Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2013/5/20/business/13121631&sec=business
Published: May 20, 2013
In spite of this, the MyCC has noticed that several associations, in particular those whose members are mainly SMEs, have announced agreed price increases in the media.
Upon further investigation, the MyCC found that these associations were not aware of the CA and its implications. Even when informed that their conduct was illegal, these associations refused to withdraw their agreements.
The MyCC will not tolerate this blatant disregard of the law. This article seeks to explain to associations the areas which are of most concern to the MyCC.
When associations discuss too much
Associations across Malaysia provide excellent services to their members. They assist members with industry-wide issues such as government policy and improving standards, and they provide services such as training.
In this new era of competition law, associations have another key role to play, that is, to ensure competition law compliance both by the associations themselves, and by their members.
The gathering of members at an association meeting provides an opportunity to discuss prices, share sensitive business information or divide up contracts or markets. Casual discussions of matters that should not be discussed (including prices, quantities, or future business strategies) can lead to agreements or informal understandings in clear violation of the competition rules.
It is for this reason that associations and their activities are subject to close scrutiny by competition authorities around the world.
So how does the CA apply to associations? As associations should know by now, anti-competitive agreements are prohibited by the CA and the law clearly states that an “agreement” includes a decision by an association.
Associations should know that agreements to fix prices, share markets, limit production or supply, and rig bids will always be illegal. These are known as “hard-core cartel” offences and will be subject to substantial fines, which can be as high as 10% of worldwide turnover.
Other types of agreements may be anti-competitive if they have the effect of preventing, restricting or distorting competition in Malaysia.
Associations should therefore review their rules of admission, standard terms and conditions, codes of conduct and certification schemes as these may include conditions that could be anti-competitive, particularly if they have the effect of excluding players from the market.
Price fixing is illegal
Two areas of non-compliance by associations are raising particular concerns for the MyCC the fixing of prices and the sharing of commercially sensitive information.
An agreement to fix prices is a serious breach of the CA. It appears that it is common practice in Malaysia for members of associations to look to their association for direction or, at the very least, guidance on what prices should be charged. Although this type of activity may have been common practice in the past, the MyCC would like to emphasise that it is now illegal.
To avoid liability for price fixing, each member of an association must decide independently of each other what price to charge for goods or services. It is not permissible for members to agree on any matters regarding their prices and they should not discuss pricing issues, such as profits, price increases or decreases, or even pricing policy.
In these circumstances, even though an agreement on price might not have been reached, you may be found to have reached an “understanding” with your competitors, which would also be illegal.
The best practice for associations and their members to adopt will be not to discuss prices, or any pricing-related matters, at all.
Related to these issues are that of professional associations where “recommended scale fees” are agreed upon.
Many jurisdictions with competition laws have undertaken market research on professional associations to assess the benefits of recommended scale fees. The MyCC is in the process of undertaking a comprehensive study of this issue before reaching any conclusion.
What associations should do
The other area that is causing concern for the MyCC is the sharing of commercially sensitive information. Many associations commonly collect and disseminate industry data and statistics for their members and in many cases, sharing this type of information will not give rise to competition law issues.
However, where information is commercially sensitive, competition law issues are likely to arise. This is because it is likely to reduce the uncertainty that would normally exist in a competitive market.
For example, if an association shares information on the retail sales and market shares of each of its members, this would be highly likely to breach the CA, particularly if the market is highly concentrated (only a few players).
By comparison, if an association disseminates information regarding historical pricing trends (and historical would mean information that cannot influence future market behaviour), it is unlikely to breach the CA, provided the information is truly historical.
Similarly, aggregated data (data that is compiled in such a way that it is not possible to identify the data that applies to a particular business) is often able to be exchanged without giving rise to competition law issues. If the data can be easily disaggregated (so that you can identify “whose data is whose”), competition concerns may arise.
The MyCC does not want to see the excellent work of Malaysian associations hampered by an overly cautious approach to the CA. Members should not be reluctant to attend association meetings for fear of breaching the CA. This fear can be avoided if members understand what is, and what is not, permitted to be discussed under the CA so that they can have the confidence to participate in association meetings without breaking the law.
The MyCC encourages all associations to put in place a compliance policy that is made available to present and potential members.
As part of their compliance activities, associations should also be reviewing their own practices to ensure the association is not breaching the CA. It may be appropriate to create a simple list of dos and don'ts to govern association meetings. This way, members are clear on what can and cannot be discussed.
Associations should also require their members to complete competition law training so that they can be sure that they, and their members, are not breaching the CA. This will be of particular benefit to SMEs, which look to associations for guidance on good industry practices and which may otherwise find it difficult to access training.
The MyCC hopes to publish guidelines for associations in the future, but for now, the MyCC recommends that associations seek independent legal advice if in doubt about the way the CA applies to their activities.
Shila Dorai Raj (shila@mycc.gov.my) is CEO of the Malaysia Competition Commission (www.mycc.gov.my)
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