Tribunal upholds decision in LDI case
The Competition Appellate Tribunal has upheld the Competition Commission of Pakistan's (CCP) decision to penalise Pakistan Telecommunication Company Limited (PTCL) and other Long Distance International (LDI) operators for entering into an anti-competitive International Clearing House (ICH) agreement. These companies have been directed to deposit the fine within 30 days.
The total turnover of PTCL and other LDI operators amounts to Rs11 billion and they have been directed to deposit 2% of the turnover within a month.
While upholding the CCP's findings, the tribunal reduced the penalty from 7.5% to 2% of the turnover generated from ICH-related activity. It said that if the operators failed to deposit the penalty within 30 days, it would automatically reinstate the original 7.5% fine.
The ICH agreement, signed in 2012, routed all incoming international calls through a single gateway operated by PTCL as the head of LDI consortium. All other LDI operators assigned their termination rights to the consortium, and traffic and revenues were shared on a quota basis rather than through competition.
The arrangement fixed termination rates at around 8.8 US cents per minute, up from about 2 cents earlier, effectively eliminating competition and reducing consumer choice.
Data from the Pakistan Telecommunication Authority (PTA) showed that the incoming call volume dropped 70%, from 1.9 billion minutes in September 2012 to 579 million minutes in February 2013. Despite the sharp decline in traffic, the LDI operators' revenue surged 308%.
In April 2013, the CCP declared the ICH a cartel arrangement involving price fixing and market sharing. It imposed penalties of 7.5% of the annual turnover (approximately Rs11 billion) on each LDI operator and directed the PTA to restore competition to pre-ICH levels. The ICH policy was subsequently withdrawn in June 2014.
During proceedings, the LDI operators claimed they entered into the ICH agreement on directives from the Ministry of Information Technology (MOIT) and the PTA, arguing that non-compliance would have risked the loss of their licences. However, the tribunal found no genuine state compulsion and ruled that records showed that the LDI operators had lobbied themselves for the ICH policy.
The MOIT had no authority under the Telecom Act, 1996 to issue directives to the operators and its powers were limited to issuing policy directives to the PTA.
The tribunal noted that even if the directives had been given, the operators were fully aware that the ICH violated competition laws, as evidenced by their earlier application for exemption under Section 5 of the Competition Act. The agreement, it held, restricted competition, prevented new entrants and clearly fell within the CCP jurisdiction.
The ruling reaffirmed that the Competition Act, 2010 applies to all undertakings, including the regulators and government bodies. The tribunal stated that even the PTA could be held liable, if found guilty of restricting or reducing competition.
PTCL had argued that the CCP should have conducted an inquiry before issuing a show-cause notice. The tribunal rejected this, saying that an inquiry is not necessary in every case, particularly where facts are admitted. The LDI operators had already acknowledged the existence of the ICH agreement, which was the root cause of the violation.