Abuse of Dominant Position Lawyer Malaysia | Chapter 2 Competition Act

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Abuse of Dominant Position in Malaysia — Chapter 2 of the Competition Act 2010

If your business holds a dominant position in a Malaysian market — or if a dominant competitor’s conduct is harming your business — Chapter 2 of the Competition Act 2010 is directly relevant to you. Dominance is not itself illegal in Malaysia: competition law does not prohibit a business from being successful, large, or powerful. What is prohibited is the abuse of that dominant position — conduct that exploits the dominant enterprise’s market power in a way that is harmful to competition or to trading partners.

At NZSK, our competition lawyers in Kuala Lumpur and Selangor advise both dominant enterprises whose conduct is under scrutiny by MyCC, and businesses and individuals harmed by the abusive conduct of a dominant enterprise. We act from offices in Mont Kiara, KL and Puchong, Selangor, and we bring rigorous analysis of market structure, commercial economics, and competition law to every Chapter 2 matter.

Why Choose Us?

What Is a 'Dominant Position' Under Malaysian Competition Law?

Section 2 of the Competition Act 2010 defines a dominant position as a situation where one or more enterprises possess such significant market power that they are able to adjust prices or output without effective constraint from competitors or potential competitors. MyCC assesses dominance by reference to market share, barriers to entry, countervailing buying power, and the overall competitive structure of the relevant market.

There is no fixed market share threshold for dominance in the Competition Act — MyCC looks at the full market picture. However, MyCC’s guidelines indicate that an enterprise with a market share below 25 per cent is unlikely to be considered dominant, and an enterprise with a market share above 60 per cent is likely to be considered dominant. Enterprises with market shares in the 25–60 per cent range will be assessed on a case-by-case basis taking into account all relevant market factors.

Types of Abusive Conduct Under Chapter 2

The Competition Act does not provide an exhaustive list of abusive conduct — the Chapter 2 Prohibition applies to any conduct that amounts to an abuse of a dominant position. However, MyCC’s Guidelines on Chapter 2 Prohibition identify the following categories as the primary forms of abuse:

Predatory pricing — pricing below cost with the intent of driving competitors out of the market — followed by price increases once the competitive threat has been eliminated. MyCC assesses predatory pricing using cost benchmarks and evidence of intent
Exclusive dealing and exclusive supply arrangements — requiring customers or suppliers to deal exclusively with the dominant enterprise, to the exclusion of competitors — particularly where this has the effect of foreclosing the market to rivals
Tying and bundling — conditioning the supply of one product on the purchase of another (tying) or offering products only as a package at a combined price (bundling) in a manner that forecloses competition in the tied or bundled market
Refusal to deal — refusing to supply goods or services to existing or potential customers without objective justification — including refusal of access to an essential facility that competitors must access to compete effectively
Margin squeezing — where a vertically integrated dominant enterprise sets its prices at wholesale and retail levels such that equally efficient competitors operating only at the retail level cannot trade profitably
Excessive pricing — charging prices that are excessive in relation to the economic value of the product — recognised as a form of abuse in Malaysian competition law, though difficult to establish in practice
Discriminatory pricing and trading conditions — applying dissimilar conditions to equivalent transactions with different trading partners, placing certain trading partners at a competitive disadvantage

Assessing the Objective Justification Defence

Not all conduct by a dominant enterprise that restricts competition constitutes an infringement of the Chapter 2 Prohibition. A dominant enterprise may escape liability if it can demonstrate an objective justification for its conduct — meaning that the conduct is objectively necessary, proportionate to a legitimate business aim, and not capable of being achieved through less restrictive means.

The objective justification defence is narrow and fact-specific. We advise dominant enterprises on whether a credible objective justification exists for specific conduct, how to document and present the justification to MyCC, and how to structure business practices to minimise the risk of a Chapter 2 finding while achieving the legitimate commercial objectives.

Being Harmed by a Dominant Enterprise — Private Action

If your business is being harmed by the abusive conduct of a dominant competitor — for example, through predatory pricing that is destroying your ability to compete, exclusive dealing arrangements that are locking you out of key customers or supply channels, or a refusal to supply that is preventing you from competing effectively — you may have a private right of action under section 64 of the Competition Act to recover compensation for your loss.

