A cartel is an arrangement between competitors to coordinate rather than compete — by fixing prices, carving up markets, limiting output or rigging bids. Under section 4(2) of the Competition Act 2010 these are the most serious breaches of competition law, prohibited by their very object, and they expose the businesses involved to penalties of up to 10% of worldwide turnover.

This article explains the four hardcore restrictions, why cartels are treated so severely, how MyCC detects and punishes them, and how the leniency regime offers a way out for those who come forward.

Key takeaways •Cartels are the worst kind of breach. They are prohibited by object under section 4(2), so MyCC need not prove harmful effects. •Four forms. Price-fixing, market sharing, output limitation and bid rigging. •Severe penalties. Up to 10% of worldwide turnover over the infringement period (section 40), plus directions and private damages. •No paperwork needed. An informal understanding or concerted practice is enough; MyCC can infer it from conduct. •Leniency is the escape route. Self-reporting under section 41 can cut the penalty by up to 100% — but only for those who move first.

What is a cartel?

A cartel exists when businesses that should be competing instead agree, formally or informally, to act together. The agreement removes the rivalry that drives down prices and improves quality, transferring value from customers to the cartel members. Because the harm is so direct and there is rarely any legitimate justification, competition law treats cartel conduct as anti-competitive by its object — unlawful in itself, without any need to measure the damage.

Importantly, a cartel does not require a contract. It can be an unwritten understanding, a pattern of coordinated behaviour, or a “concerted practice”, and MyCC can establish it from circumstantial evidence.

The four hardcore restrictions

Section 4(2) of the Act sets out the four categories of cartel conduct between competitors:

• Price-fixing (section 4(2)(a)). Agreeing prices, discounts, surcharges, margins or any trading condition — directly or indirectly. MyCC has pursued price-fixing in sectors ranging from food production to financial services.
• Market sharing (section 4(2)(b)). Dividing up markets or sources of supply — by geography, customer or product. A well-known example involved major airlines found to have shared markets.
• Output limitation (section 4(2)(c)). Limiting or controlling production, market outlets or access, technical development or investment to keep supply scarce and prices high.
• Bid rigging (section 4(2)(d)). Coordinating tenders — cover pricing, bid suppression, bid rotation, or agreeing the winner. This is a repeated focus of MyCC enforcement in public procurement, including procurement of safety and other equipment.

Why are cartels treated so seriously?

Cartels are the textbook example of conduct with no redeeming features. Unlike a vertical arrangement or a genuine joint venture, a naked agreement among competitors to fix prices or share markets produces no efficiency that benefits consumers — it simply raises prices and reduces choice. That is why the law deems it anti-competitive by object, why penalties are pitched at up to 10% of worldwide turnover, and why competition authorities worldwide prioritise cartel detection.

How does MyCC detect cartels?

Cartels are secret by nature, so MyCC relies on a mix of tools:

• Complaints. From customers, competitors or whistleblowers (section 15).
• Leniency applications. A participant breaking ranks to self-report is one of the most powerful sources of cartel evidence.
• Market screening. Identifying suspicious patterns such as identical pricing, parallel movements or unusual tender outcomes.
• Investigation powers. Information requests (section 18) and searches of premises under warrant (section 25).

What are the consequences?

On a finding of infringement under section 40, MyCC can impose a financial penalty of up to 10% of worldwide turnover over the period of the infringement and direct the conduct to stop. The figures can be large — in one prominent matter MyCC issued a proposed penalty of around RM173.66 million against an insurance association and its members for alleged price-fixing, although the Competition Appeal Tribunal later set that penalty aside. Beyond penalties, cartel members face reputational harm and exposure to private damages claims under section 64 from customers who overpaid.

The escape route: leniency

The single most important practical point for a business caught in a cartel is the leniency regime under section 41. A participant that admits its involvement and cooperates with MyCC can obtain a reduction of up to 100% of the penalty. Because the greatest benefit goes to the first to come forward, there is a powerful first-mover advantage — once one member breaks ranks, the others are exposed. The decision to self-report is therefore urgent and should be taken with legal advice. See the leniency regime: reporting a cartel to MyCC.

Cartel red flags and how to stay clear

The conversations that create cartel risk are often informal — at industry events, in association meetings, or in casual contact with competitors. Treat any discussion of prices, customers, territories, capacity or tenders with a competitor as off-limits. In tenders, prepare bids independently and avoid any contact with rival bidders. Build these rules into staff training and a compliance programme.

See building a competition law compliance programme and competition law for trade associations and information exchange.

Frequently asked questions

What is a cartel?

A cartel is an arrangement between competitors to coordinate their behaviour instead of competing — typically by fixing prices, sharing markets, limiting output or rigging bids. Under section 4(2) of the Competition Act 2010 these are prohibited by their object, so MyCC does not need to prove harmful effects.

Is bid rigging illegal in Malaysia?

Yes. Bid rigging — where competitors coordinate their tenders, submit cover prices, or agree who should win — is a hardcore restriction under section 4(2)(d). It is a particular focus of MyCC enforcement in public procurement.

What is the penalty for taking part in a cartel?

On a finding of infringement, MyCC can impose a financial penalty of up to 10% of an enterprise’s worldwide turnover over the period of the infringement (section 40), plus directions to stop. Businesses also face reputational damage and private damages claims under section 64.

Can I avoid a penalty by reporting a cartel?

Possibly. The leniency regime under section 41 allows a participant that admits involvement and cooperates — especially the first to come forward — to obtain a reduction of up to 100% of the penalty. There is a strong first-mover advantage, so timing is critical.

Does a cartel have to be a written agreement?

No. A cartel can be an informal understanding or coordinated conduct (a concerted practice). MyCC can infer it from evidence such as parallel pricing combined with contact between competitors. No signed document is needed.

If you have received a notice from MyCC, are reviewing an agreement or a contemplated deal, or want to put a compliance programme in place, our competition law team can help. Ng, Zainurul, Seke & Khoo (NZSK) Offices: Mont Kiara and Puchong Phone / WhatsApp: 016-557 4789 Email: [email protected] Web: nzsklegal.com