Last month, 7-Eleven Malaysia Holdings Bhd announced that it has agreed to dispose of its entire 75% stake in Caring Pharmacy Group Bhd to BIG Pharmacy Healthcare Sdn Bhd for RM637.5 million. The acquisition includes all of Caring's subsidiaries and associate companies, as well as its manufacturing and distribution of in-house products in Malaysia. The divestiture of 7-Eleven's stake in Caring Pharmacy to BIG Pharmacy has drawn significant attention due to the prominence of both entities as well-known retail pharmacy chains in Malaysia, raising consumer concerns in the process.


This commentary does not aim to definitively state that the acquisition of Caring Pharmacy by BIG Pharmacy will necessarily raise competition concerns or harm consumers. Instead, it advocates the importance of implementing a general merger control regime. Such a regime would empower the competition regulator to conduct evidence-based assessments of deals like this to safeguard consumer interests and ensure fair competition in the market.

Safeguarding consumer interests in pharmacy deals

Pharmacies play a crucial role in ensuring public access to essential public health services and medicines. According to a PhAMA industry overview (2016), at the providers' level, retail pharmacies account for 30% of all pharmaceutical sales.1 It is therefore important to assess whether a merger would lead to reduced competition, potentially resulting in higher prices, limited choices, and compromised service quality for consumers.

In theory, horizontal unilateral effects occur when one company merges with another company that used to compete with it. This can lead to the merged company having more control over the prices and quality of a product or service without needing to coordinate with its competitors. For example, under common ownership, a merged company might be able to reduce service quality to increase profits without being concerned about losing customers to a rival. On the other hand, the advantage of economies of scale for chain pharmacies, as highlighted in the 2017 market review report by Malaysia Competition Commission ("MyCC") on the pharmaceutical sector, is that their significant market power allows them to negotiate and obtain more advantageous deals from pharmaceutical companies compared to community pharmacies.2 This means that larger pharmacy chains, in theory, have more leverage during negotiations, enabling them to purchase drugs at lower generic prices and sell them at competitive rates. These efficiencies in procurement and distribution can ultimately benefit consumers as chain pharmacies can pass on the cost savings, providing medications at more affordable prices.

A merger control regime allows the competition regulator to assess based on evidence whether it is or may be the case that the merger has resulted, or may be expected to result, in a substantial lessening in competition in the relevant market and whether it impacts consumers negatively. Some of the questions that will be assessed in the context of merger control regime are how geographically proximate the parties' pharmacies are to each other and how many competing pharmacies are in each local area, given that the convenience of location was the most important driver of pharmacy choice for consumers. Based on this evidence, the competition regulator can assess whether the acquisition will give rise to substantial lessening competition in the operation of retail pharmacies in the overlapped locations in Malaysia, whether the acquisition will lead to a reduction in competition in the parameters like quality and speed of service, opening hours, the stocks of medicines that the pharmacy has and waiting times. The competition regulator can then carefully consider whether any remedy is appropriate to address competition concerns and safeguard consumers' interests in the process.

In the UK, the Competition and Market Authority ("CMA") is investigating the completed acquisition by pharmacy chain operator Bestway Panacea Holdings Limited ("Bestway") of independent pharmacy owner Lexon UK Holdings Limited ("Lexon"). Bestway operates approximately 750 pharmacies nationwide in the UK under the Well brand and an online pharmacy whereas Lexon operates 46 pharmacies in the UK under the Knights Pharmacy brand and an online pharmacy. The CMA's investigation found that the merger could lead to a significant lessening of competition between retail pharmacies in 12 local areas located in Liverpool and North East England. Bestway offered undertakings to CMA to divest 7 seven pharmacy stores in the areas where substantial lessening competition concerns were identified, to maintain the current level of competition for local customers.

No general merger control regime in Malaysia, yet

There is no general merger control regime under the Competition Act 2010 in Malaysia. However, there is industry-specific merger regulation for the aviation industry and communications and multimedia industry. In 2022, MyCC held a public consultation as part of its ongoing exercise to amend the Competition Act 2010. The proposed amendments of the Competition Act 2010 include the introduction of a merger control regime that will provide MyCC with the power to review and investigate merger transactions that are likely to cause market concentration. Based on the consultation document published by the MyCC for the amendment exercise, the proposed amendments to introduce the merger control regime are planned to be tabled in Parliament by October 2022. As of the date of writing, the proposed amendments to the Competition Act 2010 have yet to be tabled in the Parliament and MyCC has yet to publish the revised timeline for the amendment exercise.

Concluding remarks

The sale of Caring Pharmacy to BIG Pharmacy underscores the need for Malaysia to implement a merger control regime that includes the pharmaceutical retail sector. Such a regime would ensure the protection of consumer interests, promote fair market competition, align Malaysia with international standards, and contribute to the overall growth of the economy. As Malaysia progresses towards becoming among the top 30 largest economies under the Madani Economy framework, a robust and transparent merger control regime will be a key enabler in fostering a competitive and consumer-friendly market environment in Malaysia. By thoughtfully designing a merger control framework, Malaysia can strike a balance between facilitating business transactions and safeguarding consumer welfare.


1. See MyCC's Market Review on Priority Sector Under Competition Act 2010 – Pharmaceutical Sector dated 27 December 2017, Page 57.

2. Ibid, Page 62.

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