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2016 MarsdenLR 1295
THE HONOURABLE JUSTICE HASNAH MOHAMMED HASHIM
HASNAH MOHAMMED HASHIM, J
MALAYSIAN AIRLINE SYSTEM BERHAD – Appellant
Versus
COMPETITION COMMISSION – Respondent
TRP 1-2014 TRP 2-2014
The court ruled that the collaboration agreement was misinterpreted as anti-competitive, emphasizing the need for clear intentions in agreements and establishing that the relevant law must be applied without retrospective effect.
Headnote:(A) Competition Act 2010 - Sections 4(2)(b), 40(1)(c), 51(1) - Appeal against penalty imposed for anti-competitive practices - Collaboration Agreement between airlines deemed to share market - Commission misinterpreted intentions and object of the Agreement - Proper anti-trust analysis not performed - Appeals allowed and penalties set aside. (Paras 1-3, 162)
(B) Interpretation of Agreements - Intention of parties must be ascertained from expressed terms - Conditional agreements require completion of necessary assessments before being enforceable. (Paras 72-100)
(C) Procedural Fairness - Failure of Commission to consider representations made by appellants does not amount to a breach of fundamental fairness as issues can be raised before the Tribunal. (Paras 144-158)
| Table of Content |
|---|
| 1. introduction to the competition commission's decision (Para 1 , 2 , 3) |
| 2. background on the parties involved (Para 4 , 5 , 6 , 7 , 8) |
| 3. overview of relevant legislative provisions (Para 10 , 11 , 12 , 13 , 14 , 15) |
| 4. details of inquiry and complaints (Para 16 , 17 , 18 , 19 , 20 , 22) |
| 5. main thrust of investigation regarding the collaboration agreement (Para 26 , 27 , 28 , 29) |
| 6. final decision and its reasoning (Para 32 , 33 , 34 , 36 , 37) |
| 7. grounds of appeal from the appellants (Para 42 , 44 , 45 , 46 , 47) |
| 8. conclusion of court's analysis on legalities involved (Para 72 , 126 , 162) |
[1] On 31.1.2014 the Competition Commission (‘Commission’) having conducted investigations issued and handed out its final decision (‘the Final Decision’) holding that Malaysian Airline System Berhad (‘MAS’) and AirAsia Berhad (‘AirAsia’) had infringed the prohibition under section 4(2)(b) read together with section 4(3) of the Competition Act 2010 (‘Act) by entering into a Collaboration Agreement dated 9.8.2011 (‘ CA ’) the object of which is the sharing of market within the air transport sector in Malaysia. Pursuant to section 40(1)(c) of the Act the Commission imposed a financial penalty of RM10,000,000 on MAS and AirAsia respectively.
[2] Dissatisfied with the Commission’s decision both MAS and AirAsia appealed against the Final Decision pursuant to section 51(1) of the Act to us. By consent of all the parties, both appeals were heard together.
[3] MAS is the Appellant in Appeal No. TRP 1-2014 (First Appellant) whereas AirAsia is the Appellant in Appeal No. TRP 2- 2014 (Second Appellant). For the purpose of this decision MAS and AirAsia will be referred to as the Appellants unless otherwise stated.
The Parties
[4] MAS operates an airline business as a full-service carrier providing both domestic and international flight services since 1.10.1972. As at March 2013, Khazanah Nasional Berhad is the single largest shareholder holding 69.37%.
[5] Fly Firefly Sdn. Bhd. (‘Firefly’) which was formerly registered as MAS Sdn. Bhd. is a wholly-owned subsidiary of MAS. Firefly commenced its passenger flights services on 3.4.2007. Firefly’s flight services which are based in two hubs, namely the Sultan Abdul Aziz Shah Airport in Subang and the Penang International Airport, provide various connections to various destinations within Malaysia, Southern Thailand, Singapore and Sumatra in Indonesia.
[6] AirAsia operates airline business as low-cost carrier not only in Malaysia but also throughout the ASEAN region since 1996. Tune Air Sdn. Bhd. is the largest shareholder of AirAsia. Tan Sri Dr. Anthony Francis Fernandes and Dato’ Kamarudin bin Meranum are also the largest shareholders of Tune Air Sdn. Bhd. Both hold the positions as AirAsia’s Group Chief Executive Officer and the Deputy Group Chief Executive Director respectively.
[7] AirAsia X Sdn. Bhd.’s (‘AAX’) majority shareholder is Aero Ventures Sdn. Bhd. with 139,292,800 shares amounting to approximately 62.18% as at 16.4.2013. Tan Sri Dr. Anthony Francis Fernandes and Dato’ Kamarudin bin Meranun are also the directors and majority shareholders of Aero Ventures Sdn. Bhd.
[8] AAX is also a party to the CA . For the purpose of the decision of the Commission, AirAsia and AAX are treated as forming a single economic unit as defined under section 2 of the Act. The Commission gives its reasons for so holding and_ cited Europemballage and Continental Can v Commission Case 6/72 [1973] ECR 215. We observed that the issue was not seriously challenged.
[9] The Respondent is the Commission established pursuant to the Competition Commission Act 2010.
The Legislative Framework
[10] Section 4 (1) of the Act provides -
“A horizontal or vertical agreement between enterprises is prohibited insofar as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services.”
[11] Section 4 (2) of the Act further provides -
“Without prejudice to t
