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Guidelines
MALAYSIAN COMMUNICATIONS
AND MULTIMEDIA COMMISSION
GUIDELINE ON SUBSTANTIAL
LESSENING OF COMPETITION
RG/SLC/1/00(1)
| 5. |
Implications of Policy
Objectives
| 5.1 |
The objects of the Act have different significance
for sections 133, 139 and 140. These are addressed in turn. |
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| 5.2 |
The section 133 prohibition of conduct with
the purpose of substantially lessening competition is clear and unqualified. |
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| 5.3 |
The objects of the Act nevertheless play an
important role in the enforcement of section 133. The Commission's view of what constitutes
conduct which is intended to "substantially" lessen competition will be
based on the objects of the Act, including the national policy objectives. Decisions
regarding action under section 133 will be considered in the light of the impact
of licensee conduct on the achievement of these policy objectives. To put it another
way, the Commission will make an assessment of the likely outcome of the conduct,
make an assessment of the likely outcome in the absence of the conduct, and make
a judgement on whether the difference can be called "substantial". |
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| 5.4 |
A different approach will be adopted in relation
to sections 139 and 140. Section 139 provides that the Commission may direct a licensee
in a dominant position, but leaves the Commission a wide discretion subject only
to the objects of the Act and any relevant Ministerial directions. Section 140 requires
the Commission to make an assessment of the "national interest" when deciding
whether to authorise conduct which might otherwise be regarded as in breach of the
Act, particularly of section 133 or section 139, but provides no guidance on how
to define the national interest. |
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| 5.5 |
The view of the Commission is that the national
policy objectives provide the best guide for action in these contexts. In other words,
the Commission will use the national policy objectives as the criteria for deciding
whether a particular conduct should be subject to direction (in the case of section
139) or is in the national interest (in the case of section 140). |
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| 5.6 |
In contrast to the approach to section 133,
this approach to sections 139 and 140 clearly contemplates the possibility that the
objective of promoting competition may be traded off against other objectives. The
Commission's view is that this would only be justified when the benefits of such
a course clearly outweigh the direct and attendant benefits of competition which
would otherwise ensue. |
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| 5.7 |
The Minister's rule-making power under section
144 requires the Minister to make a judgement about whether certain types of conduct
will or are likely to lead to a substantial lessening of competition in a communications
market. The Commission's role is to enforce that judgement after it has been embodied
in the rules, not to make the judgement as such. Nevertheless, the Commission believes
that this guideline will provide a useful input to the Minister's deliberations on
rule-making for international markets. |
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| 6. |
Conduct, Purpose, and Effect
The concept of "substantially
lessening competition" occurs in the context of considerations of conduct, and
its purpose and effect. For this reason, this section addresses the issues surrounding
"conduct", "purpose", and "effect" as used in the legislation.
These concepts form an important part of the framework within which the concept of
"substantially lessening competition" is located and gains much of its
relevance.
| 6.1 |
"Conduct"
| a. |
Conduct in its broadest sense encompasses
any or all commercial activity in which a licensee could engage. This includes, but
is not limited to:-
- decisions to supply or not supply certain
goods or services;
- decisions on price setting;
- decisions on the quality of goods or services
offered;
- either making or giving effect to an agreement
or understanding, written or otherwise;
- requiring others to make or give effect
to an agreement or understanding, written or otherwise; and
- making known that an agreement or understanding,
written or otherwise, is sought.
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| b. |
For the purposes of this guideline, the
Commission's view is that the relevant "conduct" means any action, or a
lack of action, which can either actually or potentially affect the level of competition
in a market. That is, the Commission is concerned with kinds of conduct which may
have a potential negative effect on competition. Examples of certain conduct which
would concern the Commission include but are not limited to:-
- Predatory pricing, where prices
are set below production costs in the short term in order to eliminate competitors
and increase long term profits.
- Foreclosure, where the customer
is forced to enter into a long term supply arrangement with a particular supplier,
limiting competition in the market through customer choice restriction. Often these
agreements will include customer penalties for early termination of the agreement.
- Refusal to supply to actual or
potential rivals goods or services which are necessary for market participation.
- Bundling, which involves a refusal
to supply a good or service separately from another good or service forcing consumers
to purchase the bundle rather than just the service they want.
- Parallel pricing, where there is
collusion between rivals to vary prices in step.
- Other pricing and supply behaviour described
under the Guideline on Dominant Position.
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| c. |
The Commission does not contend that the above
examples of conduct will necessarily result in a substantial lessening of competition
per se. The Commission will however closely monitor the market impact of such
conduct. |
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| d. |
It should be noted that some of the above
examples are also directly addressed by specific provisions of the Act. In particular,
sections 135 and 136 place prohibitions on certain practices. The Commission is not
bound to intervene against a certain form of conduct under any particular provision
of the Act, but reserves the right to take action under any relevant provision. |
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| 6.2 |
"Purpose" and "Effect"
| a. |
The concepts of "Purpose" and "Effect"
are relevant to sections 133 and 139 of the Act respectively. Applying these two
tests imposes different requirements on the Commission. |
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| b. |
The issue of the purpose of conduct is particularly
relevant to the implementation of section 133. Only conduct with the purpose
of substantially lessening of competition is prohibited under the section. Such conduct
is prohibited irrespective of its effects, although the Commission expects that conduct
without an effect of substantially lessening competition is unlikely to come to its
attention in any case. |
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| c. |
In contrast, section 139 gives the Commission
the power to direct a licensee which is in a dominant position in a communications
market, and engaging in conduct with the effect of substantially lessening
competition in that market. This power is available to the Commission irrespective
of the purpose of such conduct. Similarly, section 144 provides for the Minister
to make rules to deal with conduct which will or is likely to lead to substantial
lessening of competition in a communications market, irrespective of the purpose
of that conduct. |
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| d. |
Determining the purpose of conduct is often
difficult. The broader principles that the Commission will apply in order to infer
purpose will include:-
- the nature of the conduct, including its
scope to affect rivals in the market;
- the circumstances of the conduct, including
the process of decision-making which led up to the conduct; and
- the likely effect of the conduct, where
likely refers to reasonable possibility rather than probability.
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| e. |
It is possible for conduct to have more than
one purpose. A licensee will be deemed to have engaged in conduct with a particular
"Purpose" if that purpose is or was a substantial purpose of the conduct.
This means that the particular purpose should be one of the purposes of the conduct
and have been material to the decision to engage in the Conduct. |
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| f. |
The Commission has extensive powers of inquiry
and investigation which it can employ to determine whether any or all of these conditions
are met. The Commission will use such powers if it has reason to believe that a breach
of the Act has occurred. |
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| g. |
In contrast, determining the effect of conduct
is a matter of fact which can be determined by "examination of the results".
In the particular case of section 139, the issue is whether the conduct of a licensee
has led to or may lead to substantial lessening of competition in a market where
that licensee is in a dominant position. In this case, the issue of purpose is irrelevant,
and only the assessment of whether substantial lessening of competition has occurred
or may occur is necessary in order to activate the provisions of section 139. |
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