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FTC has no jurisdiction over Digicel, Claro merger - Appeal Court

Published:Wednesday | December 31, 2014 | 12:00 AM

Barbara Gayle, Justice Coordinator

The Fair Trading Commission (FTC) does not have the jurisdiction to intervene in the 2011 merger of telecommunications service provider Digicel with another operator Claro, which had operated independently in Jamaica up to then, the Court of Appeal ruled this month.

Digicel had appealed against a Supreme Court ruling in 2012 that the FTC had jurisdiction over the Telecommunications Act.

Attorney-at-law Georgia Gibson-Henlin, one of the lawyers who represented Digicel, said now that the telecommunications provider has won its appeal, that is the end of the dispute in the local courts in relation to the merger.

The FTC had filed a claim in the Supreme Court in 2011 after it completed an investigation into the Digicel-Claro merger. The FTC claimed that the merger would not be beneficial to consumers and that it had jurisdiction over the telecommunications industry.

Digicel asked the court to determine whether the Fair Competition Act (FCA) applied to the agreement or whether the FTC had jurisdiction in relation to the agreement or the transactions effected by the agreement.

Justice Almarie Sinclair Haynes heard the matter and ruled in May 2012 that the FTC had jurisdiction over the Telecommunications Act. She further ruled that section 17 of the Telecommunications Act applied to mergers and acquisitions such as the transaction between Digicel and Claro.

INVESTIGATION

After the merger was announced in 2011, the FTC commenced investigation and filed proceedings in the court seeking declarations that Digicel and Claro had contravened the FCA.

LIME was granted permission to be joined in the matter as an interested party and made submissions supporting the FTC's contention.

Michael Hylton, QC, argued on behalf of Digicel that the judge erred as a matter of law in finding that in the absence of specific referral or consultation by the Office of Utilities Regulation (OUR), the Fair Competition Act applies generally to telecommunications.

The lawyer argued that the OUR is the regulator for the purposes of the telecommunications sector.

Attorney-at-law Delroy Beckford, who represented the FTC, argued that the provision for competitive safeguards in the Telecommunications Act was not meant to be comprehensive as to foreclose the application of the FCA.

Denise Kitson, QC, who represented LIME, had argued that the fact that section 73(2) of the Telecommunications Act recognises a person's right to refer a matter to the FTC meant that anyone, including another competitor in the telecommunications market, could refer the agreement to the FTC. As such, she said the FTC had jurisdiction to intervene in the merger.

The appellate court found that Digicel had met all the relevant statutory requirements in relation to the merger.

The court said Digicel obtained the requisite approval of the relevant minister and, acting on the ministerial approval, entered into an agreement with Oceanic Digital Jamaica, trading as Claro.

"It could not have been the intention of Parliament that an agreement which meets the minister's approval should be subject to section 17(3) of the Fair Competition Act and that only agreements under section 17 (4) are exempt. As Mr Hylton rightly urged, it would have been a commercial absurdity to find otherwise," the court said.

It further said that there was no provision in the Telecommunications Act which restricted the right of entities to merge. The court found that Justice Sinclair Haynes correctly acknowledged that an acquisition or merger occurred as a result of the transfer of the licence.

The Court of Appeal ruled that the Fair Competition Act does not apply to the agreement entered into by Digicel and Claro. It further ruled that Section 17 of the Act is aimed at agreements involving collusive conduct, and there was no collusion between the parties.

In addition, it said that agreements that comply with the Telecoms Act and approved by the minister do not fall within the purview of the Fair Competition Act.

It also ruled that the transaction was a merger and acquisition, which is provided for under the Telecoms Act, but not under the Fair Competition Act.

The appeal was allowed in part, and no order was made as to costs.