Piam and insurers win appeal against MyCC’s decision on rebates for vehicle repairs

KUALA LUMPUR (September 8): The Competition Appeal Tribunal (CAT) has allowed an appeal by Persatuan Insurans Am Malaysia (Piam) and its 22 members against the decision of the Malaysian Competition Commission (MyCC) there two years, considering an agreement on the application of commercial discounts on the prices of automotive parts and hourly labor rates for motor vehicle repairs by workshops under the PIAM Approved Repairers Scheme (PARS) as a breach of the Competition Act 2010.

The three-member CAT Tribunal, in granting the appeal unanimously, found that MyCC had made a fundamental error in its finding of law and fact.

“MyCC’s reliance on section 4(2)(a) of the Competition Act 2010 as the determinative provision in concluding that Piam Members’ Circular 132 breached the prohibition under section 4(1) of the Act is wrong.

“The court finds that Circular 132 from Piam members in 2011 did not breach section 4(1) of the Competition Act 2010. law,” said the ruling previewed by theedgemarkets.com which was issued on September 2.

The tribunal is chaired by Datuk Dr Choo Kah Sing, while its other two members were Datuk Asmabi Mohamad and Datuk Dr Victor Wee Eng Lye.

On September 30, 2020, Piam and its members expressed their disappointment with the final decision taken by MyCC on September 14, 2020 against the association and its 22 member general insurers.

Piam said MyCC found that the association and the insurers had breached the Competition Act 2010 in relation to the arrangement between Piam and the Automobile Workshop Owners Association of Malaysia (Fawoam) on rates minimum labor hours and spare parts prices for six commonly used vehicles. types of vehicles, namely Proton, Perodua, Naza, Nissan, Toyota and Honda.

At the center of the matter is Circular 132 issued by Piam in 2011, where it states that the survey results indicated overwhelming support for the Claims Management Subcommittee’s recommendations for parts and rate discounts. labor.

The subcommittee recommended trade discounts on parts of 25% for the six vehicle brands Proton, Perodua, Nissan, Toyota, Honda and Naza and 15% for the base model Proton Saga, and maintenance rates. labor RM30 per hour, but Piam members can apply. either the Thatcham Repair Times or Opinion Times options.

For special cases, where repairers need to purchase parts at low trade discounts due to urgency, or are unable to offer 25% trade discounts, insurers may examine the property justified in each case, subject to the verification of the appointed loss adjusters and proof of the purchase invoice. .

The members’ circular was dated July 28, 2011, but the CAT noted that the Competition Act 2010 came into force on January 1, 2012.

Reason for reversing the MyCC decision

CAT, in reversing the MyCC decision, concluded that it is incorrect to assert that parts trade discounts and labor rates were determined by insurers.

“Parts trade discount and labor rates were negotiated and determined by insurers (via Piam) and PARS workshops via Fawoam. Finally, it is incorrect to conclude that insurers would have the final say in approving repair costs, as if insurers were arbitrarily determining the final amount to be paid.

“As for the determination of commercial discounts on parts and labor charges, they allow PARS shops to negotiate a better discount rate for spare parts (a lower discount rate) and costs higher labor costs (above RM30 per annum. hour).There is nothing stopping them (the workshops) from negotiating a better profit.Therefore, it is incorrect to suggest that the PARS workshop should accept which is offered by insurers,” the CAT decision said.

They also agreed with Piam’s argument that there is no market for setting the minimum labor rate for auto repairs and trade discounts on spare parts.

The CAT has ruled that PARS workshops have the discretion to grant discounts or not to grant discounts from 1% to a maximum of 25%.

“This is not a case where PARS workshops have to grant a 25% discount rate for spare parts for certain particular car models,” the court said.

Meanwhile, CAT said RM30 per hour is the minimum rate insurers can charge PARS workshops to charge for labor.

“In other words, PARS workshops can charge upwards of RM30 per hour for the labor rate if they wish. The insurers would be happy to pay less than RM30 per hour for the labor rate, but nevertheless agreed to pay a minimum of RM30 per hour,” the court said.

Setting the minimum labor rate, the CAT said, benefits PARS workshops, not insurers.

The terms and consequences of the parts discounts and minimum labor rate give PARS shops the advantage to negotiate better pricing for the goods and services they sell and supply to insurers, the CAT added. .

“PARS workshops have the upper hand to make a better profit than the insurers. The real effect (of the agreement) is that insurers have no control over spare parts pricing and wage costs,” he said in the 80-page judgment.

Piam, AIA Bhd, AIG Malaysia Insurance Bhd, AXA Affin General Insurance Bhd and Zurich General Insurance Bhd were represented by attorney Khoo Guan Huat.

Bank Negara Malaysia, which criticized MyCC’s decision two years ago, was represented by lead lawyer Datuk Dr Cyrus Das, while MyCC was represented by lead lawyer Datuk Seri Gopal Sri Ram and Lim Chee Wee.

Other insurance companies that participated in the call were Chubb Insurance (M) Bhd, Great Eastern General Insurance (M) Bhd, Tokio Marine Insurans (M) Bhd, Lonpac Insurance Bhd, Berjaya Sompo Insurance Bhd, Tune Insurance Malaysia Bhd, Prudential Assurance (M) Bhd, Progressive Insurance Bhd, MPI Generali Insurance Insurance Bhd, AmGeneral Insurance Bhd, Allianz General Insurance Company (M) Bhd, Liberty Insurance Bhd, RHB Insurance Bhd, MSIG Insurance (M) Bhd, Etiqa General Insurance Bhd, Pacific Insurance Bhd, QBE Insurance (M) Bhd and Pacific & Orient Insurance Co Bhd.

Read also:
BNM Regrets MyCC’s Final Decision on PIAM’s Case; disappointed general insurers

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