An Economic Analysis of Anti-Profiteering Law in Malaysia

Abstract

In Malaysia, the Price Control and Anti-Profiteering Act 2011 contains both price control and anti-profiteering provisions. A profiteering offence is committed when a seller makes an ‘unreasonably high profit’ which is further defined as exceeding a mark-up percentage or margin percentage from a baseline profit on the first day of the financial year or calendar year of business. Neoclassical microeconomic theory teaches that regulatory control over prices is inefficient and harms consumers more than does any good. Violations of the anti-profiteering provision are challenging to detect as prices may increase due to increased costs. Contrary to the rationale for anti-gouging laws, allowing businesses to increase prices due to a shortage of supply may save consumers from unnecessary searches for the illusive low-price controlled products and further incentivise sellers to seek alternative sources of supply. In a competitive market, market discipline by consumers is sufficient to deter businesses from raising prices beyond competitive market prices. Competition law and mandatory price marking law should be used to address uncompetitive market conditions. Perhaps, for these reasons, there are no more new reported cases of enforcement of the anti-profiteering law in the news since 2016 despite having a reported appeal decision in 2020.