Malaysia’s telecommunications regulator has cleared a tie-up between two of the country’s three largest mobile service providers after they agreed to continue providing access to wholesale services on fair terms, as well as divest spectrum assets and a prepaid business.

Charles McConnell
Global Competition Review

PETALING JAYA: A lawyer specialising in competition law says that on balance, the undertakings extracted by the regulator of the proposed merger between Digi and Celcom appear to favour the merging parties.

The Malaysian Communications and Multimedia Commission (MCMC) said yesterday it had no objections to the proposed merger which could potentially result in the formation of the country’s largest mobile service operator, with Digi and Celcom offering a set of undertakings to allay the regulator’s concerns about competition.

Key among them is the cumulative divestment of 70 MHz of spectrum across 1800 MHz, 2100 MHz, and 2600 MHz to MCMC – one band to be returned within two years and two bands to be returned in three years.

“Some clarification would be helpful as to the reason behind certain bands having to be divested in three years, and not two.

“The primary concern would relate to whether the merged entity would be able to install itself as an unassailable dominant player during this time period,” said Shanthi Kandiah, whose practice areas include media and telecommunications regulatory.

She said that while there is precedent in other countries for bands to be divested in three years, divestments have also been required within shorter time frames.

Shanthi noted that MCMC has had the difficult task of looking “into the future” to predict if the merger will substantially lessen competition.

If the merger goes through, the merged company (MergeCo) will have a combined estimated market share of slightly over 50%, almost double that of the next biggest player, Maxis.

“The question, therefore, is whether in three years, it could make use of synergies arising from their combined spectrum to have network advantage, significant pricing and service advantage until others may not be able to compete with it,” she said.

“What you want to see in the country is a level playing field allowing for active competition in the market.”

While she described the undertaking for a functional separation of the mobile virtual network operator (MVNO) wholesale business from the retail business as an “interesting remedy”, she said she was uncertain how this would incentivise MergeCo to compete head-to-head with MVNOs as both units would report to the same CEO.

As part of its obligations in the undertakings, MergeCo will have to establish a separate independent MVNO wholesale business unit, ensuring separation from MergeCo’s retail mobile business, within six months after the completion of the merger.

MCMC defines MVNOs as resellers who do not own any wireless network infrastructure. Instead, they purchase wireless communications services at wholesale rates from mobile network operators (MNOs) and resell subscriptions to consumers through their own branding and other value-added services.

MergeCo also has to ensure fair pricing, the introduction of price capping, the removal or waiver of any contractual lock-in agreements, and the implementation of a fair usage policy to ensure any excessive usage by MVNOs is charged fairly.

This has to be done within three years after the completion of the merger.

Jason Thomas
Free Malaysia Today
June 30, 2022

PUTRAJAYA, June 17 — The Malaysia Competition Commission (MyCC) has filed an application to seek leave to appeal against the Court of Appeal’s ruling to allow Grab Holdings Inc and its subsidiaries to commence a judicial review to challenge the Commission’s proposed imposition of RM86.77 million fine on them.

The application for leave to appeal to the Federal Court was filed on May 18 through the law firm Messrs Lim Chee Wee Partnership.

On April 19, this year, a three-man bench of the Court of Appeal led by Justice Datuk Hanipah Farikullah granted leave to Grab Holdings, GrabCar Sdn Bhd and MyTeksi Sdn Bhd to initiate judicial review against MyCC’s proposal to fine them for allegedly abusing their dominant position.

The appellate court had directed the case be remitted to the High Court for hearing of the merits of the judicial review.

Justice Hanipah had allowed the appeal by Grab and its two subsidiaries to set aside the High Court’s decision which did not favour them.

In the application, MyCC is seeking to be granted leave to appeal on several questions of law which the company said are of significance and public interest.

In civil cases in the Federal Court, a litigant is required to get leave for the merits of the appeal to be heard.

The case came up for case management today before Federal Court deputy registrar Rasidah Roslee via e-Review today who directed MyCC to file an affidavit-in-reply by July 8.

The next case management is fixed for September 14.

Lawyer Annabel Tan from Messrs Lim Chee Wee Partnership appearing for MyCC attended the case management while lawyer Nimraat Kaur represented Grab Holdings and its subsidiaries.

MyCC had alleged that Grab abused its dominant position by imposing a restrictive clause on its drivers which effectively prevented them from promoting Grab’s current and potential competitors on e-hailing platforms and in transit media advertising.

