IS MALAYSIA’S COMPETITION ACT OVERLY RESTRICTIVE?A REASSESSMENT OF JOINT PURCHASING AGREEMENTS

This Article has been published in CLJ [20255] CLJU(A) xxv

INTRODUCTION

As we progress further into 2025, Malaysians continue to struggle with

rising living costs amid persistent inflation, volatile markets, and the

gradual rollback of government subsidies. The Competition Act 2010 was

enacted to protect consumers from anti-competitive practices. Yet, the

high prices observed today are often driven by mounting operational

costs that businesses simply pass on to consumers—costs that could

potentially be mitigated through pro-competitive collaborative efforts

between competitors.

In other jurisdictions, such as Singapore and the United Kingdom,

competition authorities have adopted a more balanced approach. They

introduce guidelines[1] to foster pro-competitive initiatives between

competitors, including arrangements like joint purchasing, ensuring that

any cost benefits flow down to consumers.

By contrast, Malaysia’s regulatory body—the Malaysia Competition

Commission (‘MyCC’)—has primarily concentrated on clamping down

on anti-competitive conduct, offering limited guidance on how

competing businesses can legitimately collaborate to reduce their costs.

Although these enforcement measures are laudable, businesses remain

largely uncertain about lawful ways to reduce expenses through

collaborative efforts. This uncertainty arises from the Act’s current

drafting, which automatically deems parties to agreements for sharing

sources of supply liable for infringement.

This article therefore examines whether Malaysia’s Competition Act

2010 is excessively stringent—especially in relation to joint purchasing

agreements—and how this rigidity may inadvertently stifle valid

collaborations and limit opportunities for businesses to work together for

the greater good.

A CLOSER LOOK AT THE COMPETITION ACT 2010

Under section 4(1) of the Competition Act 2010,[2] any agreements

among competitors that have the “object or effect” of significantly

preventing, restricting, or distorting competition are prohibited.

The term “object” is not precisely defined; however, MyCC interprets it

broadly to include agreements that, by their very nature, could harm

competition. Where the object is not definitively anti-competitive, MyCC

will evaluate the agreement’s actual effect on the market.

However, section 4(2)(b)[3] goes further: it automatically deems certain

agreements—including those to “share sources of supply,” which

effectively includes joint purchasing—to have the object of significantly

harming competition.

Put differently, these collaborations are treated as inherently anticompetitive,

regardless of their real-world implications.

Section 4(2) has been reproduced below for ease of reference.

‘(2) Without prejudice to the generality of subsection (1), a horizontal

agreement between enterprises which has the object to—

...

(b) share market or sources of supply;

...

is deemed to have the object of significantly preventing, restricting,

or distorting competition in any market for goods or services.’

Because of this presumption, parties to a joint purchasing agreement are

considered to be infringing the law from the outset and must prove

otherwise, a stance tantamount to being “guilty until proven innocent”.

While section 5 offers a potential safeguard—allowing parties to

demonstrate identifiable technological, efficiency, or social benefits that

outweigh any negative impact—it remains untested in practice as there

have been no reported cases where the sharing of sources of supply has

been found to infringe the Act.

The absence of clear guidelines intensifies this uncertainty, deterring

businesses (particularly smaller ones) from exploring pro-consumer joint

purchasing collaborations that could help rein in costs.

Unfortunately, the Malaysian Aviation Commission Act 2015 has

inherited the same flaws in legislative drafting, as it closely mirrors the

provisions of the Competition Act 2010. Specifically, section 49(2) of

the Malaysian Aviation Commission Act 2015 replicates the problematic

presumptions embedded in the Competition Act, perpetuating the

disadvantage for businesses in the aviation sector.

As a result, companies operating within this space face the same legal

uncertainty and barriers, hindering pro-competitive collaborative efforts

that could otherwise enhance market efficiency and benefit consumers.

IS JOINT PURCHASING ALWAYS WRONG?

Not necessarily.

Joint purchasing agreements are not inherently harmful. They can,

however, distort competition depending on collaborating parties’

combined market share and/or market power. Recognising this, MyCC’s

guidelines state that when the collective market share of the contractual

parties falls below a certain threshold, such agreements are unlikely to

cause significant harm to competition.

