Malaysia: Significant Competition Law Reforms and Practical Implications

Expansion of Scope of Application

The Competition Act 2010 (CA) now applies to "any commercial or economic activity" and not just "any commercial activity". This expands the scope of the CA to apply to a greater range of activities with an impact on competition.

Any activities which are economic in nature may be caught within the ambit of the CA. This means that entities previously considered to fall outside the CA's reach (such as non-profit organisations, trade associations, government-linked agencies or ministries, or cooperatives) may now be subject to scrutiny if they are engaging in an economic activity.

Businesses should audit whether any of their activities previously considered non-commercial could now attract regulatory attention under the expanded scope.

Removal of Distinction between Horizontal and Vertical Agreements

The amendments include the removal of the distinction between "horizontal" and "vertical" agreements from the prohibition of anti-competitive agreements.

Under the current framework, MyCC is required to establish that an agreement is horizontal in nature before MyCC could rely on Section 4(2), which deems certain categories of horizontal agreements—such as price-fixing, market-sharing, supply control and bid-rigging—to be anti-competitive by object.

Moving forward, MyCC will no longer need to prove whether an agreement is horizontal or vertical before invoking the deeming provision under Section 4(2). This removes a significant evidential hurdle for MyCC.

The consequence however is that the amendment may be interpreted such that even vertical agreements (e.g., supply, distribution, franchise and licensing agreements) involving price-fixing (e.g., resale price maintenance), market-sharing or supply control could be deemed anti-competitive by object, significantly expanding the scope of conduct caught by the deeming provision. Until further guidance is issued by MyCC, it would no longer be prudent to simply assume vertical agreements as inherently lower risk than horizontal agreements.

Businesses with existing vertical arrangements should reassess these agreements to evaluate their exposure under the amended framework.

Enhanced Powers of the MyCC

The amendments significantly increase MyCC's powers, such that MyCC may:

• Impose late payment charges in respect of financial penalties at a rate determined by the MyCC
• Request (i) mandatory disclosure of any relevant information and documents (including from government entities); and (ii) information to conduct market reviews, failure of either of which would be an offence
• Recommence investigations after written notice of its proposed decision or supplementary proposed decision has been given, where there are material changes in circumstances or new facts have come to light
• Give rewards to an informer for information or assistance given to MyCC which leads to the discovery of any infringement which leads to any conviction for an offence.

These enhancements have significant practical implications for businesses. In particular:

(i) Businesses face greater financial exposure through the imposition of late payment charges on unpaid penalties

(ii) Non-compliance with information requests (including those for market reviews) now constitutes a criminal offence

(iii) MyCC's ability to recommence investigations after issuing a proposed decision creates the potential for prolonged regulatory uncertainty.

Businesses should review their internal processes for responding to MyCC enquiries and ensure timely compliance with all regulatory requests.

Increased Whistleblower Protection

The amendments introduce new statutory protections for whistleblowers, including safeguards against the disclosure of their identity and protection from any form of reprisal such as termination of contracts, commencement of unreasonable litigation, withholding of payments, or refusal to enter into subsequent contracts. In addition, MyCC is empowered to grant rewards to informers whose information or assistance leads to the discovery of any infringement or results in any conviction for an offence under the CA.

New Settlement Mechanism

The amendments allow offenders of the CA to accept settlements proposed by MyCC by admitting liability for infringements, in exchange for MyCC potentially granting a reduction in financial penalties up to 40%.

This mechanism provides businesses with an additional avenue to reduce exposure to financial penalties where infringement risks are assessed to be high. The potential reduction of up to 40% creates a strong incentive to cooperate with MyCC early in proceedings, which may shift enforcement dynamics in favour of early resolution.

Businesses should consider developing internal protocols for evaluating settlement offers at the outset of any investigation, including clear escalation procedures and decision-making frameworks to enable timely and informed responses to any settlement proposals from MyCC.

Revised Framework for Undertakings

Under the current framework, MyCC can accept undertakings subject to conditions and is required to close the investigation without making a finding of infringement.

The amendments now make clear that MyCC will only accept an undertaking before it has issued a written notice of a proposed decision, effectively narrowing the window for this option. Furthermore, if the enterprise fails to comply with the undertaking, or if information provided to secure the undertaking turns out to be false or misleading in a material way, MyCC is no longer obliged to treat the case as closed and may re-open its investigation.

Leniency Reductions: Coercion as a Differentiating Factor

The amendments introduce flexibility for MyCC to vary the percentage of reduction in financial penalties available under the leniency regime based on whether the applicant enterprise has coerced another enterprise into participating in the anti-competitive arrangement.

Removal of finality of CAT decisions

The amendments will delete the provision in the CA prescribing decisions of the Competition Appeal Tribunal (CAT) to be "final and binding"; and introduce an appeal route to the High Court which may be used by any persons (including MyCC) who is aggrieved by the decisions of the CAT.

New Offence for attempts to obstruct investigations

The CA currently prohibits the destruction, concealment, mutilation or alteration of records. The amendments will render any such attempt to do the same as an offence under the CA.