Grab and its subsidiaries lost their bid for leave for judicial review in the High Court which had ruled that the move was premature, given that the proposed decision was not yet final. — Bernama

Malay Mail
Thursday, 17 Jun 2021 07:51 PM MYT

PETALING JAYA: A lawyer specialising in trade competition says it is not easy to establish whether an e-commerce player is breaking the law by offering vouchers to sellers to dump its competitors.

Shanthi Kandiah was commenting on a report that online shopping market Shopee is alleged to have offered RM3,000 in vouchers to entice sellers to ditch its principal competitor, Lazada.

The offer was contained in an alleged WhatsApp conversation between a seller and Shopee, which recently surfaced on tech portal Tech in Asia. Shopee appeared to be poaching sellers from their biggest competitor by offering them incentives to close their Lazada store.

“Shopee is looking to sponsor RM3,000 (worth of) vouchers to selected sellers. The only condition is to shut down your Lazada store for 9/9 (a popular Lazada sale),” reads the WhatsApp text, which was supposedly sent to a Shopee seller last year.

Section 10 of the Competition Act prohibits abuse of a dominant position, and an enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services.

Shanthi said that for a claim of abuse of dominance, one would have to establish that a company is dominant in the market.

She said the definition of “the market” could not be limited to cover other e-commerce players but also other online marketplaces and potentially even brick and mortar stores.

“Arguably, they all compete with each other which, if so, the market definition would be broader,” she said.

However, she said, there is a tendency in most countries for the competition authorities to define markets in a narrow way to assess the conduct.
“On that basis, it would be important to determine what Shopee’s market share is and whether it would cross the threshold of dominance.”

She said the Malaysia Competition Commission (MyCC) has flagged a 60% market share as one of the indicators of potential dominance in the market.

Shanthi said there are many factors that would need to be looked at in a “robust economic analysis” to see if a company is dominant, such as the presence of barriers to entry.

“The second part relates to whether the exclusivity clause constitutes abuse. It could be abusive if it is exclusionary conduct intended to drive competitors out of the market,” she said.

“Exclusivity clauses themselves are not deemed anti-competitive. The scope and duration of an exclusivity clause are relevant considerations for a finding of abuse.

“For example, it would be difficult to argue that a one-day exclusivity clause that customers can opt out of is a type of conduct that would drive their competitors out of the market.”

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Jason Thomas
Free Malaysia Today
May 4, 2021 7:00 AM

PUTRAJAYA (April 19): A three-member Court of Appeal bench today granted leave to Grab Holdings Inc and its subsidiaries GrabCar Sdn Bhd and MyTeksi Sdn Bhd to have the merits of their judicial review application against the proposed RM86.77 million fine by the Malaysia Competition Commission (MyCC) heard.

Justice Datuk Hanipah Farikullah, who led the bench, said there are merits in the appeal based on the evidence and there is an arguable case which can be argued further in the substantive stage.

“This is not a frivolous and vexatious application by the appellants. The High Court judgement is set aside,” she said in the unanimous decision.

Sitting with Justice Hanipah were Justices Datuk Hadhariah Syed Ismail and Datuk Hamzah Hashim.

They directed the case be remitted to the High Court on April 26 and for the court to fix a hearing date.

Hanipah also ordered MyCC to pay total costs of RM12,000 to the three companies.

Grab is accused by MyCC of allegedly “abusing its dominant position by imposing a restrictive clause on its drivers which effectively prevented its drivers from promoting Grab’s current and potential competitors on e-hailing platforms and in transit media advertising”.

However, the appellants’ counsel Datuk Malik Imtiaz Sarwar contended that while they abide by MyCC’s power to investigate, prosecute and judge, the commission should not impose conditions before the proposed decision on the fine is imposed on them.

Malik complained that before MyCC arrived at its proposed decision, there was a RM15,000 daily penalty that could be imposed on Grab from the date of service if it failed to comply with MyCC’s directions.

Punitive penalty conditions imposed on Grab if it does not comply

The directions issued by MyCC on Grab and the two appellants are:

i) to permanently remove the restrictive clause from the terms and conditions, supplement terms of use and code of conduct and;

ii) send notifications to all its drivers in relation to the removal of the restrictive clause via the short messaging system (SMS) for 12 consecutive weeks, commencing from the date of issuance of the proposed decision.

Malik, who appeared with Shanti Kandiah, Yvonne Lim, Khoo Suk Chyi and Nimraat Kaur, said the conditions are a violation of the principles of natural justice as MyCC should not be imposing conditions which could lead to Grab being fined RM15,000 a day, if it does not comply, before the proposed decision is delivered or made final.

“MyCC did not have the power to impose a penalty that took effect upon the issuance of the proposed decision,” he said.

