Moving Closer Towards Malaysian Competition Act 2010

Malaysia joins the world’s developed economies with the implementation of the Malaysian Competition Act 2010 from 1 January 2012.

Earlier on we have written on the topic of Competition Act where it was stressed the need for the industry to be tech-driven dealing with any rules and regulations implementation in the era where the promotion of competition is at its highs. Check this out…. While rules and regulations are good in injecting some level of discipline to the industry, nevertheless, in essence would contain some anti-competitive elements that are frown by the consumers. By managing these rules and regulations using technology it would make our industry more transparent to both government and consumers – it would separate out what’s being administrative, technical and competition controls, making matters more open and easier for more in-depth discussion.

Some notable aspects for better understanding for a start….

 There are two notable prohibitions under this Act |

  1. anti- competitive agreements and
  2. abuse of dominant positions.

The insurance industry falls under the purview of this Act especially in regards to tariff matters, inter-company agreements, etc. The tariffs are therefore open for review by the Commission enforcing the Act but whether the industry has made the necessary application, we do not know…. Nevertheless a BLOCK EXEMPTION is a must application by the industry (LIAM have filed their application sometimes last week, which you can check this out…..) to seek some relief of liability.

Relief of Liability (Prohibition)
5.  Notwithstanding section 4, an enterprise which is a party to an agreement may relieve its liability for the infringement of the prohibition under section 4 based on the following reasons:

(a) there are significant identifiable technological, efficiency or social benefits directly arising from the agreement;

(b) the benefits could not reasonably have been provided by the parties to the agreement without the agreement having the effect of preventing, restricting or distorting competition;

(c) the detrimental effect of the agreement on competition is proportionate to the benefits provided; and

(d) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the goods or services.

(Section 4 is about the Part II Chapter 1 on Anti-competitive practices)

Block Exemption

Block Exemption
8.  (1) If agreements which fall within a particular category of agreements are, in the opinion of the Commission, likely to be agreements to which section 5 applies, the Commission may, by order published in the Gazette, grant an exemption to the particular category of agreements.(2) An exemption granted under this section is referred to as a “block exemption”.(3) An agreement which falls within a category specified in a block exempt ion i s exempt from the prohibition under Section 4.(4) The Commission in granting the block exemption may impose any condition or obligation subject to which a block exemption shall have effect.

(5) A block exemption may provide that—

(a) if there is a breach of a condition imposed by the block exemption, the Commission may, by notice in writing, cancel the block exemption in respect of the agreement from the date of the breach;

(b) if there is a failure to comply with an obligation imposed by the block exemption, the Commission may, by notice in writing, cancel the block exemption in respect of the agreement;

(c) if the Commission considers that a particular agreement is not one to which section 5 applies, the Commission may, by notice in writing, cancel the block exemption in respect of the agreement from such date as the Commission may specify;

(d) the block exemption shall cease to have effect at the end of a period specified in the order; or

(e) the block exemption is to have effect from a date earlier than that on which the order is made.

Any exemption will be gazetted and if our non-life insurance tariffs are still applicable in the context of the Competition Act 2010 then you should see them within the Gazette as depicted in the Act.
Have you seen any?

GET A COPY OF MALAYSIAN COMPETITION COMMISSION ACT 2010

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In this regard, it is good to check out what’s happening around the world…. Happy reading.
NEWS AROUND ASIA IN REGARDS TO ANTI-COMPETITION

South Korea: Life insurers sanctioned for price fixing

Twelve life insurance companies have been fined a total of KRW365.3 billion (US$316 million) by the South Korean antitrust regulator for engaging in price-fixing.

The Fair Trade Commission (FTC) accuses them of conspiring to fix interest rates applied to deposits set aside to pay for clients. It unveiled the list of the companies last week – Samsung, Kyobo, Korea, Mirae Asset, Shinhan, Tongyang, KDB, Heungkuk, ING, AIA, Metlife and Allianz, reports the Yonhap News Agency.

According to the antitrust regulator, the companies had sought to raise the insurance premiums charged to customers and slash insurance payments through collusion. They did this by fixing interest rates including the “expectation interest”, which determines the level of insurance premium, between 2001 and 2006, says the FTC.

Six big companies such as Samsung Life, Korea Life and Kyobo Life, had taken the lead in the collusion, an FTC official says. Samsung was given the highest penalties of KRW 157.8 billion, followed by Kyobo with KRW134.2 billion, Korea with KRW48.6 billion, Allianz with KRW6.6 billion won. Heungkuk with KRW4.3 billion and Shinhan with KRW3.3 billion. The others were Tongyang Life (KRW2.4 billion), AIA Life (KRW2.3 billion), Mirae Asset (KRW2.1 billion), ING Life (KRW1.7 billion), Metlife (KRW1.1 billion) and KDB Life (KRW900 million).