Private competition actions require establishing that there has been an infringement of the Competition Act and that your business has suffered loss as a result. We advise on the procedural options available — including complaints to MyCC and direct private action in the courts — and on the evidence required to build a compelling case. See our Private Actions & Follow-On Claims page for full details.

How We Have Helped — Abuse of Dominant Position Cases

How We Have Helped — Abuse of Dominant Position Cases

Anonymised examples of dominant position matters we have handled. Details modified to protect client confidentiality.

Retail Distribution | Exclusive Dealing & Margin Squeeze | Chapter 2 Defence

The Situation

A national distributor with a significant market share in a fast-moving consumer goods category was investigated by MyCC following a complaint by a smaller distributor alleging that the client’s exclusive supply arrangements and pricing structure amounted to an abuse of dominant position — specifically, exclusive dealing and margin squeezing in breach of Chapter 2.

What We Did

We advised the client on the dominance assessment, challenging the market definition proposed by MyCC and presenting evidence of genuine competitive constraints from substitute products and emerging online channels. We prepared a detailed written submission on the objective justification for the client’s exclusive arrangements — demonstrating that they were necessary to protect investment in distribution infrastructure and were proportionate to the commercial objective. We also challenged the margin squeeze analysis, engaging an economic expert to produce a countervailing cost assessment.

✔ Outcome

MyCC accepted that the client’s market definition submission significantly narrowed the scope of the investigation. On the objective justification defence, MyCC agreed that certain exclusive arrangements were commercially justified, reducing the scope of the infringement finding. The final penalty was materially lower than the initial proposed amount and the client avoided a structural remedy.

Frequently Asked Questions

My company has a large market share. Does that mean we are automatically dominant and at risk?

Not automatically — dominance depends on the overall market picture, not just market share. However, a high market share is the single most important indicator of dominance, and enterprises with market shares above 60 per cent are likely to be treated as dominant by MyCC. If your company has a significant market share and engages in any of the conduct categories described above — exclusive dealing, tying, below-cost pricing — it is important to assess the competition law risk carefully. We advise on the dominance assessment and on structuring business practices to reduce exposure.

Is it illegal to charge high prices in Malaysia if we are dominant?

Excessive pricing — charging prices that are excessive in relation to the economic value of the product — is recognised as a potential form of abuse under Malaysian competition law. However, it is one of the most difficult forms of abuse to establish in practice, requiring a comparison between the actual price charged and an estimate of the 'competitive' price. MyCC has not yet issued a major infringement decision based solely on excessive pricing in Malaysia. We advise on the specific risk profile for your sector and pricing strategy.

Can a dominant enterprise ever refuse to supply a customer in Malaysia?

A dominant enterprise may refuse to deal with customers in certain circumstances without infringing the Chapter 2 Prohibition — for example, where the customer poses a genuine credit risk, where supply is objectively constrained, or where the refusal is justified by legitimate business reasons unconnected to competition. However, a refusal to supply that has the effect of foreclosing the market to a competitor — particularly where the dominant enterprise controls access to an essential facility — may constitute an abuse. We advise on the specific facts and on how to structure supply decisions to reduce competition law risk.

A dominant competitor is pricing below cost to drive us out of the market. What can we do?

This may constitute predatory pricing — an abuse of dominant position under Chapter 2 of the Competition Act. You may lodge a complaint with MyCC, which can investigate and impose penalties if an infringement is found. In addition, you may have a private right of action under section 64 of the Competition Act to seek compensation for the loss your business has suffered. We advise on both routes and on the evidence needed to build a compelling case. Contact us promptly — documenting the pricing conduct and its effects on your business is important.

Speak to a Competition Lawyer Now!

Whether you are a dominant enterprise assessing your compliance position, defending a Chapter 2 investigation, or a business harmed by a dominant competitor’s conduct, contact NZSK for practical and commercially focused trade mark legal advice. Contact us to arrange a consultation.