[Photo by Tobias Dziuba from Pexels]
By Bryan Boo
On 9 December 2020, 48 attorney generals across 46 states in the United States of America filed a legal suit against Facebook Inc., accusing Facebook of anti-competition business practices. The complaint alleges, among other things, that Facebook had illegally maintained its monopoly in the personal social networking market in the United States of America by deploying a “buy-or-bury strategy that thwarts competition”. There are also complaints that Facebook’s monopoly allows Facebook to decide how to use the personal information of its users unfettered by the restraints of competitive constraints. The complaint may be accessed below:
On the same day, the Federal Trade Commission of the United States of America (“FTC“), which is an agency tasked with the protection of consumers and competition, filed a suit against Facebook Inc. also for anti-competition business practices. The FTC alleges, amongst other things, that Facebook maintained its monopoly by “buying up companies that present competitive threats and by imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire”. Interestingly, amongst the reliefs sought by the FTC, the FTC is seeking for a divestiture of assets or reconstruction of business including Instagram and/or WhatsApp. FTC’s complaint can be read here:
In fact, on 17 December 2020, a similar suit was filed by numerous attorney generals of different states in the United States of America against Google LLC for anti-competition business practices as well. The complaint may be accessed here:
Competition Law in Malaysia
Competition law, also referred to as antitrust law, is not something foreign to Malaysia. Competition law is necessary not only for the betterment of the economy but also for the protection of consumers. The Preamble of the Competition Act 2010 reads:
An Act to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected therewith.
Whereas the process of competition encourages efficiency, innovation and entrepreneurship, which promotes competitive prices, improvement in the quality of products and services and wider choices for consumers:
And whereas in order to achieve these benefits, it is the purpose of this legislation to prohibit anti-competitive conduct:
Section 10 Competition Act 2010
Section 10 of the Competition Act 2010 prohibits any conduct that amounts to an abuse of dominant position in a relevant market.
Section 10 Competition Act 2010
Abuse of dominant position is prohibited
10. (1) 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.
(2) Without prejudice to the generality of subsection (1), an abuse of a dominant position may include—
(a) directly or indirectly imposing unfair purchase or selling price or other unfair trading condition on any supplier or customer;
(b) limiting or controlling—
(ii) market outlets or market access;
(iii) technical or technological development; or
to the prejudice of consumers;
(c) refusing to supply to a particular enterprise or group or category of enterprises;
(d) applying different conditions to equivalent transactions with other trading parties to an extent that may—
(i) discourage new market entry or expansion or investment by an existing competitor;
(ii) force from the market or otherwise seriously damage an existing competitor which is no less efficient than the enterprise in a dominant position; or
(iii) harm competition in any market in which the dominant enterprise is participating or in any upstream or downstream market;
(e) making the conclusion of contract subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject matter of the contract;
(f) any predatory behaviour towards competitors; or
(g) buying up a scarce supply of intermediate goods or resources required by a competitor, in circumstances where the enterprise in a dominant position does not have a reasonable commercial justification for buying up the intermediate goods or resources to meet its own needs.
(3) This section does not prohibit an enterprise in a dominant position from taking any step which has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor.
(4) The fact that the market share of any enterprise is above or below any particular level shall not in itself be regarded as conclusive as to whether that enterprise occupies, or does not occupy, a dominant position in that market.
What is “dominant position”?
Section 2 of the Competition Act 2010 provides the definition of “dominant position” within the Competition Act 2010 as follows:
“dominant position” means a situation in which one or more enterprises possess such significant power in a market to adjust prices or outputs or trading terms, without effective constraint from competitors or potential competitors;.
As such, a company in a similar position as Facebook and Google as alleged in the complaints may be in a “dominant position” within the meaning of the Competition Act 2010. However, being in a dominant position does not fall foul of the Act. A company would only fall foul of the Competition Act 2010 if it abuses the dominant position, as provided under Section 10 of the Competition Act 2010.
The Malaysia Competition Commission
The Competition Commission Act 2010 establishes the Malaysia Competition Commission (“MyCC“) to, amongst other things, regulate and enforce competition laws. To that effect, MyCC issued a number of guidelines, one of which is the Guidelines on Abuse of Dominant Position. The Guidelines on Abuse of Dominant Position details the factors that MyCC will take into account when determining whether or not a particular entity is in a dominant position and whether or not there has been an abuse of such dominant position.
If a case such as the complaints made against Facebook and Google (as discussed above) is initiated in Malaysia against a Malaysian entity, the issue for determination is whether or not such entity is indeed in a dominant position, and if so, whether or not there was an abuse of dominant position. Cases such as these are not foreign to Malaysia and there have been instances in which MyCC has proposed to fine entities for abusive and anti-competition practices and conducts (see, for example, MyCC’s proposal to fine Grab RM86 million). As such, businesses, especially those in a dominant position, must ensure that their business practices comply with competition laws.