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Digicel, LIME stake out positions on FTC challenge

Published:Sunday | January 8, 2012 | 12:00 AM
Managing Director of LIME Jamaica & Cayman, Garfield 'Garry' Sinclair.- File photo
LIME Jamaica on Friday endorsed legal action by the Fair Trading Commission (FTC) aimed at rolling back the Digicel-Claro deal.

Meanwhile, Digicel says it is yet to be served with the FTC's claim and has, in turn, blasted the competition watchdog for poor timing and overreach, saying it does not have legal jurisdiction to challenge the deal.

"Two things are important to note here," said Digicel CEO Mark Linehan.

"Firstly, Digicel has yet to be served with this claim by the FTC. Secondly, the FTC is seriously misguided in its thinking that our acquisition will be detrimental to consumer welfare, and we have no doubt that its claim does not stand a chance given the fact that the deal has already been completed and took effect from 30 November, 2011. The positives to come out of the deal are manyfold and the FTC, in any event, lacks jurisdiction to regulate mergers and acquisitions," he said.

LIME views the deal as detrimental to competition in the telecommunications sector, but lost a bid in the Supreme Court to stop it. It is appealing the ruling.

"We fully support the FTC as we have always believed that the merger is detrimental to competition in the telecoms market and has the potential to reverse much of the gains of liberalisation," said LIME Jamaica's managing director, Garry Sinclair.

Sinclair also urged the new Simpson Miller administration to push through the emergency telecoms legislation tabled ahead of Parliament's Christmas break.

The FTC argues that Digicel's acquisition of Claro's Jamaican business is likely to damage competition and stymie consumer benefits.

"We are seeking a declaration from the Supreme Court that the underlying agreement between Digicel and Claro would have, or is likely to have, the effect of lessening competition substantially in the telecommunications market, and that the agreement is, therefore, unenforceable under Section 17 of the Fair Competition Act, 1993," said FTC lawyer Dr Delroy Beckford.

But Linehan counters that not only did the FTC turn to the courts after the deal was closed, it actually knew of the impending transaction from March 11, 2011.

Meanwhile, Digicel has declared the acquisition a plus for consumers as it announced plans Thursday to implement a J$3.50 per minute peak-rate reduction on calls to the LIME network and J$2 reduction in off-peak rates.

Digicel said it would also invest US$30 million to deploy 4G mobile service across 80 per cent of Jamaica.

The company already offers 4G wireless broadbrand in sections of Jamaica and said it would be extending free service to schools and post offices in rural areas of Jamaica.

The move by the FTC, a government regulatory body, to derogate from the position of the Government previously occurred when the Office of Utilities Regulation (OUR) took its own minister to the Privy Council and won, some two years ago. The OUR fought a directive in April 2002 by then Minister of Industry Commerce and Technology Philip Paulwell, which barred the OUR from intervening in the mobile market.

At least one telecoms lawyer who opted for anonymity sees some commonality with the OUR case.

"It is different, but there are similarities in that the FTC matter is trying to address competition because what people do not realise is that the high rates that persons pay to call a LIME phone are not determined by LIME but by Digicel," the lawyer said.

Last August, then prime minister, Bruce Golding, approved Digicel's acquisition of Claro Jamaica on the proviso that Digicel continues operating two separate networks, as a check on the market leader's dominance. Beckford explained that the FTC and the Government did consult prior to offering final positions on the matter.

"Extensive consultation was done," he said, but added that the two pieces of legislation, that is,the Telecommunications Act, 2000, and the Fair Competition Act, 1993, contain different provisions regarding how competition issues are addressed in such matters.

Specifically, under Section 17 of the Telecommunications Act, 2000, there is no requirement for the minister (PM) to take into account the provisions of the Fair Competition Act in exercising his discretion.

"So yes, there was consultation, but differences in the provisions of the legislation prevented coherence in addressing competition issues in the underlying agreement providing for exit of a competitor from the market," he said. "The PM would have considered whether Digicel met the criteria for the transfer of the licence under the Telecommunications Act but not necessarily whether the underlying agreement (that prompted the request for the transfer of the licence by Digicel) is an agreement to lessen competition in a market under the Fair Competition Act. And to that extent, the FTC is not acting contrary to Government's position."

Beckford said LIME's appeal comes up for a hearing on January 30, and that the FTC hearing is set for the next day at the Supreme Court.

LIME's application is "an appeal against a decision refusing leave to seek judicial review regarding the decision of the PM exercising his discretion under Section 17 of the Telecommunications Act on the question of the transfer of Claro's licence and of the action of the FTC in the conduct of its investigations regarding the underlying agreement," said Beckford.

LIME said Friday that it continues to advocate for lower calling rates and greater flexibility for consumers through the combination of parity in the pricing of "on-net" and "off net" calling rates, lower mobile termination rates, and local number portability.

"We believe that lower rates and more flexibility are in the interest of all Jamaicans and it is now in the new Government's hands to deliver," said Sinclair.

business@gleanerjm.com