For example, if a few major purchasers controlling 80% of the market

band together to buy from a single supplier, it could block out other

suppliers from accessing that 80% share of the downstream purchasing

market.

In contrast, if the collaborators’ aggregate market share remains within a

20% “safe harbour,” MyCC’s own guidelines[4] suggest that the

agreement is unlikely to cause significant market distortions. Similar

perspectives are echoed by numerous competition authorities around the

world.

An illustrative scenario is the gradual replacement of small sundry shops

in urban areas by large chain supermarkets and convenience stores.

Thanks to bulk-buying power, these chain operators can secure lower

prices from suppliers—an advantage beyond the reach of individual

sundry shops. Over time, such chains may drive smaller shops out of the

market, eventually leaving consumers with fewer competitors and

potentially higher prices.

Allowing small sundry shops to collaborate through joint purchasing

agreements could disrupt this dynamic. By pooling their resources and

negotiating as a collective, these smaller businesses could access the

volume discounts that chain supermarkets enjoy. This would enable them

to compete more effectively, offer better prices, and potentially improve

product quality—while also keeping bigger supermarkets in check.

However, such agreements are not without risks. Collaborating on

purchases could inadvertently lead to the exchange of sensitive

information, creating an environment prone to collusive practices. To

mitigate these concerns, businesses must carefully design their

agreements with strong safeguards.

When structured properly with expert guidance, joint purchasing can

enhance efficiency, foster genuine collaboration, and ultimately deliver

cost savings to consumers without breaching competition laws.

Despite the potential advantages, many businesses remain hesitant to

enter into such agreements for fear of being automatically categorised as

infringing the Act. In practice, section 4(2)(b)’s deeming provision acts

as a major deterrent to alliances that could otherwise bring about real

consumer benefits, such as lower prices and more diverse product

offerings.

The pivotal question is whether the legislative and policy architects of

our Competition Act were justified in flatly prohibiting joint purchasing.

A comparison with competition laws in the European Union (EU),

Singapore and the UK suggests otherwise.

THE EU, SINGAPOREAN AND UK EXPERIENCE

Interestingly enough, when introducing the Competition Act 2010, the

Honourable Minister acknowledged that Malaysia drew inspiration from

international best practices, particularly the EU, UK, and Singapore.

However, a critical distinction lies in section 4(2)(b) of Malaysia’s Act,

which deems certain agreements as inherently anti-competitive—a

presumption absent in the frameworks of these jurisdictions.

In contrast, even agreements involving hardcore prohibitions such as

price-fixing or market-sharing are not automatically presumed unlawful

under the frameworks of these jurisdictions. Instead, parties retain the

right to justify their conduct by invoking statutory exemptions, allowing

for a proper assessment of their object or effect on competition before a

final determination is made. This approach aligns with the fundamental

principle of innocent until proven guilty.

This principle extends even to joint purchasing agreements between

competitors.

In the EU, Article 101 of the Treaty on the Functioning of the European

Union (‘TFEU’) applies to agreements that may affect trade between

Member States and have the object or effect of restricting competition.

While sharing sources of supply is referenced, it is not inherently

presumed to significantly distort, restrict, or prevent competition.

Instead, its anti-competitive nature must be substantiated through proper

assessment, ensuring that restrictions are identified based on evidence

rather than assumption.

Article 101 of the TFEU is reproduced here for ease of reference:

‘1. The following shall be prohibited as incompatible with the internal

market: all agreements between undertakings, decisions by

associations of undertakings and concerted practices which may

affect trade between Member States and which have as their

object or effect the prevention, restriction or distortion of

competition within the internal market, and in particular those

which:

(a) directly or indirectly fix purchase or selling prices or any other

trading conditions;

(b) limit or control production, markets, technical development,

or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with

other trading parties, thereby placing them at a competitive

disadvantage;

(e) make the conclusion of contracts subject to acceptance by the

other parties of supplementary obligations which, by their

nature or according to commercial usage, have no connection

with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article

shall be automatically void.’

Based on the above reading, any agreement in section 101(a) to (e) above

that may affect trade between Member States and has the object or effect

of restricting competition will be prohibited. However, the law does not

go so far as to deem such agreements as inherently anti-competitive

automatically. Instead, its restrictive nature must be demonstrated rather

than presumed.

