commercial Law

BM062-3-5-2 COMMERCIAL LAWASIA PACIFIC UNIVERSITYUC2F21408KMGT


Table of Contents
1.0 INTRODUCTION 2
2.0 TYPE OF FINANCING IN MALAYSIA 3
2.1 Bank Overdraft 3
2.2 Tern Loan 3
2.3 Cash Flow loans 3
2.4 Bank Guarantee 4
2.5 Line of credit 4
2.6 Conclusion for the first case "types of financing" 5
3.0 ABUSE OF DOMINANT POSITION IN MALAYSIA 6
3.1 Definition Abuse of dominant Position in Malaysia 7
3.1 CASE ACCORDING ABUSE OF DOMINANT POSITION 8
3.2 DEFENCE FOR ABUSE OF DOMINANCE POSITION 9
4.0 ABUSE OF DOMINANT POSITION IN INDONESIA 9
5.1 SIMILARITIES 10
5.2 DIFFERENCE 11
6.0 CONCLUSION 11
Word count :2683 11
References 12








1.0 INTRODUCTION
The objective of this assignment is to highlight the numerous type of legal issues, the first case we will to discuss about the types of financing in Malaysia which provide to the companies to borrow money, according to the first question of the case, the companies act will be used to support the various types of financing, the chosen company is Sime Darby Berhad.
According to Sime Darby website, "Sime Darby was incorporated in 1910 as a small British company managing 500 acres of rubber estates in Malacca. From such humble beginnings, Sime Darby has grown into one of the biggest multinational corporations in Malaysia. Today, Sime Darby is a key player in the Malaysian economy as well as a diversified multinational involved in key growth sectors, namely, plantation, industrial equipment, motors, property, and energy & utilities, with operation more than 20 countries. With a workforce of over 100,000 employees, SimeDarby is committed to building a sustainable future for all its stakeholders .It is one of the largest companies on Bursa Malaysia".( Sime Darby.com)
The second case is related to the Malaysian competition act 2010," the Malaysian competition commission (MyCC) is an independent body under the competition commission act the function and role is to protect the competitive process for the benefit of the business, consumer and the economy" and we will to discuss and compare the abuse of dominant position in Malaysia and in Indonesia.








2.0 TYPE OF FINANCING IN MALAYSIA
The Sime Darby company wishes to can borrow the money RM 50 million for their operational expenditure, and they get the following types of the loan that offered by some commercial banks such as RHB bank, CIMB bank and Maybank
2.1 Bank Overdraft
Is the facilities for business loan which can help the company through provides cash flow relief in the transaction accounts to help and manage with funds to cover business expenses such as invoices and wages, by only pay the interest on money used and it can save on the interest cost, This types of loan is better than standard loan. According to Sime Darby company, this overdraft will support in expanding the credit facilities for a short period of time, the company only can withdraw the money on their account in the short term because for bank overdraft there is a limited to the company on borrowing on a bank current account, and the amount of borrowing may vary on a daily basis. In this circumstance the amount of bank overdraft is from RM 200,000 up to RM 1000,000 with the interest rates is 2 % up to 4. The Sime Darby borrow the money through bank overdraft up to RM 1.000.000 with the RM 2000 interest rates

2.2 Term Loan
Term Loan are the loan from the a Bank for a specific amount , is often to used for a major investment and that has the specific repayment in the business and acquisition, the loan itself often has the fix and floating interest rates, and the period of the term loan from one until ten years. In this case Sime Darby can borrow the money up to RM 1.679.550 with the 8 % interest rates for first 12 (twelve) months from Maybank and the period of these term loan up to 5 years.

2.3 Cash Flow loans
Cash flow loans are a capital financing that working directly to the value of unpaid receivables. Is this the type of debt financing, the process itself the banks lends funds and for the working capital using the cash flow that the company borrow the loan. According to the Sime Darby company they can borrow the money from this types of financing up to RM 5.255.808 for the few days, few weeks and few months with the interest only RM 262 per day and the money can be in the Sime Darby accounts within 24 hours, and the company also can keep the money as long as they need it and pay back any time they wants based on the saving interest.

2.4 Bank Guarantee
A bank guarantee is an permanent responsibility of a bank to pay the amount of the particular borrower the loan, the bank will guarantee the debtor to acquired the goods, money and the equipment and if the debtor fails to settle the debt and the bank will be cover the loss, this type of financing need to fulfill the legal requirement the bank guarantee in Malaysia itself issued under the banking and financial institution act 1989. RHB bank will be guarantor for Sime Darby and they can borrow the money with amount RM 30.000.000 and with the 5 % rates ( RM 1.500.000)

2.5 Line of credit
A line of credit is the short term loans or the flexible loans from the bank that can let the company access the specified amount of money to draw as they need up to the company credit limit. The company only pay the interest amount that loans by their selves as soon as money is borrows, and the company as the borrower must be got the approval by the bank. Line of credit can be used to buy the inventory and for their operational expenditures. Then the relate to the Sime Darby company they can borrow the money from CIMB bank through the types of business financing provider is the line of credit up to RM 12.000.000.




