Malaysia: Monopolistic Practices Of Touch ‘n Go: Consumer Or Competition Issue?

Key Takeaways

The complaint from the Federation of Malaysian Consumers Association ("FOMCA") on Touch 'n Go's ("TnG") monopolistic abuses on consumers and the response from Malaysia Competition Commission ("MyCC") reveal confusion among consumers about the jurisdiction over consumer protection issues in Malaysia. Although competition policy and consumer policy have different approaches to the market, they share a common goal of enhancing consumer welfare. In Malaysia, MyCC is primarily tasked to focus on competition policy. There is a need for stronger coordination between all levels of government and agencies involved in consumer protection issues to address the challenging competition and consumer policy landscape in Malaysia.

Background

Early this year, in 2023, the primary competition watchdog of Malaysia, MyCC has been accused by FOMCA of failing to end the monopolistic behaviour of the operator of TnG. Briefly, TnG is an electronic payment system used for tolls, parking and public transportation in Malaysia and its operator is perceived as a monopoly in the country's electronic toll collection.

FOMCA claimed that it filed a complaint with the MyCC in October 2018 against TnG's monopolistic abuses on consumers. However, in August 2020, MyCC concluded that the issues raised did not raise any competition concerns. FOMCA argues that TnG has continued to abuse consumer welfare with TnG's RFID (Radio Frequency Identification) replacement of SmartTag (a handheld device that drivers can use to pay their tolls), which forced consumers to purchase the RFID at an exorbitant price, and MyCC has been ineffective in responding to consumers' complaints. FOMCA urged the Minister of Domestic Trade and Cost of Living to review the effectiveness of MyCC in protecting consumers.

In response, MyCC insisted that TnG only monopolises the toll payment system and has not raised any competition concerns. MyCC clarified that holding a dominant or monopolistic position in a particular market is not itself an infringement of the Competition Act 2010. However, a dominant enterprise would only infringe the Competition Act 2010 if it abuses its position in the market. TnG, being an electronic money service provider, is governed by Bank Negara Malaysia or the Central Bank of Malaysia. As for the association between TnG and toll concessionaires with regards to the toll payment system, it is governed by Lembaga Lebuhraya Malaysia or Malaysian Highway Authority. According to MyCC, the issues raised by FOMCA such as parking surcharge, difficulty to top up, reload charge and other customer services-related matters only relate to consumerism, and not competition-related issues, despite FOMCA's claims that MyCC should address consumer issues.

Our comments

Consumer issue v. Competition issue?

Whilst we do not intend to discuss whether the issues raised are appropriately classified as consumer or competition issues falling within or outside MyCC's jurisdiction, we think the complaint from FOMCA and the response from MyCC bring to light the uncertainty among consumers about the jurisdiction over consumer protection issues in Malaysia.

Previously, competition policy in most jurisdictions embraced various rationales, including safeguarding small competitors from larger ones. Now, in most jurisdictions competition policy has evolved to a single purpose of enhancing consumer welfare in some forms. Hence, competition policy and consumer policy are widely understood to share a common, overarching goal: consumer welfare. In Malaysia, the preamble of our Competition Act 2010 explains that it is "An Act to promote development by promoting and protecting the process of competition, thereby protecting the interests of consumers and to provide for matters connected therewith". The reference to consumers in the purpose clause of the Competition Act 2010 reflects Parliament's appreciation that competition is not an end but a means to achieve the goal of protecting consumer welfare.

However, competition policy and consumer policy employ a different approach to the market. Competition policy primarily approaches a market from the supply side; its purpose is to ensure that businesses compete fairly and through competition, consumers have the widest possible range of choice of goods and services at the lowest possible prices. Thus, competition policy undertakes to prevent certain types of conduct that interfere with competition, for example, harmful conduct by a monopolist or dominant firm or collusion between competitors on price and other trading terms. Consumer policy, on the other hand, typically approaches markets from the demand side: to ensure that consumers are able to exercise intelligently and efficiently the choices that competition provides. For example, safeguard consumers from false advertising and unfair contract terms.

As noted above, competition policy and consumer policy are ultimately not so different because they share the common goal, that is to say, consumer welfare. In fact, they can complement each other by tackling different problems with different tools. For example, when competition policy has limitations in making markets structurally more competitive on the supply side especially when it comes to government created monopoly, a close coordination between competition and consumer policies will be required to achieve the common overarching goal, i.e. consumer welfare. The prime focus ought to be the market and what can make it work better for consumers.

Given that coordination of both competition and consumer policy is important in achieving the common goal, this raised the question of whether housing the 2 functions under a single agency will make it the most effective institution to ensure the 2 policies are properly integrated to provide effective public policy and provide better clarity and trust in the regulatory system. In some jurisdictions, the 2 functions are housed in a single agency like CCCS (Competition and Consumer Commission) in Singapore and ACCC (Australian Competition and Consumer Commission) in Australia. In Malaysia, MyCC is not a consumer protection agency per se.

Whether or not there will be a combination of the 2 functions under 1 single agency in the future, we think there is a clear need for stronger coordination between all levels of government and agencies involved in consumer protection issues to confront the challenging competition and consumer policy landscape in Malaysia.

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