Date: 20 July 2026
By: Nicole Leong
Introduction
Recent news reports in Malaysia have highlighted how the influx of competitively priced Chinese products, brands and platform-driven business models is beginning to reshape parts of Malaysia’s consumer market.
For consumers, lower prices may appear attractive. They can mean more choice, wider access and better value. But for businesses, especially local SMEs, the picture is more complex.
When competition becomes driven mainly by extreme price-cutting, forced discounts, platform pressure or unsustainable margins, the market may move away from healthy competition and towards what China has described as “involutionary competition” (in Chinese: Nei Juan) or “race-to-the-bottom competition”.
This raises an important question for Malaysia: when does aggressive competition remain healthy and when does it become harmful to the competitive process?
Involutionary competition v. healthy competition
Competition is generally good for business and consumers. It pushes companies to improve quality, innovate and serve customers better. Healthy competition rewards businesses that are efficient and genuinely better than their competitors.
However, not all competition is healthy.
“Involutionary competition” (in Chinese: Nei Juan) is not just strong competition. It describes a market where businesses are forced into excessive, unsustainable or destructive competition that does not create long-term value. In a healthy market, businesses compete by offering better quality, better service or more innovative products. In an involutionary market, competition may be driven by below-cost pricing pressure, unfair payment terms imposed on smaller suppliers or exclusive arrangements that lock out competitors, and sometimes government subsidies.
The problem is not lower prices by themselves. Lower prices can benefit consumers when they result from genuine efficiency. The concern arises when the market becomes distorted.
If large companies impose unfair payment terms, SMEs may suffer serious cash-flow pressure. If platforms push sellers into pricing below sustainable levels, sellers may end up competing on survival rather than quality.
Over time, this can reduce choice and quality for consumers, weaken innovation and make the market less competitive in the long run. Hence, short-term gains for consumers may become long-term harm if unsustainable pricing pushes efficient smaller players out of the market.
China’s 2025 Anti-Unfair Competition Law and Malaysia Competition Act 2010
In 2025, China’s 2025 Anti-Unfair Competition Law was introduced to, inter alia, encourage and protect fair competition, prevent and stop unfair competition acts, and protect the legitimate rights and interests of business operators and consumers.
The law targets practices such as the abuse of platform rules to instruct others to conduct fraudulent transactions, false reviews or malicious returns of goods against another business operator, thereby harming the legitimate rights and interests of another business operator and disrupting the market competition order.
China has also introduced obligations on platform operators. Platform operators are expected to take greater responsibility for unfair competition on their platforms. This includes setting fair competition rules, establishing reporting channels and guide and regulate business operators on the platform to compete fairly in accordance with the law.
Another important area is below-cost selling pressure. Platform operators should not force or covertly force sellers to sell below cost. This addresses a common issue in digital marketplaces: sellers may feel compelled to participate in aggressive discount campaigns, subsidies or pricing strategies that may not be commercially sustainable.
China is also focusing on SME protection. A large enterprise may be found to have engaged in unfair competition even if it is not dominant in the traditional competition law sense. This may happen if a large enterprise uses advantages in capital, technology, channels, industry influence or other areas to force SMEs to accept evidently unreasonable payment periods, methods or conditions, liability for breach of contract, or other transaction conditions, thereby delaying payments to small or medium-sized enterprises for goods, projects, services, or other items.
This is significant. It shows that China is not only looking at classic monopoly or cartel behaviour through competition law lenses. It is also looking at unfair commercial pressure within supply chains and platform ecosystems to stop unfair competition and to promote healthy competition in the market.
Malaysia’s Competition Act 2010 does not prohibit “unfair competition” in the same broad way as China’s Anti-Unfair Competition Law. The Malaysian framework mainly focuses on:
- anti-competitive agreements; and
- abuse of dominant position.
This means not every unfair or aggressive commercial practice will amount to a competition law issue in Malaysia. However, where the conduct affects competition in the market, competition law may become relevant. For example, competition concerns may arise where a dominant player refuses to supply without objective justification, a dominant player applies discriminatory terms, exclusivity arrangements foreclose market access, rebates are structured to lock in customers or a platform operator uses its market power to exclude rivals.
Competition law as a shield, not only a sword
Many businesses think of competition law only when Malaysia Competition Commission or MyCC investigates them. That is too narrow. Competition law can also help businesses protect themselves when they are affected by restrictive market conduct.
For example, a business may consider seeking competition law advice if it is facing sudden refusal of supply from a key supplier, discriminatory prices compared with competitors, exclusive arrangements that block access to customers, platform rules that favour related parties, unfair terms imposed by a stronger counterparty or exclusion from essential infrastructure or distribution channels.
Although not every tough business move by competitors or suppliers will become a competition law issue, seeking a competition lawyer to make a structured legal assessment from competition law perspective can help a business understand whether the issue is merely tough bargaining or something that affects competition in the market. That distinction matters.
If there is a competition law issue, the affected business may have more options. Businesses can consider making a complaint to the relevant competition regulator. Alternatively, businesses that suffer loss or damage directly as a result of an infringement of the Competition Act 2010 can commence a legal action in a court against any enterprise which is or which has at the material time been a party to such infringement.
The other side is equally important. Businesses with strong market positions should not assume that every aggressive commercial strategy is lawful. Conduct that may seem like smart business strategy can, in certain circumstances, cross the line into anti-competitive conduct. A “survival of the strongest” approach without having competition law in mind can be risky. Competition law does not prevent businesses from competing hard, but it does require them to compete fairly. Companies with significant market power should carefully assess whether their pricing, contracting, platform or market strategy or practices could unfairly exclude competitors or exploit customers.
What legal tools can Malaysia consider?
There are useful lessons to be learnt from China. China’s experience shows that competition law can be used as a tool to address involutionary competition. However, China’s approach does not need to be copied wholesale. Malaysia has its own legal framework, business environment and regulatory priorities.
Apart from the Competition Act 2010, other laws may also be relevant, including consumer protection laws and laws or regulations governing online marketplaces and platforms.
In some cases, trade remedies may also be relevant, particularly where the concern is injury to domestic industry is caused by dumped imports, subsidised imports or a sudden surge of imports.
For Malaysia, this means the response to involutionary competition need not be one-dimensional. We do not have to choose between competition law, trade remedies and other consumer protection laws. Different regulatory tools can play different roles in supporting fair and healthy markets.
Concluding remark
Involutionary competition may be a term popularised in China, but the underlying issue is relevant to Malaysia. China’s response to involutionary competition is a reminder that competition policy is not only about punishing cartels or monopolies. It is also about keeping markets fair and functional.
For Malaysia, the lesson is not that low prices are bad or that aggressive competition should be discouraged. Competitive pricing can benefit consumers and push businesses to improve. However, when competition in a market becomes unsustainable, unhealthy competition may stop delivering long-term value to consumers.
The goal should not be to stop competition from foreign products or digital platforms altogether. The goal should be to ensure that competition remains fair, sustainable and will create long term value for end consumers in Malaysia. The key is to distinguish healthy price competition from conduct that undermines sustainable competition and long-term consumer welfare. For Malaysia, we can consider start exploring the right legal tool for the right problem. Depending on the nature of the issue, this may involve competition law, consumer protection laws, platform regulation, trade remedies or a combination of these tools. This will allow Malaysia to respond to unhealthy competition without discouraging genuine competition that benefits consumers.
This update is for general information only and does not constitute legal advice.
Please reach out if you have any questions.