This article first appeared in The Edge Malaysia Weekly on November 18, 2019 - November 24, 2019
IT is a fine balancing act for the Malaysia Competition Commission (MyCC) as it navigates a terrain of low business confidence while carrying out its role of ensuring all players adhere to the rules of fair competition.
However, MyCC is not here just to “penalise people”, its CEO Iskandar Ismail tells The Edge in a recent interview. “We understand that some segments of society feel that there is too much intervention [in doing business], in the form of enforcement, and they want the market to be self-regulated.
“But our role is not to penalise people, we are here to ensure that the process of competition is protected and promoted at all times. Of course, penalties come with the package of correcting the conduct [of those who have broken the law] ... We understand we cannot satisfy all parties.”
Formed in 2011, MyCC is an independent body established to enforce the Competition Act 2010, which came into force in 2012. Iskandar joined MyCC in 2013 and has been its CEO since October last year.
In the eight years since its formation, the MyCC has had its share of prominent cases that caught public interest, such as its decisions against MyEG Services Bhd, Malaysian Airline System Bhd and AirAsia Bhd, its proposed decision against the General Insurance Association of Malaysia (PIAM) and its 22 members and the latest proposed decision against Malaysia’s most popular e-hailing company, Grab. (See accompanying story.)
However, MyCC is currently the only competition authority in Southeast Asia without the power to regulate mergers and acquisitions. The commission is in the process of amending the act to incorporate M&A control power in Malaysia.
“Currently, we only have post-merger powers, meaning we cannot unscramble the egg. Once we have M&A powers, companies that wish to merge would still need to go to the Securities Commission Malaysia (listed companies) or Bank Negara Malaysia (financial institutions), but there is now an extra step — they have to come to us.
“Three things can happen — we approve the merger; we grant an approval with conditions imposed; or we do not give our approval at all. However, based on the experience in other countries, most mergers do get approved,” he says.
On the part of MyCC, Iskandar does not view having M&A powers as a game changer for the commission.
“No, I do not think it is a game changer for MyCC. There are three pillars under competition law — the first is the prohibition against anti-competitive agreements or cartels; the second is the prohibition against abusive dominant players; and the third pillar is merger control.
“However, the supreme evil in competition law are cartels, and that is the crux of the matter. When enterprises form a cartel and agree to fix the prices of certain goods or services, it is daylight robbery, for example, they charge RM10 for something that should be only RM3.
“We know from our own research that some people use mergers to avoid being termed cartels. So, the M&A control is an extra measure to ensure all the ground is covered. In other words, the powers of MyCC are complete with the M&A control,” says Iskandar.
The Act is expected to be amended to include M&A powers by next year. Iskandar adds that MyCC is studying the Philippine Competition Commission’s approach to M&A control.
“They have been one of the most active commissions in terms of merger control and we are learning from them since they are in the Southeast Asian market and have similarities with us.
“In Malaysia, we do not have enough merger specialists in terms of competition law. For example, when a merger takes place, other regulators such as the Securities Commission Malaysia would look into things like whether the interests of minority shareholders are protected, but we will look into whether this merger would substantially reduce competition in the market,” he says.
Not a price regulator
Iskandar corrects one misconception that the public generally has of MyCC: that it takes on the role of a price regulator.
“We are not a price regulator. Anybody can raise their prices, but what we are worried about is competition in the market, so, if we ensure that there is competition, the consumer will get three things — competitive pricing, quality and more choice.
“For example, when Uber was in the Malaysian market, there was a price war between Uber and Grab, and that is what we are aiming for. When there is good competition against dominant companies, it will give a competitive edge to their pricing, quality aspect and choices for consumers,” he says.
However, Iskandar remarks that MyCC’s presence has created the awareness among traders that they no longer enjoy the liberty to raise prices as they please.
“There was a time when trade associations would announce price increases and they would give the increase in electricity tariffs or labour charges as the driver of the increase. However, this is not a common practice today, as they can expect a visit from MyCC [if they choose to do so],” he says.
Working with other regulators
On Feb 22, 2017, MyCC issued a proposed decision against PIAM and its 22 members over the agreement with the Federation of Automobile Workshop Owners’ Associations of Malaysia on trade discount rates for parts of certain vehicle makes and hourly labour rates for workshops under the PIAM Approved Repairers Scheme.
The case attracted attention at the time, given the huge financial penalty of RM213.45 million that was imposed, which is understood to be the biggest by MyCC to date.
At the time the decision was issued, Bank Negara Malaysia had supported the insurers and labelled MyCC’s proposed decision “most unfortunate”, as the central bank said it would severely impact consumer interest.
On whether disagreement with other regulators is a hurdle to the conduct of its duties, Iskandar says this is not the case. He says the MyCC has a good working relationship with Bank Negara. In fact, the central bank was the first regulator that MyCC signed a Memorandum of Understanding with on handling competition issues.
“Bank Negara has different objectives and priorities and we have our own. So, it is about finding a middle ground and communication and the understanding of each other’s roles, and things can be handled smoothly.
“Of course, we take their views seriously and, on their part, they know how we work as well,” he says.
For the PIAM case, the written and oral representation sessions have been completed. MyCC is now in the process of analysing the representations from the 23 parties.
“It takes time. We have to be careful and we need to analyse the representations. It is not an easy process as different companies have different approaches and we need to study each one. Also, the whole process from A to Z comes under our purview — as the investigator, the prosecutor and the judge,” says Iskandar.
What is next for MyCC?
Iskandar believes that MyCC’s biggest achievement since its incorporation is the precedents it has set.
“For example, for practitioners to grasp the issues of cartels, they can refer to our case against Malaysian Airline System and AirAsia; and for issues around the abuse of a dominant position, they can refer to the MyEG case. (MyEG is alleged to have abused its dominant position in the management of online Pas Lawatan [Kerja Sementara]).
“Although both of these cases are currently in the Court of Appeal, there are already precedents in the law itself, and that is an achievement for us.
“Secondly, we managed to produce competition law experts, as well competition economists in Malaysia,” says Iskandar.
As for his vision for MyCC, Iskandar says he would like to see the regulator as a leader in competition law enforcement.
“The Malaysian Aviation Commission has competition law powers, so do the Malaysian Communications and Multimedia Commission and the Energy Commission, but we want to be the main authority on competition law and policy matters.
“We would like to have the buy-in of other government agencies, to work with us and to be a complete [regulator] once we have M&A control powers. We also have a very young and dynamic team, whom we wish to nurture on the intricacies of competition law,” he says.
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