August 27, 2010
We are pleased to provide this global competition/antitrust law update from our friends at the leading Singapore firm Rajah & Tann LLP.
Introduction
The European Commission issued a press release on 26 August 2010 announcing that it has commenced an investigation into marine insurance agreements by the Protection & Indemnity Clubs (‘P&I Clubs’) within the International Group of P&I Clubs (‘IG’). According to the European Commission, certain provisions in the agreements may lessen competition between P&I Clubs as well as restrict the access of commercial insurers and / or other mutual P&I insurers to the relevant markets.
P&I Clubs
P&I insurance covers third party liabilities and expenses arising from owning ships or operating ships as principals. Such insurance insures against claims for damage or compensation in respect of, for example, collision liabilities, personal injury to or illness or loss of life of crew members, cargo liabilities, etc. P&I Clubs are mutual non-profit making associations which provide P&I insurance to their members, the ship owners. The IG is a worldwide association of thirteen P&I Clubs.
The Suspected Infringement(s)
According to the European Commission, in the framework of the IG, the P&I Clubs operate two separate agreements: the International Group Agreement and the Pooling Agreement which contain rules on the sharing of insurance claims and joint reinsurance as well as rules on the contractual relationships between the P&I Clubs and their members. These agreements are not automatically covered by the block exemption for the insurance sector in force in the European Union (‘EU’). This is because the block exemption provides for certain exemptions only where the parties involved have a market share of below 20-25% and according to the European Commission, the members of the IG provide P&I insurance to about 93% of the world’s ocean-going tonnage.
The European Commission’s investigation is seeking to uncover whether, as a result of certain provisions in the International Group and Pooling Agreements, competition between the P&I clubs would be reduced, thus infringing Article 101 of the European Community (‘EC’) Treaty which prohibits agreements which appreciably adversely affect competition in the relevant market(s). Additionally, where provisions in the International Group and Pooling Agreements establish barriers to entry in the market, IG may be liable also for abusing its dominant position in the relevant market, thus infringing Article 102 of the EC Treaty which prohibits the same. Having said this, it is not clear at this stage which direction the European Commission’s investigations will take.
Asia Perspective, Including Singapore & Malaysia
Many of the competition laws of the various Asian countries have similar provisions to that of the EU which prohibit anti-competitive agreements and abuses of market dominance.
In Singapore, for example, the Competition Commission of Singapore (‘CCS’), the competition regulatory authority tasked with the administration and enforcement of competition laws in Singapore, has the power to commence investigations into any sector or any agreement / conduct on its own initiative under the Competition Act (Cap 50B). Similarly, the Malaysian Competition Act 2010, which is slated to come into force in 2012, provides for the power of the Malaysian Competition Commission (‘MCC’) to launch investigations into sectors, agreements or conduct which may adversely affect competition in the relevant market. This is also reflective of the Asian countries’ competition laws. Hence, it is possible that similar reviews could find their way into Asia.
Concluding Words
Given the wide powers of investigation awarded to competition authorities and the very high financial penalties imposed for an infringement of competition laws, businesses should undertake regular review of their activities to ensure compliance with competition laws in every jurisdiction they operate in.
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