He said that Grab’s representatives had met MyCC to assist in its investigation, but are concerned over biasness as according to the Competition Act 2010, fines and penalties issued would be used by MyCC for its remuneration, expenses and also its employees.

Hence, it is concerned over possible biasness before MyCC hears its case, or when the matter goes on appeal to the Competition Appeal Tribunal (CAT). It is also concerned over media reports in what it calls “negative publicity” concerning the result of the proposed decision.

Meanwhile, MyCC’s counsel Datuk Lim Chee Wee, who appeared with Kwan Will Sen, said the proposed decision should not be treated as a final decision and hence, the appeal for a judicial review by Grab should be dismissed.

“There were cases where MyCC rescinded the earlier proposed decision after hearing the case, with the case of Maju Steel as one of them,” he said.

Lim also gave an undertaking that MyCC would not impose the conditions.

“By allowing a judicial review, it may open the floodgates,” he warned.

However, Malik argued that email correspondence between his client and MyCC showed they had to comply with the two conditions imposed and hence, leave should be granted.

Grab and its two subsidiaries sought the judicial review in the High Court in February last year following MyCC’s proposed fine. However, the application was dismissed as the court deemed the move premature, given that the proposed decision was not yet final.

Hafiz Yatim
theedgemarkets.com
April 19, 2021 15:57 pm +08

The fact that this question is being asked may come as a surprise to those who have witnessed stringent anti-cartel enforcement since the inception of the Competition Act 2010 (CA 2010).

However, in light of the pronounced global downturn brought on by the Covid-19 pandemic and the prospect of high levels of unemployment, potential social instability and low or volatile levels of demand, should the government facilitate the formation of crisis cartels by distressed firms as a temporary measure to weather the crisis? Where governments do not have the capacity and resources to fully support alternative public policy measures to improve market outcomes (such as subsidisation), crisis cartels could be an additional or alternative strategy to aid firms and sectors in distress.

Meaning of crisis cartels

Crisis cartels, as the term implies, is used broadly to describe collaborations or joint actions taken by competitors during and as a result of an economic crisis. It describes two scenarios: > Crisis related collaborations between private sector firms, not approved by the state, that restrict competition (for example whether to fix prices, set quantities, set market shares, limit production, rig bids and even share competitive data). These are illegal under the CA 2010.

> Cartels that are enforced or directed by the state (or exempted by the relevant competition authority). These are beyond the reach of antitrust enforcement.

Motivations behind crisis cartel

Essential sectors In essential sectors such as health, medical supplies and banking, the motives for coordination between competitors presently relate to alleviating shortages and ensuring continuity of supply of essential goods and services.

As the measures may involve exchanges of information (for example, sales data, capacity data, demand data for rationing purposes), sharing of distribution networks and pooling of staff, these (while well-intentioned) are likely to be illegal as it decreases the incentives to compete and reduces the parties’ decision-making independence.

It would make sense for governments to give outright waivers for these types coordinated behaviour for the period of the pandemic, for they are unlikely to be problematic. Even if they amounted to a restriction of competition, they generate efficiencies that would most likely outweigh any such restriction.

It is noteworthy that:

> The United Kingdom government has formally waived the Competition Act 1998 for a limited period for supermarket retailers to allow sharing of data on stock levels, collaboration to keep shops open, or sharing of distribution depots.

> The Norwegian government has granted the transportation sector a three-month temporary exemption from the prohibition against anti-competitive agreements making it possible, for example, for airlines SAS and Norwegian to coordinate their schedules to maintain minimum services for citizens during the Covid-19 outbreak.

Other sectors

It is likely that proposals for coordination or joint action will not be limited to just the essential sectors. For one, non-essential sectors are the hardest hit by the movement control order, in not being able to operate optimally.

While more controversial, historically governments during crisis times have put in place processes for evaluation of joint action to enforce price fixing and capacity reduction agreements (such as during the East Asian financial crisis, great depression in the United States and even the 1980s recession in the European Union).

To filter out opportunistic behaviour, tests or rules were put in place – for example joint action to limit price cuts or stem output were permitted only where conditions in the market had driven market prices below average production cost.

These types of cartels are sometimes referred to as depression cartels, recession cartels or restructuring cartels.

It is possible to discern a set of common motivations behind these crisis cartels. They are:

> Facilitate closure of excess capacity;

> Facilitate rationalisation of input shortage such as fuel and/or spare parts;

> Limit or avoid employment losses;

> Stabilise prices particularly in products and services that are exposed to high-income elasticity of demand;

> Protect domestic firms from international competition likely to drive these firms out of the market.

