The Malaysia Competition Commission (“MyCC“) has initiated the process of amending the Competition Act 2010 (“Act“) to introduce merger control regulations and the Ministry of Domestic Trade and Consumer Affairs is planning to table the legislative amendments to the Act by the end of 2021. Once in force, mergers and acquisitions which exceed certain thresholds will need to be reviewed and approved by the MyCC. This will greatly impact the timing, feasibility and structure of transactions in Malaysia.
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In more detail
Currently, the Malaysian Competition Act 2010 (“Act“) only regulates anti-competitive agreements and the abuse of dominance, but has no provisions on merger control. There are only sector-specific merger control regulations in the aviation industry and the communications and multimedia industry.
The absence of merger control regulations is a severe impediment to the MyCC’s powers to regulate changes to market structures. The MyCC is only limited to regulating post-merger conduct but has no mechanism to prevent the creation of inefficient market players or undue concentration of market power brought on through acquisitions and joint ventures.
The introduction of a merger control regime will allow the MyCC to review proposed transactions and make the necessary orders to maintain the competitiveness of the market. The MyCC has indicated several times that it is inclined towards a mandatory notification regime, which means that once certain thresholds are met, a legal obligation to notify the MyCC will arise and its approval must be obtained. It is currently unclear whether the MyCC intends to implement a pre or post-completion notification regime but most mandatory regimes in the world are suspensory, which means that parties cannot close the transaction until approval is granted.
A mandatory notification regime will impact the transaction in more than one way:
- Timeline : Parties will need to ensure that the MyCC’s review period is aligned with the wider deal timetable.
- Feasibility : Parties will need to consider if they want to proceed with the transaction especially where filings are required and there is a risk that it may be prohibited.
- Structure : Where there is a clear likelihood that the MyCC is likely to impose remedies on the merging parties (for e.g. requiring a divestment of certain businesses or assets to maintain competitiveness in the market), parties should consider whether to offer these remedies upfront to expedite the review process.
Once the merger control provisions are tabled and approved in Parliament, we expect that the MyCC will provide further guidance on the type of transactions which are notifiable (e.g. whether the creation of joint ventures, asset acquisitions and acquisition of minority interests fall within the scope of the regime) as well as the jurisdictional thresholds (whether based on turnover, market shares of the parties and/or size of the transaction).