Similarly in the UK, section 2 of the Competition Act 1998 which has

been recently amended by the Digital Markets, Competition and

Consumer Act 2024,[5] refers to agreements that “may affect trade within

the United Kingdom” and that have “the object or effect” of restricting

competition. Although sharing sources of supply is mentioned, it is not

automatically deemed illegal.

The amended section 2 of the Competition Act 1998[6] has been

reproduced below for ease of reference:

‘(1) Subject to section 3, agreements between undertakings, decisions

by associations of undertakings or concerted practices which have

as their object or effect the prevention, restriction or distortion of

competition within the United Kingdom and which–

(a) in the case of agreements, decisions or practices implemented,

or intended to be implemented in the United Kingdom, may

affect trade in the United Kingdom, or

(b) in any other case, are likely to have an immediate,

substantial and foreseeable effect on trade within the

United Kingdom,

are prohibited unless they are exempt in accordance with the provisions

of this Part.

(2) Subsection (1) applies, in particular, to agreements, decisions or

practices which–

(a) directly or indirectly fix purchase or selling prices or any other

trading conditions.

(b) limit or control production, markets, technical development or

investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with

other trading parties, thereby placing them at a competitive

disadvantage.’

Under the amended UK Competition Act 1998, agreements falling within

section 2(a) to (d) are explicitly prohibited only if they affect trade or have

a foreseeable impact within the UK and have the object or effect of

restricting competition. Notably, the UK’s Act was modelled after

Article 101 of the TFEU.

Unlike in Malaysia, there is no automatic presumption of anticompetitive

behaviour, particularly for agreements involving the shared

use of supply sources.

Instead, the UK Competition and Market Authority (CMA) must examine

factors such as the parties’ market shares and whether the agreement

meaningfully restricts competition or simply enhances efficiencies.

Where the primary goal is cost reduction, technological advancement, or

market benefit, the arrangement may be permissible under specified

exemptions.[7]

Singapore takes a similarly balanced view under section 34 of its

Competition Act 2004:

Section 34 of the Singapore’s Competition Act 2004 has been reproduced

below for ease of reference:

‘34.—(1) Subject to section 35, agreements between undertakings,

decisions by associations of undertakings or concerted practices which

have as their object or effect the prevention, restriction or

distortion of competition within Singapore are prohibited unless

they are exempt in accordance with the provisions of this Part.

(2) For the purposes of subsection (1), agreements, decisions or

concerted practices may, in particular, have the object or effect of

preventing, restricting or distorting competition within Singapore

if they—

(a) directly or indirectly fix purchase or selling prices or any other

trading conditions

(b) limit or control production, markets, technical development or

investment

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with

other trading parties, thereby placing them at a competitive

disadvantage; or

(e) make the conclusion of contracts subject to acceptance by the

other parties of supplementary obligations which, by their

nature or according to commercial usage, have no connection

with the subject of such contracts.’

A closer reading of section 34(1) shows that an agreement is only

prohibited if it has the object or effect of restricting competition in

Singapore. While section 34(2)(c) includes sharing sources of supply, it

uses the term “may”—indicating that such agreements are not

automatically outlawed.

These provisions are thoughtfully crafted to align with international best

practices, granting businesses the flexibility to engage in pro-competitive

initiatives, such as joint purchasing, without the presumption of

automatic liability.

Both the UK and Singapore have complemented this approach with

detailed guidelines[8] that enable businesses and competition law

practitioners to assess when a joint purchasing agreement might cross

into anti-competitive territory.

While the law allows for some flexibility, the guidelines take a firm

stance by classifying ‘hardcore’ infringements—such as price-fixing,

market-sharing, and bid-rigging—as presumptively anti-competitive and

lacking merit. However, despite this strict approach, such agreements are

not deemed inherently unlawful under the legislation. Parties still have

the opportunity to justify their conduct by invoking exemptions provided

under the relevant legal framework before a final determination is made

regarding their object or effect on competition.

On the other hand, pro-competitive collaborations like joint purchasing

are not only permitted but actively encouraged, provided they are

carefully structured to avoid harming competition. This balanced

approach offers clarity, promotes consumer benefits, and fosters a

regulatory environment that is both fair and adaptable.

