A DECISION by Malaysia Airlines (MAS) and AirAsia Berhad to enter into an agreement on sharing local air transport services did not breach laws governing market competition, the Court of Appeal heard today.

Counsel Ambiga Sreenevasan, who acted for AirAsia, submitted this was because the collaboration agreement between the carriers was entered on August 9, 2011, while the Competition Act 2010, has yet to come in force at the material time.

“Competition Act only came into force on January 1, 2012. At the same time when the collaboration agreement was entered, shares swap took place at the same time. The collaboration agreement was initiated by Khazanah, when MAS was having a problem at the material time.

“Another supplementary agreement was entered between these two air carriers on May 2, 2012 after the Competition Act came into force,” she argued before a three-member panel comprising judges Hanipah Farikullah, Lee Swee Seng and Mohd Sofian Abd Razak in proceedings via Zoom.

AirAsia and MAS are appealing against the Kuala Lumpur High Court ruling in December 2018, which had affirmed the Malaysia Competition Commission’s (MyCC) decision to impose a RM10 million fine each against AirAsia and MAS breaching a market-sharing prohibition. 

“As a matter of general principle, the law should not be applied but the commission argued even if you had entered into an agreement before the law came into force, the effect of the agreement carries on.

“In fact, these two airlines had written to the commission before January 1, in expressing their intention to obtain an exemption for the CA (collaboration agreement) as it does not involve the Anti-Competition Act,” she said.

At this juncture, when Hanipah queried Ambiga as to whether AirAsia and MAS had officially filed their applications for exemption, the lawyer replied both airlines did not do so in the end as the commission had started investigations against them for allegedly breaching anti-competition rules.

The lawyer added this was not a case of two airlines secretly distorting the market.

Meanwhile, MAS’ lawyer Logan Sabapathy said the collaboration agreement did not infringe the law when it was signed in 2011.

The hearing continues on February 5, during which MyCC’s lawyer Lim Chee Wee will reply to AirAsia and MAS’ submissions. 

MAS and AirAsia’s case with MyCC started in 2014 when the commission found both airline companies had breached the market-sharing prohibition under Section 4(2)(b) of the Competition Act by entering into an agreement on sharing markets in the air transport services sector within Malaysia.

MyCC has the power to fine both airlines 10% of their global revenue for infringing the Act, but imposed a far lesser penalty because they were “cooperative” during investigations.

The RM10 million fines by MyCC were based on flights by both AirAsia and MAS in the four months between January 1 and April 30, 2012 on the Kuala Lumpur-Kota Kinabalu, Kuala Lumpur-Kuching, Kuala Lumpur-Sandakan and Kuala Lumpur-Sibu routes. – Bernama, January 12, 2021.