringement and the individual’s loss and that the loss is not too remote. Subject to such proof by the individual, the calculation of the damages will be based on the financial and material losses sustained by the individual due to the infringement.
On what grounds can a decision of the relevant authority be appealed?
Appeals against MyCC’s decisions are made to the Competition Appeal Tribunal (‘CAT’), which has exclusive jurisdiction to review on appeal any findings of infringement or non-infringement made by MyCC. The CA does not expressly prescribe the grounds of appeal to the CAT. Hence any aspect of the decision of the MyCC can be a ground for appeal and it is usually on the basis that the decision erred in law or in fact.
What is the process for filing an appeal?
A person aggrieved by MyCC’s decision may appeal to the CAT by filing a notice of appeal to the CAT within 30 days of the decision. The said notice of appeal shall state in summary form the substance of the decision of MyCC being appealed against, and an address for service of notices related to the appeal.
Thereafter, the CAT may confirm or set aside the decision being appealed against, or any part of it, and may:
(a) remit the matter to the MyCC;
(b) impose or revoke, or vary the amount of, a financial penalty;
(c) give such direction, or take such other step as the MyCC could itself have given or taken; or
(d) make any other decision which the MyCC could itself have made.
The CAT’s decision is decided on a majority of its members, and is final and binding on the parties to the appeal. Nonetheless, the CAT’s decision is subject to judicial review by the High Court.
What are some recent notable cartel cases (limited to one or two key examples, with a very short summary of the facts, decision and sanctions/level of fine)?
The most recent cartel case reported by the MyCC in Malaysia is the case against 7 tuition and day care cantres for allegedly fixing and standardising the fees charged for tuition and day care centres in the Subang Jaya area in the State of Selangor. A total financial penalty of 33,068.85 ringgit was proposed to be imposed on the said tuition and day care centres. The said tuition and day care centres are also required to repudiate the price fixing agreement with immediate effect and to complete the MyCC’s e-learning course on competition compliance for small and medium enterprise.
Another recent notable case would the aforementioned case against PIAM (General Insurance Association of Malaysia) and its 22 members for cartelish behaviour in fixing the parts trade discount at 25% for six vehicle makes namely Proton, Perodua, Nissan, Toyota, Honda and Naza and 15% for the Proton Saga BLM model, as well as the labour hourly rate of RM30.00 per hour for PIAM Approved Repairers Scheme (‘PARS’) workshops. The fine was 213.45 million ringgit and it is the highest fine imposed by the MyCC to-date.
What are the key recent trends (e.g. in terms of fines, sectors under investigation, applications for leniency, approach to settlement, number of appeals, etc.)?
The MyCC is seen to be taking on a more active role in identifying and investigating infringements of the CA.
In March 2018, it was reported in the media that MyCC was investigating 16 cases across six industries, including government procurement, pharmaceutical, information technology, financial products and logistics and in September 2018, it was reported in the media that MyCC was investigating tyres and beverage companies in Malaysia for possible cartel conduct to fix prices.
The most recent media report was in December 2018. It was reported that the MyCC was investigating anti-competitive elements that may occur in the domestic market for chicken eggs such as the existence of price-fixing cartels, market sharing and deliberate limiting of production by certain parties.
What are the key expected developments over the next 12 months (e.g. imminent statutory changes, procedural changes, upcoming decisions, etc.)?
There are no indications of any key developments over the next 12 months insofar as Chapter 1 Prohibition is concerned. However, there are indications that the MyCC has intentions to introduce merger control laws under the CA.