Malaysia Competition Commission : Affirming Trust in the Marketplace

Competition laws are a cornerstone of any modern economy. They serve to ensure that free markets operate fairly and prohibit any exploitative or exclusionary business activities that stifle healthy competition in the marketplace. The establishment of the Malaysia Competition Commission, known as MyCC, as the independent body mandated to enforce and protect the competitive process in Malaysia, motioned a new progressive chapter for the country. With a steady hand at the helm,
MyCC looks to further empower the market in the interest of consumers, businesses and the overall economic progress of the nation.

“Competition will guarantee three things for the consumer: competitive prices, quality and choices. This is a proven theory.”

For over a decade, MyCC has protected the practice of free and fair competition in Malaysia, and in doing so, raised the nation on par with other open markets. Although relatively young in comparison to other Government agencies, MyCC’s track record speaks for itself. And in celebrating its 10th anniversary, the Commission pledges to continue this upward trajectory, to further advance and streamline pro-competitive measures as Malaysia moves ahead with its digital economy aspirations. CEO Iskandar Ismail speaks to International Business Review about MyCC’s role in this transition. He expounds on cultivating thriving competitive markets to achieve balanced growth in the face of increasing expectations and challenges.

A Decade of Change

The history of competition laws and policies can be traced back to the late 19th century. Antitrust or competition policies have been implemented in over 130 countries as a tool to safeguard the interests of consumers and businesses in an open economy. When the Competition Act 2010 (CA2010) was gazetted on 10 June 2010 and came into effect on 1 January 2012, Malaysia became the 120th country to implement and enact a national competition law. In comparison, neighbouring countries like Indonesia and Singapore had enacted their competition laws in 1999 and 2005 respectively.

MyCC was established under the Competition Commission Act 2010 with the mandate to implement and enforce the provisions of CA2010. Its role is to safeguard the process of free and fair competition in commercial markets in the interest of both consumers and businesses. The breadth of its functions includes investigation and enforcement, carrying out market reviews in relation to issues connected to competition in the Malaysian economy and issuing policy advice and guidelines concerning competition laws. The Commission also undertakes education and advocacy programmes to enhance awareness among the public about the importance of competition.

With strong credentials in law and prosecution, honed by experiences in acclaimed organisations such as Bank Negara Malaysia and the United Nations, it comes as no surprise that Iskandar was the man chosen to lead the Investigation and Enforcement Division in MyCC before he was appointed CEO.

“For over 10 years, MyCC had demonstrated great dedication and commitment in being the competition watchdog and champion,” Iskandar notes. MyCC has issued 59 policy advice, conducted more than 306 advocacy programmes and published seven guidelines on Competition Law.

Stimulating the Economy

CA2010 was formulated to promote the economic development of Malaysia by protecting the process of competition. Fair competition in the marketplace promotes a conducive ecosystem for the economy to thrive. In other words, it creates a free market that works well for consumers and businesses. It is simple economics that is often taken for granted. According to Iskandar, a competitive culture among traders will encourage efficiency, entrepreneurship and innovation. “Lack of competition will stifle innovation,” Iskandar highlights. This goes back to the basic principles of economics and human nature. “Traders will become too comfortable because they know that at whatever quality or price, consumers will have no choice but to buy their products.”

In turn, healthy competition between players within an industry also helps guarantee three things for consumers: good prices, choices and quality. Iskandar cites an easy example of hypermarkets like Giant, Econsave and Aeon which are present across the country. “With these three players actively competing with one another, consumers have access to a wide variety of products with better quality and at competitive prices.” This allows consumers to make comparisons and informed choices based on their preferences and financial capabilities.

This serves the macro side of things as it impacts consumer confidence. Iskandar remarks, “If consumers are satisfied with the price and quality, they are happier and become more willing to spend.” Consumer spending makes up the largest component of aggregate demand. If consumer expenditure drops, demand will remain stagnant; traders will have no source of revenue which will adversely impact Gross Domestic Product. This is the reason why indices on consumer confidence and satisfaction are important as it reflects the overall health of the economy. “Consumers hold the trump card. So it is very important for us to ensure that the process of competition is alive and kicking,” he continues.

Stabilising the Supply Chain

Iskandar also notes that many consumers are not aware of how predatory business activities impact the price of goods. Anti-competitive practices such as resale price maintenance (RPM) have a significant knock-on effect on the supply chain. RPM is the practice of fixing prices at the wholesale and retail levels through an agreement by manufacturers, wholesalers and retailers. “Think of it as pricing a RM1 ball pen at RM5 and RM10 at the wholesale and retail level respectively with the aim to eliminate competition at all levels, thus depriving consumers of competitive pricing,” he notes.

