KUALA LUMPUR (Aug 10): Four major feedmillers are seeking to suspend the RM367 million penalty imposed by the Malaysia Competition Commission (MyCC) in 2023, pending the hearing of the merits of their challenge.
They argued that as key suppliers to the poultry industry, the penalty could disrupt the food supply chain.
The four feedmillers are Leong Hup Feedmill Malaysia Sdn Bhd, Dindings Poultry Development Centre Sdn Bhd, FFM Bhd and Gold Coin Feedmills (M) Sdn Bhd. Their appeal to the Competition Appeal Tribunal (CAT) was dismissed in February.
They have since filed a judicial review against the CAT and MyCC, with the High Court granting them leave to proceed.
The RM367 million penalty represents the largest fine in Malaysia for price-fixing in the chicken feed industry. The four companies, together with PK Agro-Industrial Products (M) Sdn Bhd, are said to control about 40% of the market.
Of the RM367 million, Leong Hup had been slapped with a RM157.47 million penalty, Gold Coin RM97.51 million, Dindings RM70.02 million and FFM RM42.69 million.
PK Agro Industrial Products has not opposed its financial penalty.
On Monday, the four millers asked High Court judge Alice Loke Yee Ching to suspend the penalty while they challenge it in court. The High Court had granted them permission in March to proceed with their judicial review.
In judicial review proceedings, leave (permission) is sought first to make sure the challenge is not frivolous, vexatious and an abuse of the court process.
Feedmillers warn penalty could raise feed, poultry prices
Lawyers for the four feedmillers told the court that without a stay, the penalty could strain their finances and force them to raise feed prices, potentially leading to higher poultry prices.
Leong Hup was represented by Brian Foong Mun Loong and Eolanda Yeo Jin Huay from Messrs Cheang & Ariff, while Manshan Singh, Tan Shi Wen, Ho Pui Yen and Chong Zheng Yang from Messrs Skrine appeared for Gold Coin.
Foong said the bulk of the financial penalty was imposed on Leong Hup, but it only controls 2% of the market share for feedmill.
“Yet our client is saddled with the largest sum of RM157.47 million,” he said.
Manshan said that while the government is providing stimulus to support the economy, the penalty imposed on his client could have the opposite effect by putting financial pressure on the industry. The key issue, he said, is whether the company can afford to pay the penalty.
“The parent company should not be penalised to pay the fine of its subsidiary as they have to take care of other companies.
“The penalty may result in certain fixed assets having to be sold pending the merits of the judicial review being heard. While MyCC and CAT may argue companies could issue new shares to help pay, I seriously doubt such capital can be raised,” he said, adding that the penalty imposed would affect the whole supply chain.
Senior lawyer Tan Sri Cecil Abraham, Datuk Sunil Abraham, Chia Eng Yi, Lee Sin Yee and Nicole Leong from Messrs Cecil Abraham and Partners are appearing for FFM while K Shanti Mogan, Lilien Wang and Ooi Ji Shen from Messrs Shearn Delamore & Co represent Dindings.
Cecil and Sunil informed the court that the financial penalty, if imposed on their client, would prejudice its cash flow position and reminded that the feedmill is a capital intensive industry.
Furthermore, Sunil said the feedmill is also presently affected by the war in the Middle East that has driven up costs.
Meanwhile, Shanti said the penalty would affect the poultry industry as a whole if the feedmills are required to pay now before the judicial review is heard.
CAT, MyCC lawyers say penalty needed to break price-fixing grip
Tan Sri Tommy Thomas, together with Mervyn Lai and Ahmad Azhad of Messrs Tommy Thomas, represented the CAT and MyCC against Gold Coin, FFM and Dindings. Jason Teoh, Nicholas Lai, Ng Wei and Ling Ru Xin of Messrs Jason Teoh and Partners represented the CAT and MyCC against Leong Hup.
Tommy said the RM367 million penalty was imposed to break the feedmillers’ control over pricing, which affects the poultry industry.
He noted that Malaysia is one of about 50 countries with a Competition Act, introduced in 2010 to promote healthy competition.
Tommy also argued that the feedmillers were financially strong enough to pay the penalty, either through their parent companies or by issuing new shares. He said if the penalties were considered a burden, consumers and poultry farmers could turn to other feedmillers offering better prices, which would encourage competition.
Teoh, representing the MyCC and CAT against Leong Hup, also argued that the penalty would not put the companies under financial strain. He pointed out that Leong Hup had declared a RM150 million dividend and could potentially declare another RM150 million this year.
He said if the company is able to pay such huge dividends to its investors, it could surely pay the penalty.
“The money is there, (it has been set) aside waiting for payment,” he said, adding the company could opt to pay a lower dividend next time around.
Loke said she would deliver her decision on the stay application on Sept 29.