2.6 Conclusion for the first case "types of financing"
Sime Darby as an borrower they can borrow the money from the Bank which is RHB, CIMB , and Maybank with the amount RM 50 million for their operational expenditure with the different types of financing that they get from the bank. They can borrow the money through bank overdraft , term loan, cash flow loan, Bank guarantee, and line of credit loans, and as the borrower the bank will expect them to can manage their company very well so the loan will be repaid on time, because the bank need the report of the performance of the company by looking for their profit and their financial position that the Sime Darby get. And Sime Darby company they should remembered their loans, when the time or periodic they need to repaid it can be monthly, and yearly. And as the trustworthy and the big scale of company the bank expect them to can avoid the late payment because the bank will notice and warning them to ensure the loan will be paid. The effects of the priority is from the fixed charge of their company because they have a lot of assets and the floating charge based on their sales or the cash flow in their company

SIME DARBY COMPANY MALAYSIA
Name of bank
Types of financing
Amount
CIMB
Bank overdraft
RM 1000.0000
Maybank
Term Loan
RM 1.679.550
RHB
Cash Flow Loan
RM 5.255.808
RHB
Bank Guarantee
RM 30.000.000
CIMB
Line of Credit
RM 12.000.000.
RM 49.935.358


3.0 ABUSE OF DOMINANT POSITION IN MALAYSIA
According to Malaysian Competition Act 2010 in Act 712"An Act to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected there with". the objective of this act itself include the promotion of economic development by promoting and protecting the process of competition and include the protecting of the consumer interest and can apply to all the business activities in every industry within and outside of Malaysia as long the impact will be influence domestic Malaysia market. The Malaysian competition Act is established by the Malaysia Competition Commission (MyCC) was form in June 2011 to protecting the competitive process for the business, consumer and economy benefit.
Which is the corporate body that have the authority under the Malaysian competition Act 2010. The MyCC is embrace of representative from the public and privates sector. There are two strictly prohibitions in this Act such as : anti- competitive practices and Abuse of dominant position." For the first prohibition is the Act itself discuss about the anti-competitive related to the horizontal and vertical agreement between enterprises which have the object or effect of significantly preventing restricting or distorting competition in the market for goods and services, this substantively have the similar contain to the provision of article 101 the treaty on the functioning of the European Union (EU)" (Sharon Tan Suyin : 2010) and "in general, the main trust of the competition Act is to promote a competitive market environment and provide a level playing field for all players in the market, which in the process will squash anti-competitive practices such as cartel and collusion"( (Nurdianawati Irwani Abdullah. and Siti Salwani Razali., 2008) the implication of the Malaysian competition Act 2010 itself such as :
To protect the companies / enterprises / business from anti-competitive practices.
Increasing productivity and innovation in Business sector.
Reducing price fixing occurrence
Providing more variety and choices for the customer.
Encourage allowance for the lower price for business and consumer.
Reducing abuse of dominant position in the market.

3.1 Definition Abuse of dominant Position in Malaysia
Malaysia presenting the formulating a specific legislation to deal with competition issues in the business market, there is some competition issues found in many different types of legislation and apparently in the past Malaysia has relied on the evidence that collected abroad to can justify for the national fair trade laws and regulation.
Abuse of dominant position is from 2 word " Abuse" in the business market there is two kind of abuse which is : Exploitative conduct ( this situation happen when such as excessive pricing that give the impact of the structural conditions in the market because the dominant power is able to hsetting the high price to exploit the consumer, because they realized they are the main player in the market and does not have any competitor and any substitute for their product and the MyCC will to solve the problem by set the consideration of the actual price and the cost of supply, mainly deliberate setting the highest prices) and Exclusionary Abuse ( this situation referring to the ability of an company to dictate ( monopoly) their competitor in the market conducting stops the competitors from competing which leads direct, indirectly to the higher prices, low of the quality and lack of innovation.
And the dominance position means the situation in which one or more enterprise holding such a significant of power in the market to adjust prices, outputs and trading terms without effective constrain from competitor of potential competitor, in the company or enterprise whether there is supplier or a buyer is measured to be dominant or the majority if it has significant market power in a applicable market in Malaysia. According to section 10 (2) the Malaysian competition Act 2010, the act itself provides a non-exhaustive list of conduct that may constitute of the abuse of dominance position such as:
It can be direct or indirectly imposing an unfair purchases selling price and the other unfair trade condition by the supplier or the customer.
Controlling and set the limitation of production, in the market access, it can be technical or non technical development and the investment to the prejudice of the customer.
Refusing and rejecting to supply or distribute to particular company or the enterprise or the other group of enterprise.
Applying the discrimination and discourage when the new market entry or market expansion by the existing competitor, this is can harms the competitor and can close the other opportunity, because they control the entire market.
And any bad behavior that can harms the other people business.

