GUIDELINE ON SUBSTANTIAL LESSENING OF COMPETITION RG/SLC/1/00(1)
The Malaysian Communications and Multimedia Commission ("the Commission") has prepared this guideline in order to clarify how it will apply the test of "substantial lessening of competition" to a licensee in a communications market for the purposes of administering the Communications and Multimedia Act 1998 ("the Act"). This guideline should be read in conjunction with the guideline published by the Commission concerning market dominance.
2.1 Section 134 of the Communications and Multimedia Act 1998 ("the Act") states that the Commission may publish guidelines which clarify the meaning of "substantial lessening of competition". This document is the first such written clarification of the concept of "substantial lessening of competition" issued by the Commission.
2.2 This guideline sets out the considerations which will usually guide the Commission in any decision to take legal action against conduct by a licensee. The intention of the guideline is to provide insight into the Commission's approach to the enforcement of sections 133 and 139, the kinds of conduct which the Commission may be compelled to act against, and the considerations which will be relevant when considering whether to authorise conduct under section 140.
2.3 Section 134 of the Act states:-
(1) The Commission may publish guidelines which clarify the meaning of ‘substantial lessening of competition’.
(2) The guidelines may include reference to -
(a) the relevant economic market;
(b) global trends in the relevant market;
(c) the impact of the conduct on the number of competitors in the market and their market shares;
(d) the impact of the conduct on barriers to entry into the market;
(e) the impact of the conduct on the range of services in the market;
(f) the impact of the conduct on the cost and profit structures in the market; and
(g) any other matters that the Commission is satisfied are relevant."
2.4 Section 134 does not require the Commission to present an exhaustive or definitive list of the factors which it will consider relevant, or of the approaches it will adopt in forming a view whether a substantial lessening of competition has occurred. In considering issues related to lessening of competition, the Commission will form a view in good faith and on reasonable grounds. The Commission will have regard to this guideline, but will not be limited by it if the Commission forms the view that other factors may also be relevant to decisions that it is required to make.
3. Legislative Context
3.1 The concept of "substantially lessening competition" is fundamental to the economic regulation of the communications industry. The concept arises in four contexts in the Act. Each of these contexts requires the Commission to make an assessment of whether conduct has had, is having, or will have, the purpose or effect of substantially lessening competition in a communications market:-
a. Conduct by a licensee in a communications market which has the purpose of substantially lessening competition is expressly forbidden under section 133 of the Act.
In this case, the Commission may seek interim or interlocutory injunctions under section 142 or seek the imposition of fines under section 143 against a licensee engaging in any conduct prohibited under section 133. This requires the Commission to be satisfied that conduct has been engaged in with the purpose of substantially lessening competition in a communications market. Moreover, the Commission may direct a licensee under section 51 to cease such conduct to the extent that a contravention of section 133 is a breach of licence condition.
b. Under section 139, the Commission may direct a licensee in a dominant position in a communications market to cease a conduct which has or may have the effect of substantially lessening competition. This requires the Commission to be satisfied that there is such an effect.
c. The Commission may authorise conduct under section 140 which might otherwise be forbidden under sections 133 or 139, if it is satisfied that the conduct is in the national interest.
This will normally require the Commission to be satisfied that the national interest in the conduct outweighs the possible negative effects (if any) of substantially lessening competition in a communications market.
d. The Minister may make rules under section 144 intended to prevent or mitigate conduct by foreign network facilities providers and/or foreign network service providers which will or is likely to lead to a substantial lessening of competition in a communications market. The Commission is responsible for the enforcement of these rules.
3.2 The Commission recognises that the concept of "substantially lessening competition" is new in the Malaysian context. Nevertheless, the concept has antecedents in other jurisdictions which may provide useful guidance.
4. Policy Context
4.1 The Act is designed to achieve certain policy objects which are set out in section 3. The Commission must have regard to these objects in the implementation of the Act. Section 3 states:-
(1) The objects of this Act are -
(a) to promote national policy objectives for the ommunications and multimedia industry;
(b) to establish a licensing and regulatory framework in support of national policy objectives for the communications and multimedia industry;
(c) to establish the powers and functions of the Malaysian Communications and Multimedia Commission; and
(d) to establish powers and procedures for the administration of this Act.
(2) The national policy objectives for the communications and multimedia industry are -
(a) to establish Malaysia as a major global centre and hub for communications and multimedia information and content services;
(b) to promote a civil society where information-based services will provide the basis of continuing enhancements to quality or work and life;
(c) to grow and nurture local information resources and cultural representation that facilitate the national identity and global diversity;
(d) to regulate for the long-term benefit of the end user;
(e) to promote a high level of consumer confidence in service delivery from the industry;
(f) to ensure an equitable provision of affordable services over ubiquitous national infrastructure;
(g) to create a robust applications environment for end users;
(h) to facilitate the efficient allocation of resources such as skilled labour, capital, knowledge and national assets;
(i) to promote the development of capabilities and skills within Malaysia's convergence industries; and
(j) to ensure information security and network reliability and integrity"
4.2 The Explanatory Statement to the Bill sets out specific objectives for the economic regulation in Part VI. These objectives explicitly link the prohibitions of Part VI to the implementation of the objects of the Act, including the national policy objectives for the development of the communications and multimedia industry. These objectives are:-
to promote consumer markets which offer choice, quality and affordability;
to promote any-to-any connectivity for network services used for communications between end users;
to promote competition in all communications markets; and
to promote investment and innovation in network facilities, network services and applications services, and their efficient utilisation.
4.3 In addition, the Explanatory Statement also sets out a number of goals for the administration of Chapter 2 of Part VI, including sections 133, 139 and 140. These goals are:-
to provide protection for smaller operators in the absence of a general competitive policy or trade practices regulatory regime;
to provide a context for, and certainty about, the manner in which the general powers and procedures under the Act should be administered. This reinforces the regulatory intent of the national policy for the development of the communications and multimedia sector;
to establish a framework and clear powers for the Commission to ensure that anti-competitive practices do not undermine the national policy.
4.4 The establishment and maintenance of competitive communications markets is closely related to many of these objectives. Competition of itself promotes several kinds of efficiency which are directly related to the objects of the Act such as technical or productive efficiency, allocative efficiency and dynamic efficiency. It is therefore a powerful instrument to improve industry performance.