Proposed Amendments to Malaysia’s Competition Act

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→Proposed Amendments to Malaysia’s Competition Act

Proposed Amendments to Malaysia’s Competition Act

The Malaysia Competition Commission (“MyCC”)[1] has embarked on an amendment exercise for the Competition Act 2010. On 25^th April 2022, MyCC published its proposed amendments to the Competition Act in the form of a consultation paper and a separate document which presents the salient points of the proposed amendments. These are now open to public consultation, and MyCC is inviting all interested stakeholders and members of public to make written submissions in response to the proposed amendments until 27^th May 2022. As explained in detail below, the proposed amendments relate to a new merger control regime, MyCC’s investigation and enforcement powers, and new procedures.

Proposal for New Merger Control Regime
Currently, the Competition Act only sets out prohibitions against anticompetitive agreements and abuses of dominant market position. In Malaysia, merger control regimes only exist in relation to the aviation and communications sectors, under the Malaysian Aviation Commission Act 2015 and the Communications and Multimedia Act 1998 respectively. MyCC is now proposing to introduce a merger control regime under the Competition Act, which would prohibit any merger or anticipated merger that may result in substantial lessening of competition in any market for goods or services.[2]

Hybrid Notification System:

The proposed merger control regime involves a hybrid notification system, which includes both mandatory and voluntary notification of anticipated mergers. Under this system, anticipated mergers which exceed the prescribed threshold must be notified to MyCC (i.e. mandatory notification),[3] and for mergers or anticipated mergers which do not exceed the prescribed threshold, enterprises may voluntarily notify MyCC either before or after the merger or anticipated merger has been consummated (i.e. voluntary notification).[4] The notification threshold is to be prescribed by MyCC by an order published in the Gazette,[5] after the amendments to the Competition Act have been passed. MyCC also seeks to impose a requirement on enterprises not to consummate any anticipated merger for which mandatory notification has been given, prior to receiving approval from MyCC.[6]

Penalties for Merger Violation:

Failure to notify MyCC of an anticipated merger which exceeds the prescribed threshold would result in merger violation. Similarly, any enterprise which consummates an anticipated merger prior to obtaining MyCC’s approval would be liable for merger violation, and the merger would be rendered void.[7] For these violations, MyCC is proposing a financial penalty of up to 10% of the value of the merger transaction or anticipated merger transaction.[8]

Review Period for Notifications:
As regards the review period for assessing anticipated mergers that are subject to mandatory notification, MyCC would have 120 working days[9] from the date of receipt of complete notification to issue its decision on the anticipated merger. This time limit would only apply to mandatory notifications and would not apply to mergers or anticipated mergers that are voluntarily notified. In the event that MyCC has not made any decision despite being notified of the anticipated merger (as required), upon expiry of the 120 working days review period, the anticipated merger shall be deemed to be approved and the parties may proceed to consummate the merger. However, it is also possible for MyCC to stop or suspend the merger assessment when:

(a) MyCC requests further information from the enterprise

(b) the enterprise seeks an extension of time to file for their written representation

(c) the enterprise wants to make an oral representation, or

(d) the enterprise submits a commitment offer.[10]

Merging enterprises may offer commitments to MyCC to encourage MyCC to issue clearance decisions, which determine that the merger or anticipated merger does not infringe the Competition Act. These are commitments to remedy, mitigate or prevent the substantial lessening of competition caused by the merger or anticipated merger. Commitment offers may be accepted by MyCC at any time before MyCC makes a decision in relation to the notified merger or anticipated merger, or before the completion of an investigation carried out by MyCC.

Exclusions from Merger Control Regime:

The following types of mergers and anticipated mergers are proposed to be excluded from the merger control regime:

(a) Mergers involving commercial or economic activities regulated by the Communications and Multimedia Act 1998, Malaysian Aviation Commission Act 2015, Gas Supply Act 1993, Energy Commission Act 2001, Postal Services Act 2012, and the Petroleum Development Act 1974 (for upstream activities only)

(b) Mergers between enterprises licensed or approved or registered with the Bank Negara Malaysia (BNM), Securities Commission (SC), Labuan Financial Services Authority (LOFSA) and Suruhanjaya Perkhidmatan Air[11] (SPAN)

(c) Mergers that were engaged in order to comply with a legislative requirement

(d) Mergers carried out by enterprises entrusted by the Federal or State Government with the operation of services of general economic interest or having the character of a revenue-producing monopoly in so far as the prohibition under section 10A[12] would obstruct the performance of the task assigned to the enterprise.[13]

