Competition Appeal Tribunal sets aside the Malaysia Competition Commission’s decision against PIAM and its members
08 September 2022
On 25 September 2020, the Malaysia Competition Commission (“MyCC
”) issued its final decision dated 14 September 2020
”) against the General Insurance Association of Malaysia (“PIAM
”) and its 22 members (“Insurers
”) whereby the MyCC made a finding that the parties had infringed section 4 of the Competition Act 2010 (“CA 2010
”) by entering into an agreement which has the object of preventing, restricting or distorting competition in the market of parts trade discount and labour charges under the PIAM Approved Repairers Scheme (“PARS
In accordance with the finding of an infringement, the MyCC imposed, among others, an aggregate financial penalty of RM173,655,300.00 against the all the Insurers.
Following from the MyCC Decision, PIAM, the Insurers and Bank Negara Malaysia (“BNM
”) had filed appeals to the Competition Appeal Tribunal (“CAT
”) against the whole of the MyCC Decision.
On 6 September 2022, the CAT released its decision dated 2 September 2022 wherein it unanimously decided and ordered, inter alia
- the appeal by BNM be dismissed; and
- the appeal by PIAM and the Insurers be allowed and that the whole of the MyCC Decision be set aside.
The BNM appeal
First, the CAT held that BNM had locus standi to file an appeal because even though BNM is not a person aggrieved by the MyCC Decision in accordance with section 51 of the CA 2010, the MyCC Decision had an overarching effect and affected the interest of BNM as the regulator of the Insurers and therefore, BNM is not an incidental party to the subject agreement.
Whilst the CAT acknowledged that BNM is empowered under the Insurance Act 1996 to issue a direction to PIAM and for PIAM and the Insurers to engage into the terms of the subject agreement, on the facts of this case, the CAT held that BNM did not issue a direction to PIAM but had merely expressed its intention for PIAM to show greater commitment in resolving the issues. On this premise, the CAT dismissed BNM’s appeal.
The PIAM and the Insurers’ appeals
In its decision, the CAT addressed four grounds which were raised by PIAM and held, among others, that:
- as PIAM does not carry out any commercial activities it does not fall within the definition of an “enterprise” under section 2 of the CA 2010;
- the MyCC had not satisfied the two conditions for a finding of an infringement under section 4(1) and section 4(2)(a) of the CA 2010 which are as follows:
- there must be a horizontal agreement (between enterprises); and
- the horizontal agreement must have the object to fix, directly or indirectly, a purchase or selling price or any other trading condition.
The CAT did not accept that the agreement in question was concluded solely by the Insurers but held that it was a result of negotiations between PIAM and the Federation Automobile Workshops Owners’ Association (FAWOAM) who represented the PARS workshops. The CAT further held that there was no evidence that PIAM and the Insurers had met to fix the parts trade discount and labour rate or that the Insurers had acted or behaved like a cartel.
Further, the CAT commented that the consequences of the terms for the parts trade discount and minimum labour rate gives the PARS workshops an edge to negotiate a better pricing for the goods and services which they are selling and providing to the Insurers. As such, the CAT failed to see how the fixing of a maximum discount rate or minimum labour rate would significantly prevent, restrict or distort competition in the market;
- as no liability had been established under section 4 of the CA 2010, the discussion on relief of liability under section 5 of the CA 2010 does not arise; and
- the issue as to whether MyCC had acted in breach of natural justice and ultra vires had become academic upon the CAT’s finding that there is no violation of section 4 of the CA 2010 by PIAM and the Insurers.
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The CAT further held that as PIAM is successful in its appeal, the appeals by each of the Insurers will follow suit.
Our Partner Khoo Guan Huat appeared as counsel for PIAM and four insurance companies. The same four insurance companies were also represented by our Partners, Tan Shi Wen and Melissa Long, Senior Associate, Manshan Singh and Associate, Angela Hii.