by Ashley Gwee Chai Lian (6 December 2021)
The Malaysia Competition Commission (“MyCC”) is the body established under the Competition Commission Act 2010 to enforce the Competition Act 2010 (“CA 2010”). CA 2010 applies to all commercial activities undertaken within Malaysia as well as outside of Malaysia (if it has an effect on competition in the Malaysian market), with the exception of certain commercial activities that have been carved out such as the commercial activities regulated under the Communications and Multimedia Act 1998, the Energy Commission Act 2001 and the Malaysian Aviation Commission Act 2015.
MyCC is to protect the competitive process for the benefit of businesses, consumers and the economy. The number of enforcement decisions made by MyCC has attracted a lot of attention from the public. In a recent decision made by MyCC on 26 July 2021, MyCC has issued fines of over RM1 million to 7 warehouse operators in Port Klang, namely SAL Agencies Sdn Bhd, WCS Warehousing Sdn Bhd, Regional Synergy (M) Sdn Bhd, Intrexim Sdn Bhd, Pioneerpac Sdn Bhd, Prima Warehousing Sdn Bhd and Interocean Warehousing Services Sdn Bhd (the “Operators”), for price-fixing.
Background Facts
The Operators were enterprises involved in cargo handling and warehousing services in Port Klang, which were regulated and managed by the Port Klang Authority (“PKA”). The Operators were also subject to the laws and regulations set by the PKA, which included tariffs and charges gazetted (such as warehouse storage charges and handling charges).
Through the investigation by MyCC, MyCC discovered that the representatives of the 7 Operators had formed a WhatsApp Group to discuss the imposition of the surcharges. The representatives agreed on the rate of the surcharges and further signed a Surcharge Memorandum in May 2017, which was an attempt to fix and standardise the rate for handling services for long length at RM350.00 per handling. The Operators had agreed to implement the agreed rate from 1 June 2017.
The Relevant Laws
CA 2010, amongst others, prohibits agreements between enterprises which significantly restrict competition. A horizontal or vertical agreement that has object or effect of significantly preventing, restricting or distorting competition in any market for goods or services in Malaysia shall be held to be in breach of Section 4 of CA 2010.
The texts of Section 4 of CA 2010 are reproduced as follows:
“4. (1) A horizontal or vertical agreement between enterprises is prohibited insofar as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services.
(2) Without prejudice to the generality of subsection (1), a horizontal agreement between enterprises which has the object 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—
(i) production;
(ii) market outlets or market access;
(iii) technical or technological development; or
(iv) investment; or
(d) perform an act of bid rigging, is deemed to have the object of significantly preventing, restricting, or distorting competition in any market for goods or services.(3) Any enterprise which is a party to an agreement which is prohibited under this section shall be liable for infringement of the prohibition.
MyCC’s Decision
MyCC concluded that the conduct of the Operators amounts to an infringement under Section 4 of CA 2010. The internal agreement reached by the Operators evidenced by the entry into of the Surcharge Memorandum was a horizontal price fixing agreement which had the object of significantly preventing, restricting or distorting competition.
It is notable that only 6 of the Operators had actually implemented the agreed rates as stated in the Surcharge Memorandum. However, the Operator who had not strictly adhered to the Surcharge Memorandum was still held liable for entering into the agreement.
In addition to the imposition of fines, the Operators were ordered to cease and to refrain from engaging in price-fixing agreements that may disrupt competition in the handling of long length and heavy lift import and export cargoes in Port Klang, Malaysia.
Conclusion
Given the unprecedent circumstances brought about by COVID-19 pandemic, we note that businesses are seeking out ways to explore or collaborate with competitors. However, businesses are reminded to be mindful of the provisions of CA 2010. This recent decision is a reflection of MyCC’s tough stance to ensure healthy competition and best possible prices for consumers. It will be advisable for businesses to seek for legal advice before any collaboration or cooperation with the competitors are undertaken.
Note: This article does not constitute and should not be relied on or treated as legal advice on or with respect to any particular case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.