Is Compliance on your Agenda?

The obligations in the Competition Act 2010 (CA 2010) have been available to businesses since Royal Assent in June 2010, now nearly 5 years ago.  Against this background, the MyCC expects that competition law is already part of the compliance activities of every business in Malaysia.  If it isn’t, your business should be taking urgent steps to put a competition law compliance programme (“compliance programme”) in place immediately. 

Many businesses, especially smaller ones, may be wondering exactly what a compliance programme involves. It is basically the implementation of a set of policies and procedures designed to ensure your business complies with the CA 2010.  The programme must apply to all employees, including senior management and the board of directors. 

Businesses that operate in jurisdictions with well-established competition regimes recognise the importance of competition law compliance.  It is regarded in the same way as compliance with health & safety legislation, anti-bribery and corruption legislation and tax laws.  For these businesses, competition law compliance often forms part of a wider corporate compliance programme. 

If you are wondering what a good compliance programme looks like, it will be comforting to know that there is no “one size fits all” programme.  Large companies will require something different to small businesses and those in high risk industries will need something different to those businesses in lower risk areas.  All businesses will need to individually identify their own risk areas, assess the extent of those risks and manage those risks going forward.

The UK Office of Fair Trading recommends a four step competition law compliance process – risk identification, risk assessment, risk mitigation and review.  The Australian Competition and Consumer Commission also refers to a need for businesses to identify, remedy and reduce the risk of competition law breaches as part of their compliance programme.

Although such a programme will differ from business to business, the key components should be:

(1) A statement, supported by senior management, setting out the policy of your business towards competition law compliance. 

(2) Training (tailored to your business and industry) for staff, particularly those who work in risk areas.  

(3) A reference manual which explains in simple language what the law says and how it applies to your business, using relevant examples.  For small businesses, this may be a simple list of dos and don’ts.

(4) A competition law representative who is responsible for competition law compliance and audit and to whom questions or problems can be directed.

(5) An annual compliance report (this may not be necessary for smaller businesses).

(6) Periodic review to check that the programme is working.

Since its inception, the MyCC has been stressing the need for Malaysian businesses to become competition law compliant. Yet a 2012 survey conducted by the Federation of Malaysian Manufacturers found that almost 20% of respondents had not taken any steps to comply with the CA 2010.  Another survey conducted by the MyCC based on the feedback obtained from its advocacy sessions held throughout 2012 reveals that 61.9% of the respondents were of the view that their companies probably took appropriate action to ensure compliance, 27.5% were not sure whether their companies had a compliance programme while 10.6% did not take any appropriate action. These are worrying statistics and the MyCC wants to see them improved. 

It may be interesting to note that in mature jurisdictions where competition law has been in force for decades, cartels remain a substantial problem. Statistics released by the Organisation for Economic Cooperation and Development (OECD) show that between 1990 and 2005 a total of 174 companies violated laws against price fixing at least 2 times with some reoffending as many as 26 times! This has raised serious concerns which led the OECD Competition Committee to hold a roundtable on Promoting Compliance with Competition Law in June 2011 to identify and assess numerous factors that influence compliance.  The delegates from around the world agreed that the objectives of a good competition compliance programme could be summarised as the “5 C’s” of compliance – Commitment, Culture, Compliance know-how and organisation, Controls and Constant monitoring and improvement. (The 5Cs were originally used by Fiona Carlin of Baker & McKenzie.)

What is clear is that competition authorities around the world remain extremely active.  An inaugural Corporate Counsel Survey done by Deloitte in 2011 found that corporate counsels reported greater activity among regulators over the last five years.  Conducting investigations was cited most often as a focus of regulators and among these were breaches of competition or antitrust laws.

The introduction of a compliance programme will require the investment of time and money by your business but this will be well worth it as the substantial benefits of having a compliance programme in place will far outweigh these costs. 

An effective compliance programme should significantly reduce the risk of your business breaching the CA 2010 and thereby avoid being fined up to 10% of the worldwide turnover of your business. 

It will be worth your effort to do a regular review of your business agreements and activities which will give your business an opportunity to identify and remedy any potential breaches before the MyCC investigates.  In these circumstances, your business may choose to apply to the MyCC for leniency which could result in any fine being reduced (provided all the MyCC’s conditions are met). 

An investigation by the MyCC will be both time consuming and costly for your business and should be avoided if you have an effective compliance programme in place.  Without an effective compliance programme there is a greater risk of your business breaching the CA 2010, resulting in substantial negative publicity and damage to the reputation of your business.    Conversely, if you have compliance programme in place, your business will be regarded as having good corporate governance and more international businesses may be willing to do business with you.

It is crucial that someone senior within your organisation ensures that a comprehensive and clear compliance programme is put in place to prevent your business from incurring the severe sanctions laid down for an infringement of the CA 2010.  As the requirements for competition law compliance will differ from business to business, you should seek your own advice either from a competition law or compliance expert. 

The MyCC has published a Compliance Guideline which set out more detail what is required for an effective competition law compliance programme. To download MyCC publications and for more info on the MyCC, please log on to www.mycc.gov.my.