Spread the news

WHO would have thought that a group of businessmen looking to make ends meet would be involved in a conspiracy to strong arm consumers into parting with their hard-earned cash? This, however, was what happened during an association meeting where the simple act of raising hands ultimately led to a group of confectioners and bakers being on the receiving end of heavy fines from the Malaysia Competition Commission (MyCC) for participating in a price-fixing cartel.

MyCC has zero tolerance for hardcore cartels such as price fixing cartels and will not hesitate to investigate reports of such illegal activities. They have, on many occasions, levied crushing financial penalties on those deemed to have infringed the Competition Act 2010 (Act).

It is quite understandable that the phrase “hardcore cartel” results immediately in one envisioning the drug cartels of Latin America. This is not, however, the topic of conversation. Hardcore cartels in the Competition Law context arise, quite simply, when there are agreements between competitors to fix prices, share markets, limit or control output and conduct bid rigging activities. Such anti-competitive agreements are expressly prohibited under the Act. The Act also expressly grants MyCC broad powers to impose debilitating fines upon those deemed to have infringed the Act. Generally, one will not walk away unscathed if MyCC finds that one has participated in cartel conduct.

Given the crippling sanctions that MyCC can impose upon often unsuspecting infringers of the Act, it is wise to consider certain precautions when conducting business. First, when meeting with competitors, an entity should not discuss matters related to prices or production levels of its products or services. Second, entities should not share commercially sensitive information as such information may facilitate the creation of the abovementioned illegal agreements. It is often the case that what businessmen deem as “harmless information” might very well constitute “commercially sensitive information”. If one is aware that prices of products or services will be discussed during a meeting between competitors, an entity who is a competitor may want to avoid the meeting altogether.

Given the current Covid-19 crisis, it would not be surprising if businesses work together to overcome the economic challenges they face. Nevertheless, reasons such as economic hardship or pressure from competitors to participate in cartel agreements have generally not been accepted as defences against participation in such cartel agreements. One might sometimes even try to argue that there was no explicit agreement to participate in a cartel. Nonetheless, according to MyCC’s guidelines, even being present without objection at a meeting where a proposal for price increases is discussed could be sufficient grounds for an agreement to be found.

Should MyCC be of the view that you might have been/are participating in a cartel, it can carry out what is known as a “dawn raid”. A dawn raid begins when the MYCC officers arrive, without warning, at your premises. They will often produce a warrant for the raid and will require you and your business to give them what they deem as evidence relevant to their investigations. They are given broad powers of investigation and have powers of search and seizure that allow them not only to seize documents but computer hardware containing soft copies of what they deem as relevant evidence.

In the event that businesses have to deal with a dawn raid, it is strongly advised that your lawyers are present to ensure that MyCC does not take anything beyond what is authorised.

To cement its conviction and commitment to prosecuting and punishing anti-competitive infringements, MyCC has, since the coming into force of the Act, imposed stifling penalties against those it regards as contraveners of the Act. An illustration of this is in one of the more recent financial penalties imposed by MyCC against 22 members of the General Insurance Association of Malaysia for cartel behavior where the fine amounted to RM173 million. Aside from the power to impose crippling fines, a finding of infringement may result in negative publicity for the business, diminishing the likelihood that other businesses or customers will deal with them.

Finally, it would be folly to think that escape from criminal liability is available for foreign nationals participating in a cartel outside Malaysia. Should one be found to have participated in a hardcore cartel in the US, the US Department of Justice has the power to bring criminal charges which may result in imprisonment. This power is not just a facile threat.

To summarise, MyCC does not show mercy when it comes to cartel enforcement and it would be wise to carry out compliance programmes within the business/organisation and to seek legal advice to ensure that a business has not inadvertently participated in such activities and is protected from any such liability in the future. In this instance, ignorance is never bliss.

This article was contributed by Samuel Ong Ying Yie of Christopher & Lee Ong.

Click to rate this post!
[Total: 0 Average: 0]

Spread the news
CONTACT US : support@melodyinter.com
Previous articleWhy transfer pricing documentation is vital
Next articleClimate change, principle-based taxonomy and the financial services industry


Please enter your comment!
Please enter your name here