Price fixing is another example of anti-competitive behaviour when a group of traders or association members forms a cartel to raise the price of a particular good or service. “We can equate this to daylight robbery as these businesses are supposed to fix their price independently and compete with one another,” Iskandar remarks. “Prices have to be set by the market. When suppliers or traders collectively raise the price of goods, they are fixing the price for the consumers”.

That is the basis of the issuance of MyCC’s Final Decisions against a group of ice producers and an association of bakery and confectionary producers. Many of these products are important components of essential goods like bread, or ice used to keep raw fish fresh. When the prices of these products increase due to anti-competitive practices, it will be absorbed into the cost of the product as it moves from one spectrum of the supply chain to the other. “In the end, consumers will be the ones to suffer,” Iskandar highlights.

“This is where our role to inform and educate the public comes in,” Iskandar concludes. He notes that MyCC’s efforts over the past decade have proven to be fruitful. “People have come to gradually understand MyCC’s role in safeguarding the process of competition in commercial markets”. This is evident in the increasing number of complaints that MyCC has received from the public which can be a good indication of a significant increase in consumer and industry players’ awareness about MyCC and how competition may benefit consumers and the economy of Malaysia.

Judge and Jury

While most countries have implemented competition laws, many would argue that the true measure of their success rests on their enforcement. “I must say that the highlight of MyCC’s achievements lies in investigation and enforcement,” Iskandar remarks. The CA2010 empowers MyCC to investigate whether a party or parties have infringed the law, and based on their findings, enforce their own decisions. “This sets us apart from other quasi-judicial bodies in the country in that we act as both judge and jury,” Iskandar notes.

Up until today, MyCC has issued a total of 19 Final Decisions and four Proposed Decisions, involving some admittedly high-profile cases, including the issuance of a Final Decision against MyEG for abusing its dominant position in the provision and management of online foreign workers’ permits renewals. Other than that, MyCC also issued a Proposed Decision against GrabCar for an alleged anti-competitive practice.

In 2014, MyCC imposed a penalty on both Malaysia Airlines and AirAsia for entering into a market-sharing agreement for air transport services in Malaysia. This case was also brought for judicial review where the High Court upheld MyCC’s decision. Iskandar shares that it was his first case as the Director of the Investigation and Enforcement Division in MyCC.

In 2020, MyCC had issued two Proposed Decisions against seven warehouse and ferry operators respectively, and one Final Decision against the General Insurance Association of Malaysia (PIAM) and its 22 members for being parties to an anti-competitive agreement. More recently, MyCC issued a decision against Dagang Net for abusing its dominant position by engaging in exclusive dealing. This showcases MyCC’s commitment in upholding CA2010 for the betterment of the society and nation. “People see that MyCC is impartial with no fear or favour. That is our main principle.”

Empowering the Market

Market reviews, which form a major part of MyCC’s core responsibilities, are research on particular sectors of the Malaysian economy conducted by MyCC that delves deep into the structure of the market and conduct of the players and consumers. Iskandar reveals that due to the expansiveness of these reviews, it usually takes up to one year to complete. MyCC has completed a total of six reviews thus far, specifically on the market for professional bodies, domestic broilers, pharmaceutical, construction material, food sector and wholesale and retail. MyCC will soon be launching its seventh market review on the transportation sector.

“Market review highlights the importance of competition as it will help understand any feature in the market that prevents, restricts or distorts competition in the market,” Iskandar explains. The astuteness of these studies provides a new perspective to the market, helping identify bottlenecks within the supply chain of specific sectors thus mobilising action either by the Commission, the Government or industries.

For instance, MyCC’s market review on the food sector revealed that there are on average a total of seven intermediaries involved in the transportation of mackerel or ikan kembung – the most popular fish consumed by Malaysians – from Kuala Kedah to the Selayang Wet Market. “This has caused the price to go up by almost 70 percent by the time it arrives at the market and one of the reasons why prices are so volatile,” Iskandar highlights. These findings prompted MyCC to urge the Government to drive trade digitalisation. “Through digitalisation, we can reduce the number of intermediaries in the supply chain and streamline processes which will drive efficiency and reduce costs.”

It is a source of gratification for MyCC when its efforts are recognised by the Government and industry players. “We are witnessing an increasing number of enquiries about competition matters and requests for advocacy programmes,” Iskandar notes. This allows MyCC to forge stronger relationships with stakeholders across various sectors of the economy. “MyCC will also work closely with other sector regulators, Ministries, and government agencies to ensure consistency in the application of competition policy and law in the Malaysian markets,” Iskandar reveals. For instance, the Commission is working closely with the Government and its agencies to increase transparency and accountability in the public tender process, in order to eradicate bid rigging that is draining government’s funds.