The regulator’s sanction against the life insurers came about four years after it took punitive action against the non-life insurance sector in 2007 when 10 general insurers were fined KRW50.8 billion for price-fixing. The insurers had formed a cartel in 2002 to fix premiums on eight types of insurance schemes, including those covering damage caused by fire and industrial accidents. The insurers’ move aimed to prevent a price war following the deregulation of insurance premiums in April 2000.

(Asia Insurance, 18 October 2011)

Vietnam Price-fixing Decision Includes a Warning for All Businesses in the Country

Vietnam’s Ministry of Industry and Trade recently announced that 19 insurance companies operating in Vietnam had been fined a total of VND 1.7 billion (approximately US$89,000) for their involvement in unlawful price-fixing activities. The companies that have been fined include the country’s largest insurer Bao Viet, as well as Petro Vietnam Insurance, Bao Minh, and the Agriculture Bank Insurance.

The price-fixing decision, announced on 29 July 2010, follows a long running investigation into collusive practices in the motor vehicle insurance sector in Vietnam, and is most significant anti-cartel enforcement efforts yet by the Vietnamese authorities under a cross-sector competition regime that became operational in 2005.

In this update we examine the decision and the message it sends regarding the future of competition law enforcement in Vietnam.

Background – the investigation process

The Vietnam Competition Authority (“VCA”) began its investigation into cartel practices in the insurance sector in November 2008, following allegations of collusion made by several customers and other industry participants.

At that time, the VCA’s investigation was seen at a significant step in the development of Vietnam’s competition regime, as enforcement efforts had previously been extremely low.

VCA’s investigation ran for over 12 months, and focussed on 19 insurance companies that, according to government data, account for 99.79% of the national motor vehicle insurance market (although at least one of the relevant insurance companies disputed the VCA’s findings regarding the relevant market affected by the arrangements).

During its investigation, VCA found that in September of 2008, 15 insurance company executives met and reached a cooperative agreement on the level of motor vehicle insurance premiums that would be applied going forward. VCA also determined that four more insurance companies subsequently became involved in the price-fixing agreement. According to reports, these facts were largely admitted by the participating companies, some of whom cited a perceived need to respond to severe price competition in their industry as a primary reason for their actions.

In accordance with the standard enforcement process under Vietnam’s competition regime, VCA then passed its findings to the country’s Competition Council, which has adjudicative powers in relation to relevant competition cases. The Competition Council conducted its own investigative hearings and confirmed the existence of the unlawful price-fixing arrangements, leading to imposition of the penalties.

Determination of the fine amounts

Under Vietnam’s Competition Law, companies found to have engaged in unlawful cartel activities can be fined up to 10% of their annual turnover in the financial year preceding the year of the relevant infringement.

However, in this case the Competition Council determined that the fine amount applied to each of the insurance companies participating in the price-fixing agreement would be calculated as 0.025% of their total turnover in 2007 (the year preceding the year in which the price-fixing agreement was implemented). Additionally, the 19 insurance companies involved in the violation of the Competition Law have been ordered to pay administrative fees of VND 100 million.

In a press release relating to the decision, the VCA stated that the penalty was of a “warning nature”, and noted that this was due to factors including “low awareness” of the Competition Law.

Notably, a number of the relevant insurance companies are reported to have requested the Competition Council to consider applying a reduced penalty on the basis of the emerging status of the insurance market in Vietnam, and the need to preserve the standing of this market. Although there is no indication that this factor was given significant weight by the Competition Council, it has been reported that the Council’s decision to impose relatively low penalty levels on many of the participants in the collusive arrangements was influenced by the fact that those participants voluntarily suspended their relevant behaviour once contacted by the Vietnamese authorities and took steps to implement remedies for their behaviour.

(Legal Update – Antitrust & Competition, Vietnam, 16 August 2010)

 

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2 comments for “Moving Closer Towards Malaysian Competition Act 2010

  1. Anonymous
    June 20, 2012 at 07:20

    How can we know sitting down together to discuss issues concerning insurance matters constitutes a cartel? Does sitting in a meeting under the banner of LIAM committee constitute such attempt to form a cartel?

    • June 27, 2012 at 09:33

      I think if discussion is under some official banner like PIAM, LIAM is ok. If anyone alleged t hat this is against the Act then it is for him or her to prove

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