3.1 CASE ACCORDING ABUSE OF DOMINANT POSITION
Example of the case Abuse of dominant position in Malaysia is the case by Megasteel Sdn Bhd RM 4,5million after finding their company breached the Malaysian competition Act 2010 by practicing unfair pricing in steel material this company was found to have infringed by practicing abuse of dominant position. Megasteel company applying charging or imposing price for Hot Rolled Coil (HRC) that is disproportionate to sell the price of its Cold Rolled Coil (CRC) the amounts to a margin squeeze that can create anti-competitive effects in the market, and the infringement is under the section 10(1) of the Act (margin squeeze is a vertically integrated firm holding a dominant position in the upstream market prevents its ( non vertically integrated) downstream competitor from achieve an economically viable price-cost margin or the dominant enterprise / company has power to upstream market and to drive out their competitor in the downstream market ) sources : (http://www.themalaysianinsider.com/malaysia/article/megasteel-abused-dominant-position) the MyCC had the first received the reported for the complaint against Megasteel from Melewar group which is the company had breached the Act because their practicing anti-competitive conduct Melewar industrial group are the producer of CRC and it is depend to HRC as the main raw material of their product. And they claimed that Megasteel company is the dominant supplier if Hot Rolled Coil (HRC) and also Melewar competitor in the Cold Rolled Coil (CRC) manufacturing because both of this company is to produce the steel and it create conflict of interest between them. And they alleged that Megasteel practicing unfair pricing directly or indirectly.


3.2 DEFENCE FOR ABUSE OF DOMINANCE POSITION
Dominant enterprise or company are the defend has been invoke in some different circumstances but what seems to be the ordinary denominator. In the most of these type of cases is they refuse to licenses, moreover a blunted refusal or a de facto refusal, and meeting the competition defend, according chapter ! prohibition ( the enterprise can get the information that an agreement which is a risk and include of being anti-competitive can however be justify on pro-competitive benefit)

4.0 ABUSE OF DOMINANT POSITION IN INDONESIA
In Indonesia there is Business Competition Supervisory Commission (BCSC) ( komisi pengawas persaingan usaha ) was established on 8 July 1999 ( Orde Baru) and was applying in the business competition on June 2000 because the BCSC must to wait the approval from the house of representative Indonesia, the BSCS (KPPU) implementing the Indonesian Competition Law (ICL) the implication of this law itself such as :
Reviewing agreement, in business practices and the merger that may create anti-competitive effects
Advise the Government about the policy/ punishment to the enterprise which breach the law
Informing the guidelines and any information related to the ICL
To minimize the case of abuse dominant position on the market.
Price fixing agreement
The case related with the abuse of dominant position in Indonesia:
Regulation in Article no 5 ICL 1999 prohibits the enterprise to practicing abuse of dominant position and to determine it based on the domination in the market if there one company have the domination and control the market up to 50 % above and for two or three enterprise under the same group and they have the domination up to 75 % in the market share so this can be justify the enterprise practicing abuse of dominant position in the market. According the case from BSCS , PT Bank Negara Indonesia (persero) Tbk, ( BNI) the well known public company in Indonesia, related to their insurance policies, they have partnership only with four Insurance companies to safe and guarantee the loan, and they refuse the other insurance companies which want to join with them, BNI create the difficult requirement regulation which is very unreasonable for other insurance so they can not join. And BSCS was examine the cases of BNI finally BNI has been prove not guilty by the decision 5 and 6 commission no 10/BCSC-L/2001 in fact that they ordered to BCSC to breach the contract with the four existing insurance companies and still give the chance the other insurance companies to be their partner.
5.1 SIMILARITIES
MALAYSIA
INDONESIA
Malaysia has their own law against abuse of dominant position under Malaysian competition Act 2010
Malaysia has Malaysian competition commission (MyCC) to monitoring the market
Indonesia has their own law against abuse of dominant position under Indonesia Competition Law 1999
Indonesian has Business Competition Supervisory Commission (BCSC) ( komisi pengawas persaingan usaha) to monitoring the market
Both of the country Malaysia and Indonesia they had been made an agreement to be the partner to solve the competition in business market in ASEAN (www.kppu.go.id)
On 14-15 februari 2013 Tan Sri Dato Seri Norma Yaakob as the chairman of MyCC visited KPPU in Jakarta, Indonesia
On 14-15 februari 2013 Tan Sri Dato Seri Norma Yaakob as the chairman of MyCC visited KPPU in Jakarta, Indonesia







5.2 DIFFERENCE
Malaysia
Indonesia
Malaysia competition Act has the similarity with article 101 treaty that functioning European Union.
BCSC( komisi pengawas peraaingan usaha ) set their own rules because they are the leading of commission to control and monitor the market competition the south east Asia since 1999 and already solve a lot of cases after economic crisis on 1998

6.0 CONCLUSION
The Malaysian competition act 2010 is still new and need a lot of improvement to can solve many business competition cases that happening in the real market in Malaysian and the act itself need to take the reference from the other country Act to solve the problem . And the MyCC need to be more strict when they set the rules to warn the enterprise avoid any violation/ offends in the business market.


Word count :2683









References
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