29 August 2019
On 17 May 2019, the Malaysian Communications and Multimedia Commission (“MCMC”) issued the Guidelines on Mergers and Acquisitions (“M&A Guidelines”) and the Guidelines on Authorisation of Conduct (“Authorisation Guidelines”) (collectively, “Guidelines”) in order to increase transparency and provide clarity on MCMC’s approach when assessing (1) mergers and acquisitions (“M&A”) in the telecommunications sector and (2) applications for authorisation of conduct which would substantially lessen competition in the telecommunications market. The Guidelines apply to licensees under the Communications and Multimedia Act 1998 (“CMA”).
Anti-competitive conduct is generally regulated in Malaysia under the Competition Act 2010 (“CA”). The telecommunications industry is one of the sectors excluded from the CA as it is subject to its own sector-specific competition provisions under the CMA. M&A transactions which take place within this sector will now be subject to the newly introduced M&A Guidelines.
M&As may result in a reduction of competition and potential market dominance. The CMA, in general, prohibits its licensees from engaging in any conduct, including M&A, which may substantially lessen competition in all sectors, including the telecommunications market. The M&A Guidelines provide an avenue for parties to an M&A transaction to voluntarily notify MCMC of the transaction if it may result in a substantial lessening of competition in the telecommunications market. An M&A transaction may raise competition concerns if:
- one of the parties to the transaction is a licensee under the CMA who is already in a dominant position in the telecommunications market; or
- the transaction results, or may result, in a licensee obtaining a dominant position in the telecommunications market.
MCMC will generally view a licensee with a market share of 40% or more in the telecommunications market as being in a dominant position.
In the event MCMC decides that the M&A transaction meets the thresholds above, MCMC will commence the following assessment process:
- Phase 1 assessment: An information-gathering exercise, expected to be completed within 30 business days of notification of such assessment by MCMC; and
- Phase 2 assessment: A more comprehensive information-gathering exercise, expected to be completed within 120 business days from the date of its commencement.
Upon completion of the assessment process, a notice of non-objection (“Notice”) will be issued if MCMC does not view the transaction as substantially lessening competition. The Notice will stipulate the timeframe within which the transaction will have to be completed. The Notice will no longer be valid once the timeframe has lapsed.
Where MCMC concludes that the transaction would give rise to a substantial lessening of competition, MCMC will impose enforcement measures including a direction for the licensee to cease all conduct deemed anti-competitive under
Where a transaction is still in the planning stages, the parties may obtain a confidential assessment of the transaction from MCMC. In carrying out a confidential assessment, MCMC will not consult with third parties on the transaction and will not make an announcement of the result of its assessment.
Apart from the procedure for merger notification as set out above, parties can also submit an application for MCMC to authorise a particular form of conduct, including an M&A transaction. An application for authorisation of conduct can be made before, during or after submitting an application to MCMC for an assessment of an M&A pursuant to the M&A Guidelines. Under the CMA, MCMC can authorise conduct if it is satisfied that such conduct is in the national interest in accordance with the national policy objectives under the CMA, that is, the benefits of engaging in such conduct from the perspective of national interests are greater than the detrimental effect of such conduct in substantially lessening competition.
In assessing an application for authorisation of conduct, MCMC will adhere to the following procedure:
- A preliminary phase, during which MCMC will establish the facts of the case and if necessary, undertake an initial economic, legal and technical analysis. This phase will generally be completed within 30 days from receipt of application;
- An investigative phase, during which MCMC will embark on an investigation to determine if the conduct should be authorised, including conducting a cost-benefit analysis. This phase will generally be completed within 120 days; and
- A decision-making phase, during which MCMC will decide on the appropriate cause of action. This phase will generally take up to 30 days to complete.
Reference materialsThe Guidelines are available from the website of MCMC, www.mcmc.gov.my, or by clicking on the links below: