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Small and developing competition agencies – Competition Commission of Malaysia – December 2017 OECD discussion

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This presentation by the Competition Commission of Malaysia was made during Break-out Session 1: Advocacy in the framework of the discussion on “Overcoming adversity and attaining success: Small and developing competition agencies” held at the 16th meeting of the OECD Global Forum on Competition on 8 December 2017. More papers and presentations on the topic can be found out at oe.cd/sda.

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Small and developing competition agencies – Competition Commission of Malaysia – December 2017 OECD discussion

  1. 1. 1 Dato’ Jagjit Singh a/l Bant Singh Member of the Commission, MyCC 16th OECD GLOBAL FORUM ON COMPETITION 7 – 8 December 2017, Paris Advocacy Efforts within the Government and creating a competition culture in the public “within the budget”.
  2. 2. • An independent body established under the Competition Commission Act 2010 to enforce the Competition Act 2010. • Came into effect on 1 April 2011. Main roles include: • Advocacy • Investigation & Enforcement • Market review • Exemption • Compliance & Leniency • Advisory to the Government MALAYSIA COMPETITION COMMISSION (MyCC) 2
  3. 3. COMPETITION ACT 2010 • An Act to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected therewith. • Came into force on 1 January 2012. 3
  4. 4. ANTI-COMPETITIVE PRACTICES ANTI-COMPETITIVE AGREEMENTS (Sec. 4) ABUSE OF DOMINANT POSITION (Sec. 10) MAIN PROHIBITIONS OF THE COMPETITION ACT 2010 4 4
  5. 5. CHALLENGES OF ADVOCACY EFFORTS WITH THE GOVERNMENT • National competition law is still a relatively new phenomenon. • Lack of understanding of competition law and culture in devising government policies amongst government bodies. • Balancing between national interest and competition law. • Political economy versus competition policy to fully implement competition neutrality on all government agencies. 5
  6. 6. 1. Lack of understanding of competition law within the government • Competition law and culture is still fairly new in the government sector. • Competition law said to be technical. • Resistance to competition policies and law since it is perceived to impede governmental policies – “an unnecessary additional layer”. • Competition policies and law seen as an interference to the freedom that had been traditionally enjoyed by the Ministries and Agencies in performing their duties and functions. 6
  7. 7. Dated 24 March 2017 Website: www.mycc.gov.my “Study on Awareness and Perception of CA 2010 and Role of MyCC in Malaysia”. 7
  8. 8. Amongst research objectives... • To determine the level of awareness and knowledge of the various stakeholders including the government agencies of the Competition Act 2010. • To determine the level of awareness and knowledge of the various stakeholders on the role of MyCC. 8
  9. 9. SUMMARY OF RESULTS RESEARCH OBJECTIVE 1 To determine the quality of advocacy and outreach of MyCC. • Government agencies were among the medium category of stakeholder groups in acknowledging on the quality of advocacy and outreach programs of MyCC.
  10. 10. RESEARCH OBJECTIVE 2 To determine the level of awareness and knowledge of the CA 2010. • Government agencies knowledge on CA 2010 was low but were able to correctly identify illegal practices under CA 2010 especially on bid rigging and price discrimination. • Only business organizations indicated they have a lot of knowledge about CA 2010.
  11. 11. RESEARCH OBJECTIVE 3 To determine the level of awareness of the role of MyCC. • Government Agencies indicated having a fair amount of knowledge about MyCC. • None of the stakeholder groups indicated having a lot of knowledge about MyCC.
  12. 12. ACTIONS TAKEN TO OVERCOME ADVOCACY CHALLENGES • MyCC Advocacy and Communication Committee (ACC); • Strategic Plans for Competition Advocacy; • Adoption of good practice ‘Guidelines’; • Government funded market studies/public consultations; • Training programs for government bodies. 12
  13. 13. • The ACC was established for the promotion of a competition friendly environment through advocacy and non-enforcement initiatives, directed at the government, business and civil society sectors; • The ACC focussed its advocacy efforts towards encouraging stakeholders to choose self-compliance over being caught for non- compliance of the law; • The ACC consisted of representatives from government agencies, consumer and business associations, media and SME Corporation. 13 MyCC Advocacy and Communication Committee (ACC)
  14. 14. 14 Strategic Plan for Competition Advocacy • MyCC issued two handbooks on Competition Advocacy Strategic Plan in 2012 and 2015. • Sets out the rationale and framework for the work program of the MyCC in first and second phases of the implementation of the Competition Act 2010.