The OECD Report on Crisis Cartels (2011) suggests that a policy towards crisis cartels could be justified in one of the following ways:

> The policy raises total welfare standards (both producer welfare and consumer welfare) more than any other policy embarked upon (for example, if the issue faced by the industry is a liquidity crunch, a crisis cartel here would not be an efficient policy as it takes time to affect prices, sales and revenues of cartel members);

> The policy attains a numerical target with a chosen non-economic objective at a lower cost than any other alternative policy considered (for example, a policy that ensures that employment losses are no more than 5%).

Antitrust purists would argue that there is nothing different between a cartel and a crisis cartel – both raise prices above incremental costs, limit output and distort market outcomes away from efficient outcomes, and so harm consumers.

Yet the exemption provision for cartels in the CA 2010 appears to accommodate interests other that consumer interests. Social benefits (such as stemming job losses) is a ground for exemption as much as efficiency considerations are.

While the scope for social policy considerations is presently untested, the current climate will put pressure on competition authorities to accommodate such considerations when evaluating the types of benefits capable of offsetting the anti-competitive effects of any crisis cartel pursued.

Routes for exemptions

The crisis calls for swift measures by the government or competition authorities to get competition law out of the way. They include:

> Outright waivers or exemptions on a pro-active basis to firms needing to coordinate to secure the availability of essential goods and services where there is high demand – for example, food and medical supplies or bank collaborations to fund distressed SMEs.

The routes available in the CA 2010 (i.e. Ministerial Order or a block exemption) require a 30-day public notice period for submissions to be made by members of the public, as well as the requirement to give due consideration to the comments received. While this offers broader accommodation to a sector, it does not offer swift reprieve from the CA 2010.

> Expedited exemption approvals (individual/block exemptions) upon application by firms from all sectors including collaborations to establish and enforce the rules relating to prices and output.

This route appears to be sans the need for public notice and therefore offers speedier timelines for approvals, as the following antitrust authorities have done:

> Within a week: The US Department of Justice and the Federal Trade Commission have announced an expedited antitrust procedure (within seven calendar days of receiving all information necessary to vet these proposals) for Covid-19-related healthcare collaborations;

> Overnight approval: The Australian Competition and Consumer Commission has issued exemptions on an expedited basis to, for example, the Australian Banking Association’s application on an overnight basis to permit banks to work together to implement a small business relief package.

> Within 48 hours: The Icelandic Competition Authority has an expedited process for granting exemptions in relation to the Covid-19 pandemic – within 48 hours of an application.

A waiver by the MyCC of the fees for individual exemption applications of RM50,000 per application would be a welcome gesture to facilitate applications.

It is unlikely that SMEs who would be worst hit by the crisis would have the resources to navigate the process of securing exemptions. Therefore, competition authorities may wish to emulate the counterparts in the UK, EU and New Zealand by temporarily modifying their enforcement practices and providing reassurances that good faith collaborations to share staff, distribution networks and ensure continuity of supply are permitted.

Conclusion

Sectors in Malaysia that could benefit from temporary flexibilities (subject to a finite timeframe and review based on a pre-specified criteria) include:

> Medical equipment – to minimise disruption in supply of medical equipment (both manufacturing and distribution);

> Hospitals – to designate hospitals to undertake testing and those for critical care facilities

> Food supplies – to share data on stock levels, collaboration to keep shops open, or share distribution depots and delivery vans;

> Airlines – to facilitate rationalisation of routes in the face of low demand;

> Hotels – to reduce capacity (for example, days open for business) to meet low demand given travel restrictions;

> Banking – collaborations to spread risk and offer broader funding to SMEs;

> Building materials – collaborations to ensure closure of excess supply and access to inputs such as spare parts/fuel to maintain operations.

These examples provide strong impetus for the government and competition authorities to enhance and expedite existing procedures to evaluate proposals for such cartels given these extraordinary times.

The Star
By Shanthi Kandiah
April 2, 2020

Grab Inc, alongside related corporate entities Grabcar Sdn Bhd and Myteksi Sdn Bhd, filed a leave application for judicial review, through Messrs Shanthi Kandiah Chambers, at the Kuala Lumpur High Court Registry on Dec 30 last year.

Malaysia Kini
By Hidir Reduan Abdul Rashid
February 12, 2020 7:12 am

The rumoured merger between Air Asia Group Bhd and Malaysia Airlines Bhd (MAS) has raised concerns about competition, mainly because the merged entity will command almost 85% of the domestic market in terms of revenue passenger kilometre.