INTERPRETATION ISSUES AND THEIR CONSEQUENCES

Both the UK and Singapore frameworks mandate a thorough evaluation

of a joint purchasing agreement’s commercial justification before

determining whether it violates competition laws. This approach has

likewise been embraced by other jurisdictions, including Brunei[9] and

India,[10] among others.

This approach allows businesses to seek legal advice and structure their

agreements responsibly, confident that compliance can be achieved as

long as the agreement does not significantly harm competition. By

providing this legal clarity, these jurisdictions encourage businesses to

collaborate within a framework that prioritises both competition and

efficiency.

In contrast, Malaysia’s Competition Act 2010 takes a far more rigid

stance. Under section 4(2), agreements involving “sharing sources of

supply” are automatically deemed anti-competitive, regardless of their

intent or market impact. Businesses are left with the burden of justifying

such collaborations after the fact, often under the threat of fines or

penalties.

This effectively brands such agreements as infringements from the

outset, reducing the role of legal advice to merely preparing defences

rather than proactively guiding lawful collaboration.

The distinction is subtle yet significant: in the UK and Singapore,

businesses can confidently pursue joint purchasing arrangements under

the safe advice of their solicitors, knowing these agreements are not

presumed illegal.

In Malaysia, however, the law starts with the presumption of

wrongdoing, discouraging businesses from engaging in collaborations

that could otherwise drive efficiencies and benefit consumers. This

prescriptive stance in Malaysia deters businesses from pursuing alliances

that could drive innovation and reduce costs.

Compounding this issue is the absence of clear guidelines from MyCC

on permissible collaborative practices, even after over a decade of its

establishment—a notable gap that speaks volumes.

Ultimately, this restrictiveness disproportionately impacts consumers,

who face fewer purchasing options and potentially higher prices over

time. By discouraging lawful collaborations that could drive efficiencies

and reduce costs, Malaysia’s overly stringent framework risks stifling

innovation and limiting market dynamism.

WHY THIS MATTERS FOR MALAYSIA

The principal goal of competition law is to safeguard consumer welfare

by promoting healthy market rivalry. If regulations are excessively strict,

they risk discouraging collaborative arrangements that could yield

tangible benefits.

In an era of high inflation and diminishing subsidies, Malaysians have a

vested interest in any measure that could help lower prices. Responsible

joint purchasing holds substantial promise for businesses looking to

reduce operational costs and pass those savings on to consumers.

Yet, as currently framed, this Malaysian law leaves little space for

strategic alliances capable of achieving these ends. By automatically

casting suspicion on such collaborations, it deters collective costreduction

measures.

This approach could also result in the MyCC diverting resources to

scrutinise potentially benign partnerships, resources that might be better

spent investigating more serious misconduct, such as price-fixing or bidrigging.

MOVING TOWARD A MORE NUANCED FRAMEWORK

Malaysia can take a significant step toward aligning with international

standards and best practices by revisiting the Competition Act and

adopting a more balanced interpretation of section 4(2).

Examples from the EU, Singapore and the UK emphasise the importance

of evaluating an agreement’s actual impact on the market rather than

assuming theoretical harm. For Malaysian policymakers, fostering procompetitive

collaborations could inject vitality into the marketplace and

ease the financial strain on consumers, who often bear the brunt when

businesses shy away from joint purchasing initiatives.

To achieve similar progress, Malaysia could refine its legislative

language or empower the MyCC to issue clearer guidelines that

differentiate genuinely anti-competitive agreements from those designed

to enhance efficiency through resource pooling. A more proactive

approach would not only encourage innovation but also drive economic

growth.

A strong example of such clarity can be found in New Zealand’s

competition framework. By explicitly distinguishing between outright

anti-competitive agreements and pro-competitive collaborations, New

Zealand has eliminated statutory ambiguity. New Zealand’s Commerce

Act 1986 clearly delineates cartel prohibitions while providing structured

exceptions for legitimate collaborations, ensuring that businesses can

engage in efficiency-driven collaboration without undue regulatory

uncertainty.

Under section 30 of the Commerce Act 1986, contracts or arrangements

containing cartel provisions are strictly prohibited. Section 30A defines

cartel provisions as price-fixing, output restrictions, and market

allocation. However, section 31 introduces exceptions for collaborative

activities, and section 33 goes even further by expressly exempting joint

purchasing and promotion agreements.