He admits that due to the nature of MyCC’s work, it is not unusual that they may ruffle a few feathers. However, Iskandar was quick to take it as a positive sign and testament to the good work that MyCC is doing.

Ensuring Best Practices

As the national competition authority, MyCC actively contributes to the promotion of Competition Policy and Law (CPL) at both the regional and international levels. The Commission also participates in international forums such as the Asia-Pacific Economic Cooperation (APEC), ASEAN Experts Group on Competition (AEGC), East Asia Top Level Officials’ Meeting on Competition Policy (EATOP), International Competition Network (ICN), United Nations Conference on Trade and Development (UNCTAD) and Organisation for Economic Co-operation and Development (OECD). Recently, Malaysia chaired the 23rd and 24th AECG, where Iskandar served as the Chairperson representing MyCC.

These engagements not only reaffirm Malaysia’s commitment to free and fair competition in its commercial markets but also provide a platform for MyCC to participate in high-level discussions related to CPL, further strengthening MyCC’s role as a driver of the competition agenda domestically and globally. “When we collaborate with our international counterparts and competition authorities in other countries, it serves as an ideal platform to exchange ideas, best practices and experiences as well as the latest development in competition,” Iskandar comments.

MyCC had also volunteered to be the first ASEAN Member State to have its advocacy work peer-reviewed. This should pave the way for more substantive international collaboration activities in the future, providing guidance and leadership on competition matters. Such international collaborations would also allow Malaysia to learn from its counterparts.

Expanding Its Functions

Moving forward, MyCC looks to further expand its powers to incorporate a merger control mandate. Many key provisions under competition laws in most jurisdictions contain a merger control regime. Iskandar explains that there are three main pillars of competition law: prohibition of anti-competitive agreements (the ‘cartel’ prohibition), prohibition of abuse of market power (the ‘abuse prohibition’) and regulation of mergers and acquisitions (merger control). The purpose of merger control is to review whether proposed mergers and acquisitions (M&A) will potentially lessen the competition in the market substantially. This is to ensure that the market will remain competitive.

MyCC is currently in the process of amending the CA2010 and Competition Commission Act 2010 – an exercise that has been in the works since 2019. This will eventually empower MyCC to review mergers that will substantially lessen or distort competition in the market. Iskandar is hopeful that this amendment can be passed in Parliament by the end of 2021. As it stands, Malaysia is currently the only country in Southeast Asia that does not have merger control provisions.

I hope that the Competition Policy will be accepted and given importance as much as the Industrial Policy. Competition should be considered as the foundation which is effectively protected and promoted by the implementation of competition rules.

Iskandar believes that this is crucial and timely as there is a high possibility for M&A activities to increase in the post-pandemic landscape. “While winding down of business operations is a solution for companies that are facing financial distress, there are expectations for them to also undertake M&A as a mid-way solution to face financial challenges brought on by the pandemic.” The merger control mandate will empower MyCC to regulate any M&A that may raise competition law concerns.

Also, MyCC has been tasked to review existing policies and competition laws to facilitate digital economy growth by 2023 under the Malaysia Digital Economy Blueprint (MyDigital). Iskandar was pleased when MyCC’s suggestions to drive digitalisation efforts were taken up by the Government, which led to the formulation of MyDigital.

The rise of megatrends like Big Data, cloud and Artificial Intelligence (AI) has advanced the growth of economic sectors such as e-commerce, while completely revolutionising certain industries. This introduces a new set of competition concerns about the behaviours of players within those sectors. “These concerns are more complex as we need to understand and appreciate the linkages of the various government instruments such as competition law, consumer protection and data privacy,” Iskandar highlights.

Building a Legacy

When asked about his vision for MyCC moving forward, Iskandar emphasises that building trust among all stakeholders is a top priority for the Commission. “We aim to become more visible and relevant to the public as a trusted authority to protect the process of competition in the market,” Iskandar highlights. For the most part, this requires MyCC to continue doing what it has done, but better.

At the same time, MyCC must also address its resource constraint to ensure that it can effectively undertake the expanded roles and functions. This involves plans to increase its manpower to complement the increase in the number of cases and its current workload as well as in preparation for the emerging digital economy.

Despite these challenges, Iskandar is confident that MyCC can establish itself as one of the main drivers of the economy, and be recognised alongside established agencies such as Bank Negara Malaysia and the Securities Commission. He believes that the secret to MyCC’s success lies in its young and enthusiastic workforce that will propel and drive MyCC forward.

After an impressive ten-year run, MyCC has no intention to rest on its laurels. As Malaysia turns a corner in its ambitions to become a high-income nation, well on its tracks to embrace the digital economy, MyCC’s role as protector of the competition process is now more important than ever before. And with a clear vision and an experienced captain steering the ship, MyCC is poised to raise Malaysia’s economic potential to the next level.