THE PRICE CONTROL AND ANTI-PROFITEERING (MECHANISM TO DETERMINE UNREASONABLY HIGH PROFIT) REGULATIONS 2018 – BANE FOR COMPETITION POLICY IN MALAYSIA
What Does This Mean?
- On 6 June 2018, the new Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) Regulations 2018 (“Regulations 2018”) enforced by the Ministry of Domestic Trade, Co-operatives and Consumerism (“MDTCC”) has come into force.
- With the coming into force of the 2018 Regulations, the old Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit for Goods) Regulations 2016 (“Regulations 2016”) has been revoked.
The Regulations 2018
- Broad Scope of Application:
The Regulations 2018 apply to any goods sold or offered for sale or any services supplied or offered for supply. This new Regulations 2018 is noticeably broader than the Regulations 2016 which sought to regulate only certain classes of goods which are food and beverages and household goods.
- Mechanism to Determine Unreasonably High Profit / Profiteering:
The offence of profiteering is where a person who, in the course of trade or business, makes unreasonably high profits in selling / offering to sell / supplying / offering to supply any goods or services in Malaysia.
The Regulations 2018 prescribes a mechanism to determine unreasonably high profits by examining either: (i) the mark-up percentage; or (ii) the margin percentage, of the goods and services sold. If either the mark-up percentage or margin percentage adopted on any date in a particular financial year or calendar year is higher than the mark-up or margin percentage adopted on the first day of that financial year or calendar year, then such profit is determined as unreasonably high.
Further details can be found below:
http://www.federalgazette.agc.gov.my/outputp/pua_20180605_P.U.%20(A)%20130.pdf
- Criticism Against the Regulations 2018 - bane for competition policy in Malaysia
A typical competition policy regime including the Malaysian Competition Act 2010 seeks to ‘regulate’ prices by promoting business rivalry in the market. The promotion of this robust competitive process ultimately leads to an improvement in the quality of products and services and lower prices for consumers. Suffice to note, a competition authority in most circumstances will adopt a non-interventionist approach and will seek to intervene in the market only in cases involving ‘cartel’ type conduct and certain conduct of businesses with significant market power – as in most circumstances market forces will know best and dictate the right pricing to be offered to the consumers!
The wide scope of coverage of the Regulations 2018 has also clearly expanded from the original intent of the Price Control and Anti-Profiteering Act 2011 which was mainly designed to curb the conduct of excessive pricing only of ‘essential’ goods or services by irresponsible unscrupulous businesses.
- Penalties for Non Compliance:
The Price Control and Anti-Profiteering Act 2011 prescribes that any corporate body who commits an offence of profiteering shall, on conviction, be liable to a fine of up to RM500,000 and, for a second or subsequent offence, to a fine not exceeding RM1,000,000. Where such person is not a body corporate, he shall be liable to a fine of not exceeding RM100,000 and/or imprisonment of up to 3 years.
Way Forward
As of the time of writing, the MDTCC has not announced any grace period for the application of the 2018 Regulations. There is also an urgent need to raise the awareness level and educate businesses on the method adopted to determine unreasonably high profits so as to ensure that current and future pricing practices are in compliance with the 2018 Regulations.
In view of the Regulations 2018, there is also an urgent need to address the business communities. Perhaps the Malaysian Government may wish to clarify its economic policy direction and whether ‘price regulation’ is the new the business landscape in Malaysia moving forward.
Interestingly, The Malaysia Competition Commission (MyCC) has yet to issue any policy response to this latest development.
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Mohd Aidil Tupari,
Former Director Strategic Planning and International Affairs, MyCC. Currently the Head of Competition and Trade in an MNC.
Mohd Aidil is the Head of Competition & Trade of PETRONAS, responsible for ensuring group wide compliance on competition and international trade matters.
Prior to joining PETRONAS in 2014, Mohd Aidil was the Director of Strategic Planning and International Affairs of the Malaysia Competition Commission (MyCC) and was instrumental in setting up the Commission. Mohd Aidil graduated with an LLB (Hons) from the University of East London in 1997.