Containerchain: 4 practical lessons

The latest decision by the MyCC in the Containerchain case illustrates how the Competition Act catches ‘agreements’ to restrict competition, even when there has been no express agreement between parties.

On 1st June 2016, the MyCC issued a final decision against Containerchain and 4 container depot operators in Penang Port. It fined them RM645,774 in total with an order to cease and desist from implementing the price agreed upon pursuant to their price fixing agreement. An RM7,000 daily fine was also imposed on each of them for any failure to comply within 30 days of the decision.

Background

The MyCC began investigating the Penang Port container depot market upon receiving complaints from customers that at about the same time, certain container depot operators (CDO) had increased their depot gate charges (DGC) from RM5 to RM25.

Containerchain was not one of these CDOs, but a provider of the Containerchain system which was used by the CDOs to manage payments to the CDOs.

According to the decision, although the relevant CDOs did discuss amongst themselves back in 2012 about increasing the DGC from RM5 to RM25 due to increasing costs, the intention was never expressly agreed upon. Around the same time Containerchain came along and began advocating the use of the Containerchain system but crucially emphasised its ability to inform the industry of a need to increase the DGC.

Notably, throughout the marketing and advocating of the Containerchain system by Containerchain, it had passed on information to each CDO of a general trend of the DGC being increased to RM25 and explained the use of the Containerchain system along the RM25 line. This was however always caveated by a standard response along the lines of “it is up to each of you to determine your DGC”.

“Although lowering the DGC is entirely up to you, but you should try to maintain the RM25 DGC because that is what everyone is charging.”

– Excerpt from the decision (138mb zip file) (page 55)

Price transparency was enabled due to CDOs who signed up with the Containerchain system being required to publish their terms and conditions requiring customers to use the Containerchain system to make orders and payments. The template was drafted by Containerchain for each CDO’s use. Crucially, the published terms and conditions all referred to an increase of the DGC to RM25, which led to the complaints.

 

4 lessons from this case

1. Simultaneous price movements will catch the attention of the MyCC

The publication of similar DGC rates at about the same time led to complaints by customers, resulting in the MyCC’s investigation. It shows that you do not have to be as obvious as an announcement by an association of simultaneous price increases to find the MyCC on your heels.

2. The traditional contractual rules do not apply for competition law

As we explained earlier in The Persaingan Blog, an ‘agreement’ under the Competition Act does not follow traditional contractual rules, such as requiring offer, acceptance, and consideration. In this case the 4 CDOs never came to an agreement or put into motion the general consensus of an RM25 charge until a 3rd party (Containerchain) came along and advocated the price, which they then adopted.

3. Price transparency and information sharing is viewed warily by the MyCC

Although the parties never agreed to raise prices, the sharing of information and intentions, with Containerchain as a conduit, led to the MyCC’s finding that a vertical agreement between Containerchain and the CDOs, and an agreement amongst the CDOs themselves, existed. Accordingly, the MyCC can find an ‘agreement’ to exist even if a 3rd party, not involved in the market as a competitor, facilitated the synchronised price movement.

4. Increasing costs tend not to justify an agreement to raise prices

Although the MyCC’s decision does not elaborate on its legitimacy, an argument put forward was that the increment of the DGC to RM25 was necessitated by an increase in operating costs. Containerchain had argued that the MyCC should have considered the counterfactual, i.e. would the DGC have been increased to RM25 even without the alleged agreement? The MyCC’s position was that it was not required to do so under the Competition Act, and took the view that in any case the effect on competition was obvious.

It should be noted that under S. 4(2) of the Competition Act, an agreement to fix prices can be caught by its object i.e. intention alone, and not necessarily its effect on competition. Further, although S.5 allows relief from liability if the agreement -among other requirements- results in significant technological, efficiency or social benefits outweighing the detrimental effects on competition, price fixing agreements tend not to fall under this relief.

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Author: Mervyn Lai

Lawyer. Competition Law LLM (Distinction) University of Glasgow.

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