  15. 15. 15 Training Programs for Government Agencies • Collaborating with Malaysian Anti-Corruption Commission, National Audit Department, Ministry of Finance and Ministry of Health in hosting bid-rigging forums which is targeted for government procurement officers. • Engaging with National Institute of Public Administration (INTAN) and Judicial and Legal Training Institute (ILKAP) to provide small group training programs on competition law for government officers. • Engaging with Ministry of Domestic Trade, Co-operatives and Consumerism Offices to co-host briefing programs at the State level. • Special Working Group was set up with Malaysian Productivity Corporation in promoting Regulatory Impact Assessment relating to national competition matters.
  16. 16. THE ROLE OF MyCC ON AWARENESS ON BID RIGGING 16 Web link: http://www.mycc.gov.my/handbook MyCC Handbook on “HELP US DETECT BID RIGGING” (in English and Malay languages) 16
  17. 17. SEMINAR ON FIGHTING BID-RIGGING AND ABUSE OF DOMINANT POSITION IN PUBLIC PROCUREMENT UNDER THE COMPETITION ACT 2010 THE ROLE OF MyCC ON AWARENESS ON BID RIGGING 17
  18. 18. No. of Awareness Programs and Engagements 18 Year No. 2011 26 2012 37 2013 30 2014 31 2015 48 2016 28 2017 18 TOTAL 218
  19. 19. Government funded market studies (s. 11 CA 2010) • Study of the broiler market; – To determine if there are any features that are preventing or distorting competition in the market; – MyCC made policy recommendation to the Government; • Market review on pharmaceutical sector; • Market review on building materials in the construction Industry. 19
  20. 20. 20
  21. 21. 2: Balancing between national interest and competition law • Competition Act 2010 was a compromise between the competing interests. • Commercial/Government activities excluded from the Competition Act 2010  Section 3(4) – any activity, directly or indirectly in the exercise of government authority 21
  22. 22. • Section 3(3) – exclusions  Communication and Multimedia Act 1998  Telecommunication services  Energy Commission Act 2001  Gas supply  Petroleum Development Act 1974 and Petroleum Regulations 1974  Upstream and downstream oil and gas industry  Aviation Commission Act 2015 22
  23. 23. Reasons for exclusions from CA 2010 • Seen as strategic national industries – Petronas, telecommunications. • Specific laws regulating the sector have competition elements in their law prior to CA 2010 – want to be governed and regulated by their own Commissions. • Revenue generating for the government. • Exemptions mostly for specific sectors formerly enjoying monopolistic positions 23
  24. 24. Mergers and acquisition exempted under CA 2010 • Reasons for exclusion: – Mergers and acquisitions seen to be regulated by Securities Commission and Central Bank under Ministry of Finance; – CA 2010 seen as would be interfering in merger policies – merger approved as a matter of policy but disproved by MyCC; – National interests - National champions - banking, airline, petroleum industry; – Allow the entity be dominant but regulate it under s. 10 CA 2010. 24
  25. 25. Challenges: Dilution of jurisdiction • May lead to multiplicity/duplicity of competition authorities; • May lead to ineffective regulation and enforcement of competition policies; • Competition policy may be a small element of their law governing the sector of the industry; • How independent are the competition regulators under the specific law regulating a certain sector; • Focus may not be on competition but on the industry itself; • May tend to relax competition requirements and enforcement. 25
  26. 26. • Aviation Commission Act 2015 26 Prior to Aviation Commission Act 2015
  27. 27. The MAS-AIR ASIA case • In 2011, Malaysian Airlines (MAS) and Air Asia entered into a Collaboration Agreement as part of a share swap agreement. • It was agreed that MAS was to be a full-service premium carrier while Air Asia and Air Asia X would be regional low cost and medium-to long haul low cost carriers. 27
  28. 28. MAS-AIRASIA • It resulted in Firefly (MAS’s low cost carrier), withdrawing from several KL – Sabah and Sarawak routes, leaving Air Asia as the only low cost carrier for those sectors. 28
  29. 29. MAS-AIRASIA 29
  30. 30. MAS-AIRASIA • MyCC found MAS and Air Asia’s conduct constituted an anti- competitive agreement to share markets (s. 4(2)(b); • The Commission imposed a financial penalty of RM10 million each on MAS and Air Asia on 31 March 2014. – This case is currently under Judicial Review before the High Court. 30
  31. 31. • Aviation Commission Act 2015 MAS and Airasia are no longer under MyCC’s jurisdiction. 31 Now: Aviation Commission Act 2015
  32. 32. 32 • The Committee was established to share common issues and polices on competition law to ensure consistency in the application of the law with government regulators in Malaysia. • Regular meetings are held at least twice a year. Action taken by MyCC: Special Inter-Government Committee on Competition
  33. 33. Members 1) Malaysia Competition Commission; 2) Malaysian Aviation Commission; 3) Malaysian Communications and Multimedia Commission; 4) Energy Commission; 5) Securities Commission; 6) National Water Services Commission; 7) Central Bank of Malaysia; 8) Land Public Transport Commission; and 9) Intellectual Property Corporation of Malaysia. 33
