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CCP bench accepts appeals filed in Takaful Pak case.

ISLAMABAD, July 24 -- The Competition Commission of Pakistan's (CCP) appellate bench comprising CCP Chairman Khalid A Mirza and Member (Legal) Ms Rahat Kaunain Hassan passed an order on July 23, 2010 accepting the appeals filed by Takaful Pakistan Ltd (TPL) and Travel Agents Association of Pakistan (TAAP).

These appeals (TPL Appeal No 16/2010 and TAAP Appeal No 17/2010) were filed on March 1, 2010 against the order dated January 29, 2010 passed by a single Member (the 'Impugned Order') in the show cause notices Nos 56 and 57 of 2009. The Impugned Order held that TPL tied-in (distinct products of) insurance coverage for travel agents' default liability towards International Air Transport Association ('IATA') with the travel and health/accident insurance for passengers and thereby abused its dominant position in the relevant market in violation of Section 3 of the Competition Ordinance, 2010. Furthermore, the Impugned Order held that TPL and TAAP entered into a prohibited agreement which violated Section 4 (1) of the ordinance in terms of Sections 4 (2) (a) and 4 (2) (g) of the ordinance. Lastly, Impugned Order also held TPL and TAAP in violation of Section 10 of the ordinance for engaging in deceptive marketing.

The appellate bench has observed that in their considered view, TPL in the given facts and circumstances did not force TAAP to accept the clubbed arrangement under the agreement. Although, from the record it is very clear that for each international ticket issued, TPL had to issue corresponding travel insurance in order to reduce its risk aspect. The travel agent had the option to pass on or not to pass the charges for such cover to its passengers, or to offer insurance from a different provider, the agreements envisage the option for the passengers to opt or not to opt for the insurance cover. Importantly, it needs to be appreciated that the agreement expressly provides that the travel agents as members of TAAP were not in any manner bound under the agreement to avail the default guarantee cover and the health travel insurance from TPL. The Impugned Order does not address as to how it would have been efficient to offer the two products separately or whether separation of the two products was even viable. Moreover, the arrangement under the Agreement was apparently working out to the benefit of all parties concerned with no imposition of onerous cost or obligation - be it the member of TAAP or the passenger/consumer. In the absence of any empirical evidence to the contrary the element of 'abuse' in this case, in our considered view is not made out - even if dominance in the relevant market is to be presumed as determined in the Impugned Order. Even if it were assumed that there were two separate products we do not find any analysis of how the purported tying has prevented, restricted, reduced or distorted competition in the tied product market.

It is further observed that there appears to be a rational commercial justification for TPL and TAAP to introduce an innovative product aimed at facilitating the member travel agents of TAAP as well as TPL. The Impugned Order draws a link with the finding related to tie-in under Section 3 of the ordinance and based on the evidence related to that claim makes a finding against the appellants for violation of Section 4(1) in terms of Section 4 (2)(g) of the ordinance. The appellate bench has held that since in this case no violation of Section 3 exists which was also made basis for violation of Section 4 (1) in terms of Section 4 (2) (g) in the Impugned Order, consequently it shall suffice to state that no case for a violation of Section 4(1) in terms of Section 4(2)(g) is made out.

The bench has held that without going into the argument whether offering a product for free amounts to price-fixing or not, since the Impugned Order accepts the fact that the agents offered the health and travel accident coverage to their customers as a marketing tool and remained free to assign those benefits to the customers at any given price. This clearly shows that the agreements were not designed to facilitate price-fixing when travel agents offered insurance to their customers. The next question is, did the agents actually engage in price-fixing when offering insurance to their agents? The fact that most agents might have offered this insurance cover for free, by and of itself, does not result in price-fixing. An agreement is a pre-requisite for a finding of price-fixing. This agreement as defined under the ordinance can exist by virtue of an arrangement, understanding or practice and does not have to be legally enforceable. However, credible evidence regarding this has to exist. There is no evidence available on the record that we, in our considered view, deem credible and relevant enough to establish a finding of price-fixing among travel agents. Since member travel agents of TAAP remained free to offer the insurance with or without a charge the Bench observed that there is no credible or relevant evidence of these members entering into an agreement to engage in price-fixing, hence, no violations of Section 4 (1) in terms of both Section 4 (2) (a) and 4 (2) (g) has been committed on part of the undertakings concerned.

With regard to violation of Section 10 for deceptive marketing, The bench has given the finding that paradoxically, even though TPL and TAAP might lose their claim that the term 'participant' is limited to travel agents, they cannot be held responsible for deceptive marketing if the insurance certificate gives the impression that passengers are covered by the fund and if this is supported by Takaful Rules, 2005. The appeal has been accepted in terms of the aforesaid order by the appellate bench.

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Publication:Daily Times (Lahore, Pakistan)
Date:Jul 24, 2010
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