Tay Partners

InsiderTAPS (18 May 2012)

The First Batch of Final Guidelines

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In November 2011, MyCC issue 3 sets of draft guidelines for public consultation. The final guidelines on these were released in early May 2012. These are the Guidelines on Chapter 1 Prohibitions, Guidelines on Market Definition and the Guidelines on Complaint Procedures.

Save for a few noteworthy changes in the Chapter 1 guidelines, the changes have been cosmetic rather than of real substance. Chapter 1 guidelines seem to be the focus of feedbacks received in the consultation process judging from changes made. Overall, all 3 guidelines benefited from changes which made for better reading and flow.

Cautionary Use of Guidelines

The final guidelines have now all incorporated a standard disclaimer and exclusion on the use of guidelines. Rightly so as guidelines are not substitutes for the law and should be applied on a case by case basis. They are useful to help in understanding the law but will never replace the legal interpretation of legislations. Guidelines will not be binding on MyCC nor on our courts and at all times the spirit and substance of competition law will count for more than guidelines.

In countries with advanced competition law application, guidelines have been an indispensable tool for competition commissions, enterprises, lawyers, competition economists and the public. Competition law can be abstract and elusive in concepts if not properly illustrated and explained. They may also be revised from time to time as competition concerns are not static and hence help make the law relevant and living.

Chapter 1 – Noteworthy Changes

* RRP – A clearer signal has been conveyed through the changes on recommended retail price ( RRP ). If RRPs issued by manufacturers or suppliers act as focal points for sellers and retailers, the case for MyCC to investigate will be stronger. An RRP is seen as a variant of retail price maintenance ( RPM ) mechanism which enables sellers and retailers to form price cartels. This excludes or reduces intra-brand competition.

* Franchise – MyCC’s benign stand on franchise in the draft guidelines have been replaced with a note that separate guidelines will be issued for franchising and intellectual property.

* Exclusive Distribution Agreements – MyCC has appeared to be more hesitant to stick out on this. Previously in the draft guidelines, MyCC stated that it will not normally examine such agreements involving suppliers with market share of less than 30% and where the sole appointment is for less than 5 years. These statements have been taken out in their entirety from the final guidelines.

* Notification for Guidance – In several other jurisdictions, notification for guidance is expressly provided in legislation. In the course of the public consultation process prior to finalizing these guidelines, MyCC was asked if it will at least entertain informal notification for guidance until the Competition Act is amended at some future time to incorporate this. To remove any doubt that it will not entertain this, MyCC has grafted a paragraph to expressly exclude this until the Act is amended.

* Appendices – 3 Appendices in the draft guidelines have been omitted. The first two dealt with the analytical framework to assess a Section 5 claim for relief from liability and the other with areas excluded from the ambit of the Act. The Appendix 3 is the one many will miss though as it tabulated examples of ‘likely’ and ‘unlikely’ cases where competition will be significantly prevented, restricted or distorted. This is unfortunate as it is a useful tool to explain simply and clearly the typical areas for the benefit of both enterprises and consumers alike.

In its press release, MyCC alluded to other guidelines being prepared. One of them which is highly anticipated is the guidelines on dominance and abuse of dominance.

We continue to monitor developments closely here in Malaysia, Singapore and in the EU for matters that will affect our clients and business associates.

Tay Beng Chai
18 May 2012

PS. The Guidelines for Abuse of Dominant Position was published on MyCC website on 15 May 2012.