PUTRAJAYA (Feb 5): The imposition of a RM10 million fine each against AirAsia Group Bhd, its subsidiary AirAsia X Bhd (AAX) and then Malaysian Airline System Bhd (MAS) over their short-lived collaboration was justified as their partnership went against competition laws, said the Malaysia Competition Commission (MyCC) today.

In his submission before the Court of Appeal to uphold the High Court's decision, MyCC counsel Datuk Lim Chee Wee said in 2010, MAS wanted to go head-to-head with AirAsia by having its own subsidiary, low-cost carrier (LCC) Firefly, ply some of the same routes.

He added that the Competition Act 2010 was supposed to "promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers", as per the act.

Lim said in April 2010, the MAS board wanted the group to compete with AirAsia. In fact, its then managing director Tengku Datuk Seri Azmil Zahruddin wanted to form an LCC to rival the budget carrier.

He added that the tag line 'Firefly jets, now Tony can cry" was developed.

"The proposal was for this LCC to compete head-on with AirAsia on domestic and regional routes. The overall strategy referred to as 'Batman and Robin and Darth Vader' was to target AirAsia's profitable routes with new smaller aircraft."

However, in August 2011, the collaboration agreement (CA) was signed to restrict competition, which kept MAS as a full-fledged service carrier, while AirAsia and AAX could continue to operate as LCCs. Tengku Azmil resigned that year.

“First they were competitors, then became collaborators and now cooperators. This was against competition laws as can be seen from the CA, MAS was to cut out their Firefly routes to Kuching and Kota Kinabalu which were profitable and leave it to AirAsia,” he said.

There was a variation to the CA in May 2012, while the two airlines had also formed a joint collaboration committee, to the detriment of consumers, he added.

As a result, Lim said the Federation of Malaysian Consumers Association (FOMCA) lodged a complaint with MyCC and subsequently an investigation was also made.

With that, he added, MyCC decided to impose the RM10 million fines for violating competition laws.

Lim was submitting in the appeal by AirAsia and MAS, following the High Court's decision in December 2018 to allow MyCC’s judicial review application and quash the decision of the Competition Appeal Tribunal (CAT) to set aside the March 2014 decision by MyCC to impose the fines on the two airlines.

The counsel also revealed that prior to the CA being signed, both airlines submitted documents to MyCC to get exemptions. However, the commission was not furnished with the full documents.

Lim, who appeared with Kwan Will Sen, said his client therefore could not decide whether to grant the exemptions or not.

He also produced letters of correspondence between the two airlines to MyCC to seek the exemptions.

Lim added that the fact that they had submitted the applications to seek exemptions meant that they knew beforehand about the possibility of violating competition laws and were seeking an escape.

The lawyer also said that MyCC was the right authority to handle the complaint as FOMCA came to them first.

He pointed out that the Malaysian Aviation Commission (Mavcom) was formed in 2016, and the Act empowering Mavcom cannot be enforced retrospectively.

“Hence, MyCC is the correct authority or commission to handle this issue and the imposition of the fines,” he added.

On the issue of MyCC supposedly being unable to challenge the CAT's decision, Lim said the act stipulates that CAT can sue and be sued.

He added that MyCC found that the two airlines' act to enter the CA constituted a violation of Section 4(2) of the Competition Act.

“The CA constituted a market sharing agreement and was rightly deemed to be restrictive of competition by object,” he said.

As a result, Lim said then High Court Judge Justice Datuk Nordin Hassan, who had since been elevated to the Court of Appeal, found that the CAT's decision was wrong and agreed to reverse its decision to not impose the fines.

“The High Court was right in examining whether the CA had an anticompetitive object as it looked at the factual background prior before they entered into that agreement. It was apparent that MAS had taken aggressive steps to compete with AirAsia and the CA viewed in its totality was an anticompetitive object,” he said.

“For these reasons, MyCC applies that the airline's appeal be dismissed,” Lim added.

The three-member bench led by Justices Datuk Hanipah Farikullah along with Datuk Lee Swee Seng and Datuk Mohd Sofian Abdul Razak has agreed to hear AirAsia's and MAS' reply on Feb 19.