The urgent need for joint enforcement
By Ong Tze Chin
Recently, major newspapers reported that the Malaysian Anti-Corruption Commission (MACC) had launched a multi-agency investigation into the tyre industry over allegations of price fixing, the import of unsafe tyres, tax evasion, and money laundering linked to unlawful activities, triggered by a complaint from an Italian tyre manufacturer.
However, the MACC investigation primarily targets issues related to tyre smuggling and the falsification of import and export documents. This news extends well beyond smuggling and document forgery, stemming from deeper problems related to market distortion, anti-competitive behaviour, and unfair commercial practices that negatively impact both consumers and the economy.
The market is distorted when the natural forces of supply and demand are disrupted or manipulated, preventing the market from operating efficiently and fairly. This disruption often results from unfair practices such as price fixing, monopolies, fraud, or regulatory failures. Distorted markets not only harm consumers and businesses but also weaken the broader economy by reducing growth potential, innovation, and fairness.
The Competition Act 2010 serves to safeguard market integrity in Malaysia by preventing distortions, promoting fair competition, and prohibiting anti-competitive conduct. However, anti-competitive conduct does not always come from horizontal and vertical agreements between companies, but also illegal activities, as seen in the recent MACC investigation of the tyre industry.
The harms to consumers, businesses, and the economy caused by distorted markets include higher prices, reduced product quality, unfair competition, slowed innovation, and overall economic inefficiency. Consumers face higher prices, lower quality products, and increased safety risks due to unfair practices and a lack of competition.
Honest businesses struggle to compete against those engaging in illegal or unethical behaviour, leading to unfair market conditions. Resources are misallocated due to distorted prices that prevent the market from operating efficiently, slowing economic growth.
On the other hand, product safety and unfair commercial practices are regulated by the Consumer Protection Act 1999 (CPA 1999). Section 19 of the CPA 1999 provides safety standards of goods in (a) the performance, composition, contents, manufacture, processing, design, construction, finish or packaging of the goods; (b) the testing of the goods during or after manufacture or processing; (c) the form and content of markings, warnings or instructions to accompany the goods. It is an offence for companies punishable by a fine of up to RM250,000, with subsequent offences subject to compounding not exceeding RM500,000, under section 25(1) of CPA 1999.
For an individual, a fine not exceeding RM100,000 or imprisonment for a term not exceeding 3 years or both. Similarly, for a subsequent offence, a fine not exceeding RM250,000 or imprisonment for a term not exceeding 6 years or both. Despite the heavy punishment under the CPA 1999, no action was taken by the enforcement agencies for unsafe tyre sales in the market. The surge in tyre prices and growing road safety concerns should have prompted the Malaysian Competition Commission (MyCC) and the consumer protection agency to initiate market surveillance and launch an investigation from the outset.
This article urges joint enforcement efforts between the MyCC and the Ministry of Domestic Trade and Cost of Living in enforcing the product safety law.
Dr. Ong Tze Chin is a senior lecturer at the Faculty of Law, Universiti Malaya