News

12 July 2021

The Malaysia Competition Commission’s Market Review for Selected Transportation Sectors in Malaysia: What to Expect and How it would Change the Transportation Sectors’ Way of Doing Business?

On 24 June 2021, the Malaysia Competition Commission (“MyCC”) held its first public consultation session for the members of the public on the findings of its Market Review for Selected Transportation Sectors in Malaysia, focusing on two (2) sub-sectors, namely (i) port logistics ecosystem covering the process of importation and exportation of goods; and (ii) motor vehicle warranty covering the warranty restriction related to passenger and commercial vehicles (“Market Review”).

The Market Review which commenced in 2020 was conducted by the MyCC and its consultant, Ipsos Strategy 3 (“IPSOS”) pursuant to section 11 of the Competition Act 2010. The objective of the Market Review is to better understand the market structure, to assess market activities along the supply chain, and to determine any feature or combination of features of the market that may indicate prevention, restriction or distortion of competition.

In the draft final report of the Market Review, the MyCC together with its consultant, IPSOS have identified certain competition concerns and made amongst others, the following key recommendations/observations:

• The Port Logistics Ecosystem

• a) The length of period for concession agreements within the port logistics industry should be reasonable and not excessively long.
• b) Regular review of the concession terms to be carried out as a measure to keep concessionaires in check within the boundaries.
• c) The role of port operator in the downstream market should be limited by way of clear stipulation in the concession agreements and to make it a mandatory requirement for the port operators to obtain approval from the relevant Ministry prior to venturing into any downstream activities.
• d) Local port authorities to oversee the development of port charges including to standardise charges and review incidental charges.
• e) The Government to gazette and enforce a blanket imposition of the alternative schemes to container deposit such as the non-cheque deposit (“NCD”), container ledger account (“CLA”), and iCargo+.
• f) The shipping lines to consider appointing panel depots for the industry players to choose from which will allow equally efficient depot operators to compete on a level playing field.

• Motor Vehicle Warranty Claims

• a) Warranty restrictions imposed by car manufacturers may possibly prevent or restrict competition in the car repair and service industry as independent repairers are likely to face barriers preventing them from servicing/repairing new cars that are still under warranty. Vehicle manufacturers are therefore encouraged to remove warranty clauses that restrict consumer freedom.
• b) Maintenance and service plans are to be unbundled at the point of sale of motor vehicle.
• c) Agreements between car manufacturers and insurance companies, which usually stipulate a set of KPIs that insurance companies need to adhere to by directing certain number of insured new cars to franchise workshops, would cause foreclosure of the car accident repair market. For example, agreements that contains throughput requirement clauses that set unreasonably high KPIs will encourage insurance companies to drive business to authorised workshops over other alternatives.
• d) A warning letter shall be issued by the MyCC to parties who are found to be involved and enforcement action will be taken if the situation is not remedied within a reasonable timeframe.

Industry players involved in the supply chain of the port logistic ecosystem and warranty restriction claim of motor vehicles should therefore assess their business operations in line with the recommendations provided under the draft final report of the Market Review to ensure that they are not practising any conduct that may be deemed anti-competitive.

A copy of the draft final report of the Market Review is available at the MyCC’s website for reference.

* This article is intended for general information of the clients of our Firm. It should not be regarded as legal professional advice. If you require further information on how we may assist you in the with respect to the draft final report of the Market Review , please feel free to contact us.