Leong Hup's unit to be fined RM157.47 mil if found to have infringed Competition Act 2010

Leong Hup's unit to be fined RM157.47 mil if found to have infringed Competition Act 2010
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KUALA LUMPUR (Aug 9): Leong Hup International Bhd's unit Leong Hup Feedmill Malaysia Sdn Bhd (LFM), one of the five feed millers recently issued with a proposed decision by the Malaysia Competition Commission (MyCC), said that MyCC has proposed to impose a financial penalty of RM157.47 million in the event LFM is found to have infringed the Competition Act 2010.

In a filing with Bursa Malaysia on Tuesday (Aug 9), Leong Hup said that it provided the additional information for the purpose of clarity.

Besides the RM157.47 million fine, Leong Hup also said that if LFM is found to have infringed the Act, MyCC proposed to direct LFM to undertake the following:
i) to cease and desist from participating and engaging in the alleged anti-competitive horizontal agreement in relation to any discussion on price-related matters pertaining to chicken feed; 
ii) to submit monthly price-related matters to MyCC including the announcement of price adjustment to customers, a list of recent poultry feed prices, and the monthly cost for poultry feed within six months from the issuance of the infringement decision;
iii) to enrol directors and senior management executives in a competition law compliance programme and training at its own expense, with LFM being required to submit a progress report on the enrolment to the MyCC within 12 months from the issuance of the infringement decision; and
iv) to develop a standard operating procedure (SOP) in relation to the disciplinary procedure taken against any individuals employed by the enterprise who are found participating in any anti-competitive agreement, including the employees and the members of the board of directors, and the SOP should be submitted to MyCC within six months from the issuance of the infringement decision.

However, Leong Hup added that it does not see any financial or operational impact on the group at this juncture.

The statement by the poultry group also clarified that MyCC's investigation is conducted based on four reasons.

Firstly, the matter is of public interest with the increasing news coverage as well as traction on social media pertaining to the rising poultry feed prices. This has been supported by a statement made by Agriculture and Food Industries Minister Datuk Seri Dr Ronald Kiandee.

It is also due to the rising concern portrayed in the media pertaining to the hike in feed prices, contributing to the escalation of chicken prices in the market, as noted by the MyCC's assessment of the market.

Furthermore, it is also a result of MyCC's ongoing monitoring of the poultry and poultry feed market players and supply chain in response to the increasing media attention.

Finally, the investigation conducted is also based on information received from the Department of Veterinary Services, giving rise to the suspected collusion of poultry feed players in setting poultry feed price.

Notably, MyCC issued a proposed decision against five feed millers on Aug 5.

MyCC said that it had provisionally found five enterprises to have infringed Section 4 of the Competition Act 2010 by entering into anti-competitive agreements and/or concerted practices in increasing the price quantum of poultry feed that contained soybean meal and maize as its main ingredients, between early 2020 and mid-2022.

Besides Leong Hup's LFM, Bursa-listed companies Malayan Flour Mills Bhd's partially owned Dindings Poultry Development Centre Sdn Bhd and PPB Group Bhd's 80%-owned FFM Bhd were among the five enterprises named.

The other remaining companies involved were Gold Coin Feedmills (M) Sdn Bhd, under Gold Coin Group, and PK Agro-Industrial Products (M) Sdn Bhd, under CP Malaysia.

Following MyCC's disclosure on Aug 5, both Leong Hup and LFM on the same day said they strongly believed that the allegation of the aforesaid infringement was without merit and that they intended to defend such allegation vigorously.

"The company and LFM will review the matter with the external legal counsel and submit written representations within the specified period (prior to 12pm on Sept 20), and make an oral representation before MyCC," said Leong Hup in a Bursa filing dated Aug 5.

Leong Hup shares closed 1.94% or one sen lower at 50.5 sen on Tuesday, giving it a market value of RM1.84 billion.

Esther Lee