When it comes to a merger between airlines, however, the assessment of whether it constitutes a monopoly is not as simple as looking at the market share of the passengers it will carry in a year. According to competition law practitioner Shanthi Kandiah, such an assessment is typically based on the individual routes.

“The authorities would look at the extent of the overlapping of routes. They would also see whether the competitors have sufficient excess capacity to mitigate the risk of the merged entity’s raising prices.

“The parties would have to provide evidence of efficiencies, for example, through a better spread of scheduled flight timing and cost synergy,“ says Shanthi when contacted by The Edge last Thursday. She is founding partner of SK Chambers, a legal firm that specialises in competition law. …

Aviation is one of the sectors that have been carved out of the Competition Act 2010 and has its own competition laws and regulatory bodies. Its commercial aspects are regulated by the Malaysian Aviation Commission (Mavcom) while the air safety aspects are controlled by the Civil Aviation Authority of Malaysia (CAAM).

It is noteworthy that the government is planning to re-merge Mavcom with CAAM. However, the former still has jurisdiction over the commercial matters of the airline industry at the moment as its governing law – the Malaysian Aviation Commission Act 2015 – is still in effect.

On its website, the commission says it prohibits any merger that will substantially lessen competition in any aviation service market.

On how Mavcom goes about it, Shanthi says, “It depends on the areas of the merger, whether it is cargo, charger or commercial flights. For commercial flights, the market definition will depend on the flight’s origin and destination. What is likely is that some local destinations will lead to a monopoly provider if the two airlines merge, unless they are served by a third airline.”

International destinations are less likely to be monopolised because there usually is another carrier serving the route, she adds.

If the Air Asia Group-MAS merger is allowed by Mavcom, the commission could secure undertakings from the merged entity, for example, the divestment of certain slots to a competitor where slot availability is an issue, Shanthi explains. “It could be required to divest certain slots unless, for example, the route is low-volume and it would be difficult to sustain a competitor.”

When asked if the authorities – whether Macvom in its current form or after being merged with CAAM – can take action against the merged entity post the exercise, Shanthi says, “Any dominant player must be cautious post-merger about increasing prices because in the past, we have seen competition authorities in other countries move to investigate the merged entity.

Sometimes, the authorities even secure as an undertaking, no changes in pricing post-merger for a defined period.”

The Edge
By Kamarul Azhar
January 27,2020

“Shanthi Kandiah said currently, the Malaysian Communications and Multimedia Commission (MCMC) and the Personal Data Protection Commission (PDPC) are not legally empowered to pursue a case.

She told FMT that cyber-security cases are treated like any other criminal case, with prosecution powers in the hands of the Attorney-General’s Chambers. This means that building a case against cyber-criminals will take more time and effort.

“The burden of proof is a little bit higher, so the threshold of bringing people to task is also higher because of the nature of the liability,” the lawyer told FMT. She said getting to the root of a data breach is no easy task. Under the Personal Data Protection Act, she said, the responsibility falls on data users such as companies and not third-party data processors such as cloud service providers. She said if MCMC and PDPC had powers to impose fines, they could act quickly and bring companies that are negligent in data security to task.

“Giving the agencies such powers would send the message more quickly,” she added.

In the EU, Shanthi said, companies neglecting data security could be hauled up under the Global Data Protection Regulation, a personal data protection law applied in all EU countries.

“It’s an administrative action where agencies themselves can levy fines,” she said, citing as example a US$123 million fine imposed on the Marriott group for failing to notify customers that their data had been breached. ”

Free Malaysia Today
By Joel Shasitiran
October 8, 2019 10:00 AM

When Regulators Come Knocking: Responding To Raids, Investigations And How To Avoid Risks.

“According to Shanti Kandiah of SK Chambers, a lawyer who is an expert in competition law, MCMC has taken the view that Sections 133 and 139 of the Communications and Multimedia Act 1998 allow the commission to regulate matters pertaining to M&A involving communications and multimedia companies.

It is worth noting that the Malaysia Competition Commission (MyCC) does not have the power to regulate M&A as the Competition Act 2010 neither prohibits monopoly of business nor M&A.

“The parties involved will have to satisfy MCMC that the merger does not have the effect of lessening competition within the industry,” says Shanti.”

By Kamarul Azhar, The Edge Malaysia
December 25, 2018 17:00 +08

No one is giving the Grab-Uber union a break, now that Singapore has deemed it detrimental to competition. Is it still all-systems-go for the deal to take off in Malaysia?

Produced by: Arleen Webber
Presented by: Caroline Oh, Ezra Zaid