Public Consultation on Proposed Amendments to the Competition Act 2010 – Introduction of Merger Controls in Malaysia
On April 25, 2022, the Malaysian Competition Commission (“MyCC“) has published for public consultation the highlights of its proposed amendments to the Competition Act 2010 (“competition lawThe proposed amendments are intended not only to strengthen MyCC’s investigative and enforcement powers, but also to establish an economy-wide merger control regime in Malaysia.
Currently, mergers and acquisitions (“Mergers and Acquisitions“) are only regulated in the aviation and telecommunications sectors by their respective regulators, the Malaysian Aviation Commission (MAVCOM) and the Malaysian Communications and Multimedia Commission (MCMC) respectively. (including lawyers and investment bankers) will need to ensure that their mergers and acquisitions transactions are subject to appropriate competition scrutiny and comply with competition law once the proposed amendments are in effect. force large mergers and acquisitions transactions, to do the same to avoid MyCC scrutiny of their transactions, as the proposed introduction of merger controls is expected to take place in the fourth quarter of 2023.
Highlights of Proposed Amendments
New merger control regime
MyCC offered a hybrid diet as opposed to a voluntary scheme. Essentially, mergers or anticipated mergers (if completed) which may result in a significant reduction in competition (“SLC“) within any market for goods or services are prohibited. This new regime:
(a) mandates notification to MyCC of proposed mergers that exceed MyCC’s prescribed threshold (“Applicable threshold“); and
(b) allows mergers or anticipated mergers that do not exceed the Applicable Threshold to be voluntarily notified to MyCC, whether before or after the completion of the mergers or anticipated mergers.
The applicable threshold is not yet announced and will be prescribed by an ordinance published in the Official Gazette after the adoption by Parliament of the (final) amendments to the Competition Act.
The proposed merger control regime would also be suspensive in nature. This means that any early merger that is notified to MyCC cannot be implemented before MyCC’s clearance, i.e. parties to early mergers are subject to standstill obligations. The Merging Parties would therefore be prohibited from implementing all or part of their Merger Transaction or coordinating their competitive behavior prior to MyCC’s clearance of their Merger Transaction.
Failure to notify mergers or planned mergers that result in an SLC or arms swap would result in a merger violation. Similar to the current Competition Act, where violation of the prohibition on anti-competitive agreements or abuse of dominance carries a potential monetary penalty of 10%, a violation of a merger also carries a penalty monetary penalty of up to 10%, except that instead of 10% calculated on the infringer’s turnover during the infringement period, the merger offense the penalty is calculated on the value of the merger transaction or contemplated merger transaction.
One of the main concerns of the merging parties is the time frame within which MyCC will have to clear the merger. Under the proposed amendments, MyCC is required to render its decision on any proposed merger notified to it within 120 working days from the date MyCC accepts the notification as complete. This time limit is only applicable to proposed mergers exceeding the Applicable Threshold. The 120 business days include 40 business days for a Phase 1 review period and 80 business days for a Phase 2 review period. There is an automatic “deemed approved” disposition if MyCC has not rendered its decision at the end of the said 120 working days. MyCC may, however, stop the calculation of the 120 working day period in the following circumstances:
(a) when MyCC requests additional information from the companies concerned;
(b) when the company requests an extension of time to file its written representation;
(c) when the company wishes to make an oral statement; or
d) when the company submits an undertaking offer.
If a proposed merger and acquisition transaction is likely to significantly lessen competition in the marketplace, the merging parties have the option of entering into a commitment offer to MyCC to remedy, mitigate or prevent the SLC caused by the merger or intended merger. This undertaking offer may be offered by the parties to the merger and may be accepted by MyCC at any time before it makes a decision on the merger or the proposed merger, or before the closing of an investigation by MyCC ( if the merger has not been notified to MyCC). If the undertaking offer is accepted by MyCC, it will issue a decision and find that the Competition Act has not been violated.
