RM415 Million Penalty Against Chicken Feed Companies for Anti-Competitive Behaviour
On 22 December 2023, the Malaysian Competition Commission ("MyCC") issued a hefty fine totalling RM415 million, against 5 companies for violating Section 4 of the Competition Act 2010. This is the largest amount of financial penalty that the MyCC has imposed in the 12 years since its inception.
Section 4 of the Competition Act 2010 ("Act") essentially prohibits enterprises from entering into either a horizontal or vertical agreement(s), which has the object or effect of significantly preventing, restricting or distorting competition in any market for goods and services. Upon the finding of an infringement, the MyCC has the power under Section 40 of the Act to require the infringement to be ceased immediately, including specifying steps to be taken by the infringing companies to end such infringement. It may also impose a financial penalty not exceeding 10% of the worldwide turnover of an enterprise during the infringement period or make other directions as it deems appropriate.
In this instance, the 5 companies, were found to have violated Section 4 of the Act by forming a chicken feed pricing cartel, as the companies had engaged in anti-competitive agreements and collectively increased the quantum price of chicken feed, that had maize and soy beans as its primary ingredients. Accordingly, this caused a distortion of chicken prices in the market.
MyCC's investigation further revealed that the companies had employed tactics to give false impression that the price of chicken feed had gone up due to the rise of raw material costs. There were also instances where there was an identical raise in chicken feed prices even though the cost of raw materials had declined. Additionally, MyCC had retrieved several communication records between the companies' representatives which showed a strong correlation in pricing decision amongst the companies.
Apart from the fines, MyCC had also directed the companies to:
(1) cease participating in the chicken feed cartel through a cease and desist order;
(2) report changes in the price of chicken feed;
(3) enhance their competition law compliance program and ensure that their respective employees and board members are enrolled into the program; and
(4) insert a clause in their respective Code of Conduct recognizing participation in competition law violations as a misconduct.
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