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OVERVIEW
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Introduction
Statutory Background
Policy Objectives
Determining the Amount of Financial Statement
Seriousness of Infringement
Duration of the Infringement
Aggravating factors
Mitigating factors
Reduction of Penalty
Case Example
Business compliance
INTRODUCTION
• The Competition Act (“the Act”) gives the Malaysia Competition Commission (“MyCC”) the power to impose financial penalties and issue direction on enterprises for infringing the section 4 or section 10 prohibition under the Act.
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The Guidelines on Financial Penalties published on 14th October 2014 were introduced by MyCC to supplement the existing provisions on financial penalties under the Act.
How?
Investigation Proposed Decision Written Submission
and/or Oral Submission
Final Decision
Financial Penalty
(If there is infringement)
Appeal
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• Upon the finding of an infringement of a
prohibition, MyCC shall require the infringement to be ceased immediately (Section 40(1)(a)) and determine the appropriate financial penalty (Section 40(1)(c))
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STATUTORY BACKGROUND
• To deter enterprises/individuals from engaging in the same illicit conduct in the future
• To prevent other potential infringers from infringing the competition Act 2010
• To restore the competition in the affected market
POLICY OBJECTIVES
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Any financial penalty imposed by the MyCC shall not exceed the statutory maximum established by Section 40(4) of the Competition Act 2010: A financial penalty shall not exceed ten percent of the worldwide turnover of an enterprise over the period during which an infringement occurred. Relevant market & Period of infringement
Limitation of Penalty
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• The assessment of an appropriate penalty to be imposed for all types of infringement will depend on case by case basis.
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In Europe, the European Commission has substantially increased the level of sanctions for during the first decade of the 2000s as shown in the following table:
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DETERMINING THE AMOUNT OF
FINANCIAL PENALTY
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FACTORS
Seriousness of the
infringement Duration
of the infringement
Impact of the
infringement
Turnover of the market
involved Degree of fault
(negligence or
intentional)
Existence of a
compliance programme
Recidivism
Level of financial penalties
imposed in similar cases
SERIOUSNESS OF INFRINGEMENT
• The amount of the financial penalty to be imposed will depend in particular upon the nature of the infringement and how detrimental the infringement is.
• In assessing the seriousness of the infringement, the MyCC will consider a number of factors, including the nature of the product, the structure and condition of the market and the market share of the enterprise(s) involved in the infringement.
• The impact and effect the infringement on the market will be also an important consideration.
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DURATION OF INFRINGEMENT
• The amount of financial penalty to be imposed will also depend on the duration of the infringement.
• A period of infringement is less than six month will be counted as half a year.
• Period longer than 6 months but shorter than a year, such a period will be counted as a full year.
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AGGRAVATING FACTORS • The role of the enterprise as an instigator or leader • Obstruction of or lack of co-operation in the
investigation • The enterprise has a record of committing similar
infringements or other infringements of a Part II prohibition
• Continuance of the infringement after the start of investigation
• Involvement of board members or senior management in the infringement.
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MITIGATING FACTORS
• Low degree of fault • Relatively minor role in the infringement especially if
involvement is secured by threats or coercion • Co-operation by the enterprise in the investigation • Existence of a corporate compliance programme that
is appropriate having regard to the nature and size of the business of the enterprise
• Any compensation made to victims of the infringements.
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REDUCTION OF PENALTY
• A leniency programme is a system, publicly announced, of, “partial or total exoneration from the penalties that would otherwise be applicable to a cartel member which reports its cartel membership to a competition [law] enforcement agency”.
• The cartelist must self-report and fulfill certain other requirements.
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CASE: MAS & Air Asia(2014)
MAS and AirAsia had infringed
section 4(2)(b) of the Competition
Act 2010 by agreeing to share
markets within the air transport
services sector in Malaysia under the
Collaboration Agreement, which is
anti-competitive.
