Ever played a game of the classic fast-dealing property trading board game? Its board, easily recognisable by a portly old man with a moustache who wears a morning suit with a bowtie and tophat. Rich Uncle Pennybags, ring a bell?
Aimlessly fumbling with the two ivory dice in your hand, the clatter familiar to the ear. Jake the Jailbird prominent in the corner of the eye, seemingly one’s worst moves are yet the main thought. The principle objective is to wind up on an unowned property for purchase and receiving of the Title Deed card. Enabling collection of rent from opponents.
What’s the purpose of this here then?
To be a monopoly — the domination of a market by a single entity.
In this capitalistic society, Law is instrumental in the deterrent of a dog-eat-dog world.
Wealth and materialistic goods hold an appeal. For a businessman, the objective is profitability, maximisation of profitability. The means to achieve this end is a high margin between revenue remaining after all expenses.
Money, GDP and all things financial rely on the acceleration of product production and consumption, your revenue is largely influenced by the degree of demand for your business. Supplies and substitutes of a more affordable alternative to your product assume a part in limiting revenues. Henceforth numerous organisations endeavour to dominate the market as the sole providers of a product or service which subsequently prevent price restrictions. Similar to the board game, this entity is known as a monopoly.
With a reduced incentive to perform competitively, the buying power of consumers reduces. A monopoly's potential to raise prices indefinitely is its most critical detriment to consumers.
This is where the law of competition comes into play.
As a second-year student, this indicates the year of free electives and constructing areas of specialisation. However, amidst doing as such, there were sure classifications of Law subverted and disregarded by students due to mere unfamiliarity and comprehension. One of the modules referred to was Competition Law.
Prior to selecting my electives, I likewise had no knowledge upon the matter. The significance of Competition Law in shaping our economy and ensuring regulatory frameworks are enforced ought to be discussed.
Competition in business refers to the contest or rivalry among the companies selling similar products and/or targeting the same target audience to get more sales, increase revenue, and gain more market share as compared to others. Only with competition, will complacency be mitigated, therefore discouraging x-inefficiency (organisational slack).
The focal legislation prohibiting the following:
agreements which have the object or effect of significantly preventing, restricting or distorting competition in Malaysia; and
conduct which amounts to the abuse of a dominant position in a market in Malaysia.
is the Competition Act 2010. The Act seeks to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected therewith.
How is it that a piece of document can monitor private entities?
First, we must understand how monopolisation is achieved:
1. Mergers and acquisitions
One of the most common ways to eliminate competition is “buy out”. Purchasing majority stocks of the firm resulting in inherent ownership.
2. Copyrights and patents, the law of intellectual property
Exclusive rights to intangible creations of the human intellect, restricting third parties' right to reproduce the work.
3. Access to a scarce resource
Notoriously associated with John D. Rockefeller; over 90% of the oil pipelines and refineries in the United States was his to control.
4. Nationalisation
An intended process by which the government itself takes control over a business or industry to prompt economies of scale which keeps the costs down.
Comprehension of when a firm’s actions could be considered oppressive is significant for competition authorities because consumers and the economy would be harmed by an incorrect intervention. Accordingly, three pillars govern the Competition Law of Malaysia to counter companies which engage in practices restricting competition:
1. Horizontal Agreements
Horizontal Agreement is an agreement for co-operation between enterprises each of which operates at the same level in the production or distribution chain. A prominent instance of this occurred in Nov 2015 where Marriott concurs with a $12bn merger with Sheraton hotels proprietor, creating one of world’s largest hotel chains.
2. Vertical Agreements
An additional prohibition of anti-competitive agreements is the Vertical agreement, which differs from horizontal as it involves acquiring a business in the same industry but at a different stage of the supply chain and exists in two main forms:
Forward vertical integration: this an integration of a business that is closer to final consumers e.g. a manufacturer buying a retailer
Backward vertical integration: here the acquisition operates earlier in the supply chain e.g. a manufacturer buying a raw material or component supplier
One of the acquisitions which largely impacted consumer choice was Dell’s $67bn bet on data storage company EMC.
3. Abuse of dominance.
When competitive constraints are weak, a firm is said to have market power. Indicatively perceived by the Malaysian Competition Commission (MyCC), market shares dominated over 60%, a firm is in a position of abuse of dominance or monopoly. On account of new or emerging innovation, 30% of the developing business sector will suffice to constitute dominance.
Rivalry law is progressively supported by financial matters. For example, a case that includes valuation will require a valuer to give master proof. Thus if the contention concerns the estimation of a land or property that was necessarily procured, it is likewise a valuer on his perspectives and estimation. Contrastingly in competition law, it is not the accountant in which to bring in or the aforementioned valuer. It is the Economists.
How would you know you are suited to this area of practice?
To a large extent, the anti-competition law is driven by the aims to ensure the market is fair for consumers and producers by preventing unethical or anti-competitive practices designed to gain a larger market share than what would be achieved through honest competition. Unfair competition is a beguiling business practice that causes economic harm to other businesses or consumers. This goes beyond competition law and can incorporate trademark infringement or misappropriation of trade secrets.
Monopolies further feed into socio-economic privileges, since it sure isn’t the economically lower in income backgrounds that can bear the soaring costs.
In that capacity, the battle to appropriately control and furnish a levelled field to give consumers an increasing degree of choice and purchasing power will likewise be essential to the landscape for decades to come.