  34. 34. CHALLENGES? • Concept of monopolistic practices and culture entrenched within the governmental agencies. • Price fixing mechanisms practiced and promoted by the government. • Traditional practice for industries, and associations to fix prices • Control of Price Act – essential food stuff – rice, sugar, flour… • Scale of fees fixed by professionals • Government privatization and concession projects • Dominant entities regulated it under s. 10 34
  35. 35. 35 KELANTAN SAND TRADERS CASE Price fixing mechanisms practiced and promoted by the government
  36. 36. KELANTAN SAND TRADERS • In January 2017, the Commission received information alleging that 13 sand traders based in the state of Kelantan had collectively increase their prices for sand per lorry via the issuance of a price list which they followed. • During the course of the investigation, it was found that the Kelantan State Land and Mines Office had held meetings with these sand traders for the purpose of informing the appointment of a company that will manage the accumulation of rock (sand) material on behalf of the Kelantan State Government. 36
  37. 37. KELANTAN SAND TRADERS • Following Kelantan State Land and Mines office advice, the sand traders met to discuss about the appointment of the said company, its impact and how to deal with the situation. • The sand traders agreed to impose a new sand price based on the price list of sand produced by them for their respective districts. • The State Government than issued a price list on both the price of sand and transportation fees which were deemed to be owned by the State and required to be followed by both sand traders and transport companies. 37
  38. 38. KELANTAN SAND TRADERS • MyCC found this price fixing to be anti competitive. • The 13 sand traders offered an undertaking to repeal the list of sand prices and to issue and publish the said undertaking in local newspapers in local languages; • This undertaking was accepted by the Commission. • The Commission issued a Policy Advice to the Kelantan State Land and Mines Office to dismantle the fixed prices for sand and the transportation fee imposed on the sand traders. 38
  39. 39. 39 Example: MyEG case Government privatization and concession projects
  40. 40. The MyEG case • In 2015, MyEG, was appointed by the Government as the sole service provider for foreign worker permit renewals (FWPR). • 3 types of mandatory insurance are required to be purchased for FWPR: – Insurance Guarantee (IG); – Foreign Worker Hospitalization and Surgical Scheme (FWHS); and – Foreign Workers Compensation Scheme FWCS). • Prior to appointment, MyEG was the agent of a local insurance company. 40
  41. 41. MyEG case • Initially MyEG had made it compulsory for IG to be purchased only through them. • Subsequently, MyEG informed foreign worker employers that the FWPR process would be “easier and faster” if all 3 mandatory insurance were purchased from MyEG. • FWPR process was slower if mandatory insurance was purchased from other insurance companies that MyEG is not an agent of. • MyCC found MyEG’s conduct had distorted competition in the market for FWPR mandatory insurance via its position as sole service provider for FWPR by imposing different conditions to equivalent transactions (s. 10(2)(d)). 41
  42. 42. MyEG case • The Commission imposed a financial penalty of RM2.3 million on MyEG as at 24 June 2016. • The Commission also directed MyEG to: – Cease and desist ; – provide an efficient gateway; and – to provide an undertaking fully compliant with the relevant local insurance rules and regulations . • This case is currently under Appeal before the Competition Appeals Tribunal. 42
  43. 43. ACTIONS TAKEN • Advice to government bodies on competition matters; • MOU with government agencies. 43
  44. 44. 44 Advice to Government bodies on Competition Matters • Government agencies are required to refer policies touching or dealing with competition issues be to MyCC for their comments and feedback for Competition Impact Assessment. • Similarly any new laws to be enacted which touches on competition issues or commercial enterprises are referred to MyCC for their comments
  45. 45. Policy advice given to government/agencies by MyCC 45 Year No. 2011 2 2012 13 2013 4 2014 9 2015 4 2016 4 2017 4 TOTAL 40
  46. 46. 46 • MOU in 2014. • Worked closely with Central Bank of Malaysia on complaints, policies and issues related to competition issues in the financial sector in Malaysia. • Recent development – MyCC has issued a proposed decision against licensed bodies under the supervision of the Central Bank of Malaysia. The case is still pending. MOU with Central Bank of Malaysia
  47. 47. Conclusion • MyCC has been playing an active role in balancing the conflicting competition issues between government agencies, enterprises and MyCC largely through advocacy efforts. • This has resulted in greater awareness of competition law and policies within the governmental sector. 47
  48. 48. 48

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