Different views on competition

BY BHAG SINGH

Some manufacturers want to fix prices so that merchants will not overcharge, but the law calls this ‘anti-competition’.

COMPETITION, according to the dictionary, means “a situation in which people or organisations compete with each other for something that not everyone can have”.

Today it is also used in a more specific way to prohibit acts or actions that prevent competition in the market place.

At one time, it was thought that unbridled competition, no doubt with exceptions, was thought to be the ideal state of affairs.

Some still believe that it would result in greater efficiency, lower prices, a diversity of choices and, in the end, better products.

It has been said that through perfect competition, both the customers and producers would be in a position where they would benefit more.

A reader has asked whether an attempt by a group of businesses to agree on prices of all or some of their goods they sell or services that they offer would be permissible.

He sees this as a way where prices are fixed on a uniform basis and the purchaser who sees such goods or services would not need to go round, but would be assured that whatever is paid to one merchant would be the same if secured from another.

He thinks that in this way the group could ensure that no single merchant over-charged or charged an exorbitant amount.

However, this is not the way the law looks at it. This, in law, would be price fixing.

The Competition Act makes such conduct unacceptable.

When the Bill was tabled, the explanatory statement said the Bill “seeks to introduce prohibitions on anti-competitive conduct and practices.

The object of the Act is to promote economic development by protecting the process of competition, and thereby protecting the interest of consumers”.

The explanatory statement also went on to say: “The Act makes provision for the introduction of competition law by introducing two main prohibitions. The first is in respect of agreements or concerted practices between enterprises or association of enterprises (together referred to as ‘agreements’) which have the object or effect of significantly preventing, restricting or distorting competition in Malaysia. The second is the prohibition of the abuse by an enterprise or enterprises of a dominant position in Malaysia.”

The various stakeholders who are involved in and affected by the Act have done much to publicise its effect and implications.

The only local book available is Competition Law in Malaysia written by Nasarudin Abdul Rahman and Hanif Ahamat at the International Islamic University Malaysia.

Price fixing would come within the scope of Section 4(1) of the Act which states that “A horizontal or vertical agreement between enterprises is prohibited in so far as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services.”

It goes on to say that in subsection 4(2) that “Without prejudice to the generality of subsection (1), a horizontal agreement between enterprises which has the object to a) fix, directly or indirectly, purchase or selling price or any other trading conditions, b) share market or sources of supply, c) limit or control i) production, ii) market outlets or market access, iii) technical or technological development and iv) investment and d) perform an act of bid rigging is deemed to have the object of significantly preventing, restricting, or distorting competition in any market for goods or services.”

Thus the situation disclosed earlier would have the effect of price fixing as mentioned in Section 4(2)(a). Such was the case in connection with a complaint lodged again the Sibu Confectionery and Bakery Association (SCBA).

On Nov 17, 2013, the SCBA held its second Annual General Meeting at the Golden Happiness Restaurant in Sibu, Sarawak.

The Minutes of Meeting confirmed that the members who were “charged” attended the AGM.

The minutes of the AGM, submitted by the Chairman of the SCBA, indicated that the attendees, including those who were charged, had engaged in price fixing by agreeing to increase the prices of confectionery and bakery products by 10% to 15% in Sibu.

Excerpts from the minutes of the AGM (English version) showed the following: “This AGM we have to think and discuss carefully to fix a reasonable and acceptable selling price for our products which will be fair to bakers, consumers and society. We all know that the wages of workers, the prices of ingredients, the transportation and the sales tax, etc will rise up in the coming year. Therefore we have to discuss our selling price and make some decision first.”

They proposed that the new price of all the products would be raised 10-15%, the minutes continued: “Mr Chieng Hock Ming proposed, Mr Ko Ting Ing seconded. All the members present at the meeting put up hands to support.

It was passed and adopted.”

The Competition Commission decided that what transpired amounted to price fixing and there had therefore been a contravention of the Act.

However though all had taken part and supported the decision, only those who implemented the price increase agreed to were held to be in contravention of the Act.

In cases such as this, what is looked at is whether there has been an agreement to fix the prices.

Different consequences follow, depending on whether those who agreed implemented the increase or not.

The other aspect is that such an agreement need not be reached at a meeting.

It could be that the decision is made through an exchange of correspondence or a discussion over the telephone.

Any comments or suggestions for points of discussion can be sent to mavico7@yahoo.com. The views expressed here are entirely the writer’s own.