Section 33 of the NZ Commerce Act 1986 is reproduced below for ease of

reference:

‘Exception for joint buying and promotion agreements

A provision in a contract, arrangement, or understanding does not have

the purpose, effect, or likely effect of price fixing if the provision—

(a) relates to the price for goods or services to be collectively acquired,

whether directly or indirectly, by some or all of the parties to the

contract, arrangement, or understanding; or

(b) provides for joint advertising of the price for the resupply of goods

or services acquired in accordance with paragraph (a); or

(c) provides for a collective negotiation of the price for goods or

services followed by individual purchasing at the collectively

negotiated price; or

(d) provides for an intermediary to take title to goods and resell or

resupply them to another party to the contract, arrangement, or

understanding.’

Unlike many other jurisdictions, New Zealand’s Commerce Act

explicitly acknowledges the importance of pro-competitive

collaborations by embedding clear statutory exemptions within the

legislation itself. These explicit provisions are further reinforced by

detailed regulatory guidelines, offering businesses unambiguous

direction to facilitate responsible and pro-competitive cooperation.

By embracing a similar perspective, Malaysia can develop a legal

environment that combats true anti-competitive conduct while

encouraging collaborative strategies that benefit consumers.

CONCLUSION

Although the Competition Act 2010 and the Malaysian Aviation

Commission Act 2015 aim to protect consumers and promote fair market

conditions, their rigid drafting and interpretation could inadvertently

discourage cost-saving ventures like joint purchasing. Amid rising

prices, smaller businesses, in particular, stand to benefit from the

efficiencies and bargaining power that collective purchasing offers.

A recalibration of Malaysia’s legal framework—whether through

amending the deeming provisions or issuing clarifying guidelines—could

strike a better balance. Such revisions could stimulate lower prices,

encourage a more dynamic marketplace, and boost economic growth

through innovation rather than fear of regulatory reprisal.

As Western and Eastern nations continue to engage in tit-for-tat import

and export tariffs, the ultimate burden falls on consumers, who inevitably

shoulder these increased costs. In this context, revisiting Malaysia’s

existing framework and drawing inspiration from the approaches adopted

by Singapore and the UK may be exactly the reform the country urgently

needs.

By focusing on concrete evidence of harm instead of presumed

wrongdoing, the country can uphold consumer welfare while spurring

collaborative strategies that strengthen competitiveness and fuel

economic development. It is, therefore, imperative for the law to be

amended to empower businesses with opportunities to reduce costs—

benefits that can ultimately be passed on to consumers.

And on the subject of amendments, there could be no moment more

perfectly poised for this transformation.

With the Competition Act 2010 set to undergo amendments this year to

incorporate merger control, Malaysia stands at a critical juncture—a

window of opportunity to breathe new life into its competition

framework. This is the perfect moment to reimagine the Act not merely

as a tool to clamp down on anti-competitive conduct, but as a catalyst for

innovation, cost savings, and economic progress.

If ever there were a time to implement transformative changes, it is now

or never.

*Suren Rajah is a practising lawyer, having previously held the position of Senior

Assistant Director (Enforcement) at the Malaysia Competition Commission (MyCC).

The views expressed above are entirely his own.

Endnotes:

[1] ‘Guidance on the Application of the Chapter 1 Prohibition in the Competition Act

1998 to Horizontal Agreements’ (Competition Market Authority (UK)) and ‘Business

Collaboration Guidance Note’ (Competition & Consumer Commission Singapore).

[2] Competition Act 2010 (Malaysia) s 4(1).

[3] Ibid s 4(2).

[4] MyCC Guidelines, Chapter 1: Prohibition.

[5] Digital Markets, Competition and Consumer Act 2024 (UK) s 119(2).

[6] Ibid.

[7] Competition Act 1998 (UK) s 9.

[8] ‘Guidance on the Application of the Chapter 1 Prohibition in the Competition Act

1998 to Horizontal Agreements’ (Competition Market Authority (UK)) and ‘Business

Collaboration Guidance Note’ (Competition & Consumer Commission Singapore).

[9] Competition Act 2015 (Brunei) s 11(2).

[10] Competition Act 2002 (India) s 3(3).