Fine amount : RM10 million each against MAS and AirAsia
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CASE: Sibu Confectionery and Bakery Association (2015)
Financial penalties amounting to an overall total of RM247,730 were imposed on 14 enterprises for infringing section 4(2)(a) of the Act by entering into a horizontal agreement that has as its object to fix, directly or indirectly, the selling price of confectionery and bakery products in the Sibu, Sarawak area. (Source: Infringement of section 4(2)(a) of the Competition Act 2010 by Fifteen (15) Members of the Sibu Confectionery and Bakery Association)
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CASE: Tube Ice Manufacturers (2015)
Financial penalties amounting to an overall total of RM252,250 were imposed on 24 ice manufacturers for infringing Section 4(2)(a) of the Act by entering into an agreement that has as its object to collectively raise the price of edible tube ice by RM0.50 per bag and the price of block ice by RM2.50 per big block in Kuala Lumpur, Selangor and Putrajaya. (Source: Infringement of Section 4(2)(a) of the Competition Act 2010 by Twenty-Four (24) Ice Manufacturers of Kuala Lumpur, Selangor, and Putrajaya)
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OTHER REMEDIAL RELIEF
• Aside from financial penalties, MyCC also has the discretion to impose any other remedial relief.
• Section 40(1)(b) allows MyCC to provide directions to the infringing enterprise on the appropriate steps to bring the infringement to an end.
• Section 40(1)(d) provides MyCC with the power to give any other directions as it deems appropriate.
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BUSINESS COMPLIANCE
• Enterprises should take steps to ensure compliance with the Act.
• This requires:
• A review of current contractual and non-contractual arrangements and business practices to determine whether there are any existing concerns that need to be addressed
• The introduction of a tailored compliance programme which includes an ongoing commitment to competition law compliance
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The Competition Act 2010 Compliance Guidelines were published in September 2013 for the purpose of guiding enterprises through the necessary changes in order to have a compliance programme that is suited for their businesses.
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Benefits of a Compliance Programme
Provides an opportunity to educate employees of the do’s and don’ts under the Act
Reduces the risk of infringements under the Act
Provides the opportunity for early identification of any potential breach
Facilitates timely corrective action
Acts as a positive sign that a business has good corporate governance
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• An effective compliance programme needs to be specific to the particular business.
• Businesses in different industries will face different risks and these will need to be reflected in an enterprise’s compliance programme.
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Key elements of a Compliance Programme:
• A compliance policy statement
• A competition law compliance manual
• Education and training
• A competition compliance committee
• A periodic audit
• An annual report to the Board
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Compliance policy statement 1
• Overarching compliance statement from the CEO or the
Board
• Set out the policy of the business relating to Competition Law compliance and evidencing a commitment to compliance by senior management
• Emphasis on the importance of compliance
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Competition Law compliance manual 2
• Set out detailed guidelines on the law in simple language for employees to understand which addresses
• The key areas of risk for the business
• The do’s and don’ts within competition law
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Education and training 3
• Educate employees about Competition Law:
• The rationale of Competition Law
• How competitive markets benefit society
• Which types of conduct that are prohibited
• How the legal prohibitions apply to the activities of your company
• Case studies tailored to suit the enterprise
• Make known the consequences of such conduct to the employee if discovered
• Offer training to all employees, particularly those who will be exposed to the risks of Competition Law
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Competition Compliance Committee 4
• A committee responsible for ensuring compliance towards Competition Law
• Able to provide guidance to, and answer questions from, employees
• Able to enforce and monitor compliance within the enterprise
• Establish local compliance officers
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Periodic audit 5
• An enterprise should perform self-assessments periodically
• Assess the specific commercial activities engaged in by the company with reference to the prohibited conduct
• Establish periodic competition audit of your company
• Discuss among the senior management on the course of action (to comply) if the company is found to be in breach of Competition Act
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Annual report to the Board 6
• The Board should receive annual reports from the Committee on Competition Law compliance
• However, in smaller businesses, this will only be necessary where the senior management is not already aware of the compliance issues
• The Board members would be tasked with the responsibility for competition matters
• The Board should impose disciplinary consequences for individuals in breach