Hot on the heels of the Malaysia Competition Commission’s (MyCC) first ever decision to impose fines on Malaysia Airlines and AirAsia for engaging in market sharing arrangements (see our previous post), the MyCC has issued a draft decision proposing its first abuse of dominance fine.
MyCC is proposing to fine steel manufacturer Megasteel MYR 4.5 million (approximately A$ 1.49 million) for abusing its dominant position by charging a price for hot rolled coil (HRC) products that is disproportionate to the selling price of its cold rolled coil (CRC) products.
Megasteel is currently the only local Malaysian manufacturer of HRC products which are essential inputs for downstream manufacturers of CRC products. Megasteel is vertically integrated and operates in both the upstream HRC and downstream CRC markets.
The MyCC considers that Megasteel’s behaviour effectively amounts to margin squeeze which is an abuse of dominance under the Malaysia Competition Act. The MyCC’s view is that Megasteel has leveraged its market position in the upstream HRC market to disadvantage its competitors in the downstream CRC market by charging its CRC competitors a high price for essential inputs required in their CRC manufacturing processes. Megasteel was then able to unfairly undercut its downstream competitors on price for CRC products, resulting in squeezing rivals out of the market.
Megasteel now has 30 days to respond to the draft decision, following which a final decision will be issued.
