BACKGROUND:

The Commission took cognizance of the matter upon provision of information by the Civil Aviation Authority. Essentially, the travel insurance offered by TAAP under a scheme, through its member travel agents, is not only restricting competition but is also a deceptive as to its price to consumers. Travel agent’s part of the scheme charge Rs 600 to consumers purchasing tickets for international destinations, as charges for travel insurance. A portion of Rs 600 is infect used to pay the premium for default insurance, which every travel agent is bound to have under BSP by IATA, without the knowledge of the passengers. Based on the findings of enquiry report, the Commission issued show cause notices to TPL and TAAP.

In its analysis, the Commission held that Section 3 prohibit tie-ins i.e. the refusal to sell one product, which a buyer desires, unless the buyer also agrees to purchase a second product that the buyer would not otherwise want from tis seller on the offered terms. The relevant product market is the guarantee or default insurance offered by institutions to airlines on behalf of travel agents. The Commission reiterated the test applicable to tying provided in the Bahria University case and also stated that where the first 3 elements of the test are proven, the remaining 2 need not be.

The Commission found that the two products were distinct as the beneficiaries of each were different. As regards dominant position, the Commission found that TPL has a dominant position in the tying product i.e. the individual guarantee. On the question of force, the Commission found that TPL was able to force TAAP to accept the arrangement which TAAP would not have accepted under competitive market conditions. The Commission also found that tying substantially closed competition in the tied product i.e. travel insurance. Lastly, the Commission found against TPL on the issue of economic interest of TPL. As such all 5 elements of the Bahria test were found against TPL and the tying of travel and medical insurance with default insurance by TPL amounted to abuse of dominant position.

On the issue of prohibited agreement, the Commission, inter alia, found that the between between TAAP and. TPL had the object of fixing price of travel and medical insurance.

On the issue of deceptive marketing, the Commission found that TAAP member travel agents not informing passengers of travel and medical insurance (cost of which was likely passed on to them) and that violated section 10(2)(b). Similarly, TPL was also held to have practiced deception related to the character of the product being purchased by the consumers.

ORDER:

The Commission after conducting detailed hearings disposed of the matter vide its Order dated 29-01-2010. It was held that the TPL has abused its dominant position by tying the products in violation of Section 3, entered into Agreements I&II with TAAP in violation of Section 4 and have also resorted to the deceptive marketing practices, therefore following penalties were imposed:

For abusing its dominant position, TPL shall pay a penalty of PKR Twenty Million. It shall continue to provide TAAP members default insurance/Guarantee at the same rate of contribution i.e., PKR 70 for each international ticket and PKR 35 for each domestic ticket sold by the travel agent, in accordance with paragraph 2 of Schedule A of the TAAP Agreement-II.

For fixing price of travel and medical insurance for passengers, TPL and TAAP shall each pay a penalty of PKR Ten Million.

For deceiving customers/passengers, TAAP shall collect from its members and pay a penalty of PKR Ten Million.

TPL and TAAP both are directed to submit compliance reports within a month. Upon failure to submit their respective compliance reports, TAAP and TPL shall be liable to pay an additional penalty of PKR 200,000 per day of non-compliance.

APPEAL:

TPL & TAAP preferred appeals before the Appellate Bench of the Commission.