Proposals to Enhance MyCC’s Investigation and Enforcement Powers

MyCC is proposing several new provisions and amendments to enhance its investigation and enforcements powers under the Competition Act. Some of its key proposals are as follows:
・To empower MyCC to administer a whistleblower regime, to encourage the sharing of relevant information or assistance in relation to investigations carried out by MyCC. The whistleblower regime may include the payment of a reward to a whistleblower and shall be administered by MyCC through the issuance of a guideline.[14]

・To empower MyCC to request information or documents from any person for the purpose of conducting a market review; to empower MyCC to request assistance from any government entity if MyCC believes that the government entity possesses information or documents that are related to the subject of the market review.[15]

・To empower MyCC to make a disclosure of confidential information pursuant to an international agreement to which Malaysia is a party.[16]

・To empower MyCC to investigate merger violations when it has reasons to suspect that a merger violation has occurred.[17]

Proposals for New Settlement Procedure and Amendments to Existing Leniency Regime

MyCC is also proposing a new settlement procedure for enterprises who admit liability for infringing the anti-competitive agreement prohibition or the abuse of dominant position prohibition under the Competition Act. By opting for this settlement procedure, these enterprises will be entitled to a reduction of their financial penalty of up to 20%, which will be in addition to any reduction of financial penalty they are entitled to under the leniency regime.[18]

The existing leniency regime allows for reduction of penalties in certain circumstances. MyCC is seeking to clarify and strengthen this regime, by empowering MyCC to grant differing percentages of reduction of financial penalty to enterprises, depending on the time at which the enterprise made the leniency application, as well as other factors (e.g. whether or not the enterprise has provided information or other forms of co-operation which significantly assists in the inquiry or investigation of the infringement). MyCC also proposes to extend the application of the leniency regime to all infringements related to anti-competitive agreements (i.e. including both horizontal and vertical agreements).[19] Currently, the leniency regime only applies to infringements of horizontal agreements with anti-competitive objects outlined in section 4(2) of the Competition Act (i.e cartel practices).

Proposal to Amend Definition of “Enterprise”

MyCC proposes to amend various definitions provided by the Competition Act. One of the key proposals is to amend the current definition of “enterprise”, to ensure clarity and to prevent anti-competitive conduct from escaping legal scrutiny due to technical loopholes in the current definition. Under the current definition, “enterprise” means “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, both form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their actions on the market”.

The following amendments are proposed for the current definition of “enterprise”:

a) Replacing the term “entity” with “person”. This is to clarify that the legal status of the person is not relevant in determining whether or not the person is subject to the Competition Act.

b) Insertion of the term “economic activities” into the definition of “enterprise”.

c) Insertion of the wording “regardless of its legal status and the way in which it is funded” into the definition of enterprise.

d) Removal of the circumstances which render a parent and subsidiary company to be regarded as a single enterprise. The aim of this amendment is to prevent enterprises from misusing the current provision to escape liability for engaging in anti-competitive conduct. Nonethless, MyCC will still be able to apply the doctrine of “single economic entity” on a case-by-case basis, depending on the facts and circumstances of the case.[20]

[1] The independent body in Malaysia responsible for enforcing the Competition Act 2010.

[2] Proposed new section 10A.

[3] Proposed new section 10F.

[4] Proposed new section 10H and 10I.

[5] Proposed new section 10J. This section also empowers MyCC to review the sufficiency of the threshold and amend the threshold, through an order published in the Gazette.

[6] Proposed new section 10G.

[7] Proposed new sections 10F and 10G.

[8] Proposed new section 43L.

[9] The 120 working days consists of a Phase 1 review period of 40 working days, and a Phase 2 review period of a further 80 workings days. Phase 2 consists of an in-depth assessment and will only apply if necessary (page 23 of the Consultation Paper on the Proposed Amendments to the Competition Act 2010).

[10] Proposed new section 10F.

[11] The National Water Services Commission.

[12] Proposed new prohibition against mergers and anticipated mergers that may result in substantial lessening of competition in any market for goods or services.

[13] No. 67 of the Salient Points of the Proposed Amendments to the Competition Act 2010.

[14] Proposed new section 41A.

[15] Proposed new section 11A.

[16] Proposed new subsection for section 21(2).

[17] Proposed new section 34E.

[18] Proposed new section 40A.

[19] No. 43 of the Salient Points of the Proposed Amendments to the Competition Act 2010.

[20] No.1 of the Salient Points of the Proposed Amendments to the Competition Act 2010 (pages 5-6 of the related document).