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Competition Case Update on the Court of Appeal Decision in MAS/AirAsia v MyCC

InsiderTAPS Nov 2021

Competition Case Update on the Court of Appeal Decision in MAS/AirAsia v MyCC

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In April 2021, we wrote an article here[1] on the background facts and brief grounds of judgment delivered orally by the Court of Appeal. This is a detailed update on some of the important principles laid down by the Court of Appeal in its written judgment. 

MyCC has no locus standi to apply for judicial review to challenge CAT’s decision

  1. The Court of Appeal (“Court”) ruled that Malaysia Competition Commission (“MyCC”) cannot be “a person who is adversely affected by the decision” within the meaning of Order 53 rule 2(4) of Rules of Court 2012 and hence, has no locus standi to apply for a Judicial Review (“JR”) against the decision of the Competition Appel Tribunal (“CAT”).
  1. MyCC is a quasi-judicial body. After making a finding under Section 40 of the Competition Act 2010 (“Act”) (including an infringement decision), it became functus officio and has no personal interest in the proceeding save to assist the CAT to arrive at a fair and just decision. MyCC should take a neutral and impartial stand before the CAT. It has no personal or official interest in the confirmation or reversal by CAT of its order handed down in its quasi-judicial capacity.
  1. Under the statutory scheme of the Act, the CAT is the appellate authority of the MyCC. MyCC must thus give due deference to, respect for and abide by its superior’s appellate decision. For MyCC to ignore or challenge the decision of its own appellate authority would be administrative insubordination of a kind repugnant to the whole statutory scheme of the Act.
  1. In our view, practically, this would mean that if CAT disagrees with MyCC’s final decision in respect of an infringement finding, MyCC will not have any further legal avenues to reverse CAT’s decision. On the other hand, persons who are aggrieved by MyCC’s infringement decision will not be barred from appealing to the higher tribunal.

MyCC has no jurisdiction on anti-competitive agreement in the civil aviation service market from 1.3.2016 

  1. As MAVCOM Act came into force on 1.3.2016, from that day, the MyCC’s jurisdiction over anti-competitive agreement in the civil aviation service market came to an end. The JR application in the present case was filed by MyCC on 3.5.2016 when it no longer has the capacity to do so.
  1. The jurisdiction over the civil aviation industry (including anti-competitive agreement in the civil aviation service market) has vested with MAVCOM with effect from 1.3.2016. Assuming that there was a right to file the JR, that right had been vested in MAVCOM by operation of law with effect from 1.3.2016.

MyCC must prove active collaboration or fresh agreement after 1.1.2012 

  1. The Court held that the Act has no retrospective effect. Prior to 1.1.2012, it was not unlawful for parties to agree on how they should compete or not compete. It was a matter within the contractual arrangement and agreement of parties.
  1. The Court is the view that the Act by its operation rendered the collaboration agreement of the parties in the present case unenforceable upon the Act coming into force on 1.1.2012. The Act does not require the parties to immediately enter into an agreement to forthwith terminate any agreement that would now be caught by the Act. There would only be an infringement if parties enter into fresh collaboration or continue to agree to maintain the current agreement after 1.1.2012.

Conditional Agreement subject to MyCC’s approval is legitimate 

  1. In response to MyCC’s argument that the parties’ intention to apply for exemption necessarily meant parties are aware of the infringing nature of the collaboration, notwithstanding it being stated to be conditional, the Court held that where a conditional collaboration had been discussed and put into writing before the Act has come into force, it cannot be said that it immediately attracts liability when there was no implementation of the collaboration.
  1. Otherwise, there would be no incentive to apply for relief or exemption since the applicant would run the risk of being punished with fines for having committed an offence under the Act if the application is rejected. Attempting to apply for exemption under the Act does not necessarily mean that the parties proceeded on the basis that the Agreement was anti-competitive.
  1. The Court recognised that conditional agreement is a legitimate way for companies to plan and obtain prior antitrust clearance or exemption before they are implemented. 

Deeming provision under Section 4(2) does not absolve MyCC from the burden of proving anti-competitive object 

  1. Under Section 4(2)(b) of the Act, an agreement can only be deemed to have the object of significantly anti-competitive when it is found that the agreement has as its object to share market.
  1. Once the object is significantly anti-competitive, it is unnecessary to show or prove that the agreement will have an appreciable effect on competition. In this regard, only either an anti-competitive “object” or “effect” of an agreement needs to be established for a finding of infringement under Section 4(1).
  1. However, there is the need to examine the anti-competitive effect when the anti-competitive object of an agreement is unclear.
  1. The Court considered that the deeming provision under Section 4(2), unlike a presumption, was not something that was rebuttable. The Court further took cognizance that deeming provision is a powerful one and due to its inherent bias in producing a certain set result, the conditions set for it to operate must be strictly complied with.

Identifying restrictions by object

  1. Whether an agreement is restrictive by object, regard must be had inter alia to the context of its provisions, the objectives it seeks to attain and the economic and legal context of which it forms part.
  1. Whilst a declaration of intent is never final nor conclusive, the Court must nevertheless proceed from the basis as stated by the parties and then see whether what was indeed to be implemented would meet its stated objectives.

Relevant market needs to be properly defined by MyCC 

  1. Contrary to the averments of MyCC that the relevant market need not be defined, the Court held that the requirement to specify and identify the “market” is embedded in Section 4(1) and 4(2)(b) of the Act.
  1. Without the identification of the relevant market, the deeming provision under Section 4(2) cannot be applied. It is only after having identified the relevant market that MyCC can assess whether a particular conduct (or agreement) is anti-competitive in nature.

Restrictions by object can be defended under Section 5

  1. An agreement that infringes Section 4 (including those listed under Section 4(2)) of the Act may come within the exemption under Section 5 of the same Act if parties are able to demonstrate that the agreement yields a net economic benefit to consumers. The Court found in the case that the four criteria of Section 5 were satisfied and the collaboration qualified for relief of liability under the Act.

Concluding Remarks

The decision of the Court of Appeal has far-reaching impact on the development of competition law as it had provided much needed clarity to the interpretation of Section 4(2) of the Act as well as the jurisdiction and power of MyCC. Following the Court’s decision, we anticipate a more cautious and detailed approach on the part of MyCC before invoking Section 4(2) in its future enforcement cases.

Note: At the time of writing, MyCC has filed an application for leave to appeal to the Federal Court.

This article is authored by our Partner, Ms. Nicole Leong and Associate, Ms. Heng Jia. The views and opinions expressed in this article are those of the authors alone and do not constitute any legal advice. For further information or advice on Competition Law and Antitrust, kindly contact our Partner, Ms. Nicole Leong.

[1] See our article dated 27 April 2021 which is accessible at: https://taypartners.com.my/insidertaps-27-april-2021/.



Nicole Leong
Partner
nicole.leong@taypartners.com.my

Heng Jia
Associate
T: +603 2050 1846
jia.heng@taypartners.com.my

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