Competition law exists to ensure businesses compete fairly, protecting consumers and promoting economic efficiency. In Malaysia, the Competition Act 2010 governs anti-competitive behaviour across all commercial sectors, with enforcement handled by the Malaysia Competition Commission (MyCC). Non-compliance can result in severe financial penalties and reputational damage.

This guide explains what Malaysian businesses need to know about competition law compliance, including prohibited practices, merger considerations, and the penalties for violations.

Understanding the Competition Act 2010

The Competition Act 2010 came into force on 1 January 2012 and applies to all commercial activities within Malaysia and outside Malaysia that affect competition in Malaysian markets. The Act is built around two main prohibitions that every business must understand.

The Malaysia Competition Commission (MyCC) is the independent body responsible for enforcing the Act, investigating complaints, and imposing penalties on businesses that breach competition law.

Chapter 1 Prohibition: Anti-Competitive Agreements

Section 4 of the Competition Act prohibits agreements between enterprises that have the object or effect of significantly preventing, restricting, or distorting competition in any market for goods or services. This applies to both horizontal agreements (between competitors) and vertical agreements (between businesses at different levels of the supply chain).

Hardcore Restrictions

Certain practices are considered so harmful to competition that they are deemed anti-competitive by their very nature. These include:

Price fixing: Agreements between competitors to set, maintain, or coordinate prices. This includes agreeing on minimum prices, price increases, or pricing formulas.

Market sharing: Dividing markets by geography, customer type, or product line among competitors. For example, two suppliers agreeing that one will serve the northern region while the other serves the south.

Bid rigging: Coordinating with competitors on tender submissions, including agreements on who will submit the winning bid, what prices to quote, or arrangements to rotate winning bids.

Output limitation: Agreements to restrict production or supply quantities to artificially inflate prices.

Other Potentially Anti-Competitive Agreements

Beyond hardcore restrictions, other agreements may breach Section 4 if they significantly harm competition. These are assessed on a case-by-case basis and include exclusive dealing arrangements, resale price maintenance, and certain distribution agreements. The MyCC will consider factors such as the market shares of the parties involved and the actual effects on competition.

Chapter 2 Prohibition: Abuse of Dominant Position

Section 10 of the Competition Act prohibits enterprises with a dominant market position from abusing that dominance. Having a dominant position is not itself illegal—it is the abuse of that position that breaches the law.

What Constitutes Dominance?

A business is considered dominant when it can behave independently of competitive pressures from competitors and customers. While there is no fixed market share threshold, enterprises with market shares above 60% are more likely to be considered dominant. However, dominance can exist at lower market shares depending on factors such as barriers to entry, the strength of competitors, and buyer power.

Examples of Abusive Conduct

Conduct that may constitute abuse of dominance includes:

Predatory pricing: Setting prices below cost to drive competitors out of the market, with the intention of raising prices once competition is eliminated.

Excessive pricing: Charging prices that bear no reasonable relation to the economic value of the product or service.

Refusal to supply: Refusing to deal with certain customers or competitors without objective justification, particularly where the dominant enterprise controls an essential input.

Tying and bundling: Requiring customers to purchase one product as a condition of purchasing another, where this harms competition.

Exclusive dealing: Requiring customers or suppliers to deal exclusively with the dominant enterprise, foreclosing market access to competitors.

Merger Control Considerations

Unlike some jurisdictions, Malaysia does not currently have a mandatory merger notification regime under the Competition Act 2010. However, this does not mean mergers escape scrutiny entirely.

The MyCC has the power to investigate mergers that may substantially lessen competition. In practice, businesses contemplating significant mergers or acquisitions—particularly those involving substantial market shares or combining major competitors—should consider seeking informal guidance from the MyCC before completing the transaction.

Additionally, certain regulated sectors have their own merger control rules. For example, the Malaysian Communications and Multimedia Commission (MCMC) and the Malaysian Aviation Commission (MAVCOM) have sector-specific merger frameworks.

Penalties for Non-Compliance

The consequences of breaching competition law in Malaysia are substantial and should not be underestimated.

Financial Penalties

For infringements of Section 4 (anti-competitive agreements) or Section 10 (abuse of dominance), the MyCC can impose financial penalties of up to 10% of the worldwide turnover of the infringing enterprise for the period during which the infringement occurred.

Directors and officers who consent to, connive in, or neglect to prevent an offence may face personal liability, including fines of up to RM5 million or imprisonment of up to five years, or both.

Other Consequences

Beyond financial penalties, non-compliance can result in:

Directions to cease and desist from the anti-competitive conduct.

Requirements to take specific actions to remedy the breach.

Private actions for damages by parties who have suffered loss as a result of the anti-competitive conduct.

Significant reputational harm and loss of business relationships.

Practical Compliance Tips for Malaysian Businesses

Building a culture of competition law compliance requires proactive measures. Here are practical steps businesses should consider:

Develop a compliance programme: Implement a written competition law compliance policy tailored to your business activities and train employees regularly on its requirements.

Review agreements carefully: Before entering into agreements with competitors, suppliers, or distributors, assess whether any provisions could raise competition concerns. Pay particular attention to pricing terms, exclusivity clauses, and territorial restrictions.

Exercise caution at industry events: Trade association meetings and industry conferences can create opportunities for inappropriate discussions with competitors. Ensure employees understand what topics are off-limits, including pricing strategies, customer allocation, and market sharing.

Document legitimate business justifications: If your business engages in conduct that could potentially be challenged, ensure you document the legitimate commercial reasons for that conduct.

Seek legal advice early: When in doubt about whether particular conduct might breach competition law, seek legal advice before proceeding. Early guidance is far less costly than defending an investigation.

Monitor market position: If your business has significant market share, be particularly vigilant about conduct that could be characterised as abusive. Pricing decisions, refusals to deal, and exclusive arrangements all warrant careful consideration.

The Leniency Regime

The MyCC operates a leniency programme for enterprises involved in cartel conduct. Businesses that come forward and provide evidence of cartel activity may receive immunity from, or a reduction in, financial penalties. The first enterprise to report and fully cooperate may receive total immunity, while subsequent applicants may receive penalty reductions of up to 50%.

This creates a powerful incentive for businesses to self-report cartel involvement rather than risk being exposed by a co-conspirator seeking leniency.

Conclusion

Competition law compliance is not merely a legal obligation—it is good business practice that protects your enterprise from substantial penalties and reputational harm. By understanding the prohibitions under the Competition Act 2010, implementing robust compliance measures, and seeking appropriate legal advice, Malaysian businesses can compete vigorously while staying on the right side of the law.

Disclaimer: This article provides general information about competition law in Malaysia and does not constitute legal advice. Competition law matters are complex and highly fact-specific. For advice on your particular circumstances, please consult a qualified legal professional.