Section 10 of the Competition Act 2010 — the Chapter 2 prohibition — makes it unlawful for an enterprise to abuse a dominant position in a market in Malaysia. The key point, often misunderstood, is that being dominant is not itself a breach: a company may lawfully hold a large market share. What the law prohibits is the misuse of that position to harm competition.

This article explains what a dominant position is, how it is assessed, the conduct that can amount to abuse, and how Chapter 2 differs from the prohibition on anti-competitive agreements.

Key takeaways •Dominance is legal; abuse is not. Section 10 targets the misuse of market power, not the holding of it. •Unilateral conduct. Unlike Chapter 1, a single enterprise can breach Chapter 2 on its own, with no agreement needed. •Two-step assessment. First define the relevant market and establish dominance; then ask whether the conduct is abusive. •Many forms of abuse. Unfair pricing, refusal to supply, discrimination, tying, predatory conduct and more. •Serious consequences. Penalties of up to 10% of worldwide turnover (section 40) and private damages (section 64).

What is a dominant position?

A dominant position is a position of significant market power that allows an enterprise to act, to an appreciable extent, independently of its competitors, customers and suppliers — for example by raising prices or reducing quality without losing customers to rivals. Dominance is always assessed in relation to a defined market, so the first task in any Chapter 2 case is to define the relevant product and geographic market.

Market share is the most obvious indicator, but it is not the whole picture. MyCC also looks at barriers to entry and expansion, the strength of competitors, the bargaining power of customers, and whether the enterprise’s position is durable. A high market share in a market that is easy to enter may not amount to durable dominance. For the detail, see defining the relevant market and assessing market power.

Why is being dominant not a breach?

Competition law positively encourages firms to compete hard and win. A business that grows by offering better products, lower prices or greater innovation should not be penalised for succeeding — that is competition working as intended. The concern arises only when a dominant firm uses its position not to compete on the merits, but to entrench itself by excluding rivals or exploiting customers. Chapter 2 draws that line: it sanctions the abuse, not the success.

What conduct can amount to abuse?

Section 10 sets out examples of conduct that may, depending on the circumstances, constitute an abuse of a dominant position. They include:

• Unfair pricing or trading terms. Directly or indirectly imposing unfair purchase or selling prices, or other unfair trading conditions — including excessively high prices to customers.
• Limiting output or development. Limiting or controlling production, market outlets or access, or technical or technological development, to the prejudice of consumers.
• Refusal to supply. Refusing to supply a particular enterprise or group of enterprises, especially where access is essential to compete.
• Discrimination. Applying different conditions to equivalent transactions, placing some trading partners at a competitive disadvantage.
• Tying. Making a contract subject to acceptance of supplementary obligations that have no connection with the subject of the contract.
• Predatory conduct. Predatory behaviour towards competitors, such as pricing below cost to drive them out.
• Foreclosing inputs. Buying up scarce supplies of intermediate goods or resources that a competitor needs, where this is not reasonably required.

MyCC has applied Chapter 2 in practice, including a finding under section 10 against a dominant provider of online government-related services. For a deeper treatment of the main categories, see exclusionary abuses: predatory pricing, margin squeeze and refusal to supply.

How is a Chapter 2 case assessed?

Assessment follows two stages. First, MyCC defines the relevant market and asks whether the enterprise is dominant in it. If there is no dominance, there can be no abuse. Second, MyCC examines the conduct and its effect on competition — whether it forecloses rivals, harms consumers, or has no objective justification. A dominant firm may still defend conduct as objectively justified or as competition on the merits, so context and evidence matter.

How does Chapter 2 differ from Chapter 1?

The two prohibitions target different problems. Chapter 1 (section 4) is about agreements between two or more enterprises — it needs a meeting of minds. Chapter 2 (section 10) is about unilateral conduct by a single dominant enterprise — no agreement is required. A business can breach Chapter 1 without being dominant, and breach Chapter 2 without any agreement. Large firms should assess their conduct against both.

What are the consequences of an abuse?

The enforcement consequences mirror those for other infringements. On a finding 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 enterprise to change its conduct. Affected customers or competitors may also bring private claims for damages under section 64. Dominant firms should build Chapter 2 risk into their compliance programmes.

See building a competition law compliance programme and private enforcement and damages claims in Malaysia.

Frequently asked questions

Is it illegal to be dominant in Malaysia?

No. Holding a dominant position is not unlawful under the Competition Act 2010 — a business is free to grow a large market share by competing on the merits. What section 10 prohibits is the abuse of that dominant position to harm competition.

What is a dominant position?

A dominant position is a position of significant market power that allows an enterprise to act, to an appreciable extent, independently of its competitors, customers and suppliers. It is assessed by first defining the relevant market, then examining market share and other indicators of market power.

What kinds of conduct can be an abuse?

Section 10 gives examples including imposing unfair prices or trading terms, limiting production or technical development to the prejudice of consumers, refusing to supply, applying discriminatory conditions, tying unrelated products, predatory conduct, and buying up scarce inputs a competitor needs.

Does a single dominant firm need an agreement to breach Chapter 2?

No. Unlike Chapter 1, abuse of dominance is unilateral conduct — a single dominant enterprise can breach section 10 on its own, without any agreement with another business.

What is the penalty for abusing a dominant position?

The same enforcement powers apply as for other infringements: on a finding under section 40, MyCC can impose a penalty of up to 10% of worldwide turnover over the infringement period, plus directions, and affected parties can claim damages under section 64.

Speak to NZSK’s competition law team 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