Important to note for the merging parties is a provision that states that if additional information or documentation required by MyCC is not provided by the merging parties within the time period specified in MyCC’s notice (or such time period extended granted by MyCC), the the notice is deemed withdrawn (but with the right to submit a new notification to MyCC). Moreover, not only the parties to the concentration fall under the jurisdiction of MyCC, but also their competitors, suppliers or customers, since MyCC has the power to compel any person or government entity to furnish information or documents relating to any procurement that is the subject of the notification. Failure to comply with MyCC’s information request order is an offence.
Mergers dissatisfied with MyCC’s decisions may appeal only to the Competition Appeal Tribunal (“CATIndeed, a draft amendment to the Competition Act includes a provision providing for the exclusive jurisdiction of the CAT to review merger decisions made by MyCC.
The proposed merger control regime would not apply to the following:
(a) mergers involving commercial or economic activities governed by the Communications and Multimedia Act 1998, the Postal Services Act 2012, the Malaysian Aviation Commission Act 2015, the Malaysian Aviation Commission Act 2001 Energy Commission, Gas Supply Act 1993, Petroleum Development Act 1974 (upstream activities only); and
(b) mergers between companies licensed or licensed by, or registered with, Bank Negara Malaysia (BNM), Securities Commission Malaysia (SC), Labuan Financial Services Authority (LFSA) and Suruhanjaya Perkhidmatan Air Negara (SPAN); -this.
Key changes to the definition of “corporate” and “SEU” not limited to “parent and subsidiary”
It is proposed to amend the current definition of “enterprise” in the Competition Act (among others) so that it is not limited to “entity” engaged in commercial activities, but extended to “persons” engaged in commercial activities . MyCC said the amendment will then clarify that the a person’s legal status is irrelevant to determine whether the person is subject to the prohibitions under the Competition Act, which is more similar to the approach taken in the European Union (EU).
In addition, it is proposed to delete from the definition of “enterprise” the reference to the circumstances which make a parent company and a subsidiary considered as one and the same enterprise. MyCC pointed out that this deletion of the reference to the single economic unit (“SIU“) the doctrine does not preclude MyCC from raising the same and MyCC will still be able to apply the SEU doctrine on a case-by-case basis depending on the facts and circumstances of the case. We interpret this as MyCC no longer being limited to a parent and subsidiary circumstance for the establishment of an SEU This has been demonstrated in previous decisions of MyCC where MyCC would apply EU case law, including the application of the “control test” to establish an SEU: see MyCC’s infringement decision against Malaysian airline Sdn Bhd, AirAsia Berhad and AirAsia x Sdn Bhd (No. MyCC.0001.2012).
Main changes relating to the settlement procedure and new whistleblowing provisions
MyCC is also proposing to introduce a settlement procedure that would allow companies that have breached the anticompetitive agreement prohibition or the abuse of dominance prohibition in competition law to enter into a settlement with MyCC by admitting liability. of the said offense and benefiting from a reduction in their financial penalty of up to 20%. This reduction will be in addition to any other reduction in the pecuniary sanction to which the company would have been entitled under the leniency regime.
In relation to the existing leniency regime, MyCC has also proposed amendments to give MyCC the power to grant different percentage reductions in the financial penalty to companies depending (among other things) on the order in which they applied. leniency to MyCC. While the existing leniency powers only apply to “hardcore cartels”, through the proposed amendments, MyCC’s leniency powers will be extended to all breaches of anti-competitive agreements (which include breaches of vertical agreements) .
MyCC has also offered to empower MyCC to pay a reward to whistleblowers who provide information or assistance to an investigation conducted by MyCC. Companies should note that disgruntled employees can take advantage of this financial incentive to provide information to MyCC.
Conclusion and details of the public consultation
The proposed changes to the Competition Act highlighted above represent only a fraction of the significant changes proposed by MyCC. Since the Competition Act applies to all businesses in Malaysia, the proposed changes should be considered by all businesses and if the changes have a negative impact on the business, it would be advisable for the business to do so. goes to MyCC. MyCC’s invitation to participate in the public consultation is available on the MyCC website, www.mycc.gov.my.
The public consultation of stakeholders in the sector and the public will be held face-to-face on June 8, 2022. All views, views, contributions and comments may be submitted via email to the MyCC Amendment Team at [email protected] or by the UPC Portal before May 27, 2022. Any written submission made after May 27, 2022 will not be accepted or considered by MyCC.