My Thoughts on Technology and Jamaica: FTC's Claro Jamaica-Digicel Jamaica 2011 Merger – FTC’s Fair Competition Act powerless as Privy Council beckons

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Wednesday, July 1, 2015

FTC's Claro Jamaica-Digicel Jamaica 2011 Merger – FTC’s Fair Competition Act powerless as Privy Council beckons

The Claro Jamaica-Digicel Jamaica 2011 Merger Legal fight with the FTC isn't going away any time soon.

The FTC (Fair Trading Commission), which has been argueing the legality of the merger of Claro Jamaica and Digicel Jamaica, has been given leave by the Court of Appeal to take their case to the Privy Council as reported in the article “FTC takes Digicel/Claro matter to Privy Council”, published Sunday, June 14, 2015, The Jamaica Observer.

The FTC, via the attorney-at-law by Dr Delroy Beckford, had issued a Notice of Motion for Leave to Appeal to the Privy Council on Friday January 9th 2015, appealing the decision laid down by the Court of Appeal on Friday December 19th 2015 as reported in the article  “FTC taking Digicel/Claro merger to Privy Council”, published Monday, January 19, 2015 BY PAUL HENRY, The Jamaica Observer.

In their Judgment, the Court of Appeal had upheld that Section 17 of the Fair Competition Act does not have any bearing on the Claro Jamaica-Digicel Jamaica 2011 Merger, as there was no evidence of collusion in the agreement i.e. it wasn't being planned, merely a natural consequence of competitive forces in Jamaica.

Also, any subsequent agreement between Digicel and Claro Jamaica after the Minister of Science and Technology had signed off on the deal cannot be reviewed by the FTC, being as that is due to private negotiations between the two (2) Telecom Providers and was not being encouraged by Parliament.

The Court of Appeal also upheld the FTC's arguement that they had jurisdiction over the Telecommunications Industry, despite having previously ruled on Friday December 19th 2015.

So if this is conclusion of the Appellate Court, why is the FTC still pursuing their case against Telecom Provider Digicel?

Claro Jamaica-Digicel Jamaica 2011 Merger – FTC’s Fair Competition Act powerless against Telecom Mergers

The Claro Jamaica-Digicel Jamaica 2011 Merger was approved by then Prime Minister Bruce Golding in August 2011, finally becoming official on March 1, 2012  as reported in my Geezam blog article entitled “CLARO's Freeness ends 5th January 2012 – Digicel’s Bigger, Better with Data and Cloud”. 

Albeit more of a swap between Claro's owner America Movil and Digicel Caribbean for operations in Honduras and El Salvador, most Jamaicans, unaware of the size of the companies involved, chose to assume that Digicel had taken over Claro, not realizing that Jamaica was just a small part of billionaire Carlos Slim Helu's massive Latin American empire!

The FTC, acting on behalf of many Jamaicans who had complained of having unceremoniously lost their Claro service, took Digicel to court claiming that the merger did not benefit Jamaicans and was anti-competitive in nature as reported in my blog article entitled “Digicel to shut down CLARO's Voice Network in HSDPA+ Push - The Louisiana Purchase of Spectrum”.

The FTC, after conducting an investigation into the 2011 merger, then filed a claim in the Supreme Court in 2011 claiming that the Claro Jamaica-Digicel Jamaica 2011 Merger would not be beneficial to customers as reported in the article “FTC has no jurisdiction over Digicel, Claro merger ­ Appeal Court”, published Wednesday December 31, 2014 by Barbara Gayle, The Jamaica Gleaner

They also claimed to have the jurisdiction to make their claim under the Fair Competition Act, even though the Claro Jamaica-Digicel Jamaica 2011 Merger fell more under the Telecommunications Act of 2000 at that time.

However, the FTC claimed that they intervene via the Fair Competition Act because of the section of the Fair Competition Act that speaks to  “non­-collusive agreements and mergers in the Telecommunications sector where these are having or are likely to have an anti­-competitive effect” that gave them leeway to take action.

At the time, the Supreme Court had ruled in 2012 in favour of the FTC, upholding their claim that they had the jurisdiction to intervene in the 2011 merger via the Fair Competition Act. This ruling was made even though they did not have explicit permission under the Telecommunications Act as reported in the article “FTC opposes Digicel/Claro merger”, published Wednesday, December 28, 2011 by Paul Henry, The Jamaica Observer.

Digicel represented by Attorney-­at­-law Georgia Gibson­Henlin, soon appealed that Supreme Court Decision. On Friday December 19th 2015, the Court of Appeal overturned the Supreme Court’s ruling in 2012, stating that FTC using the Fair Competition Act, had no jurisdiction over the Telecommunications Act and thus could not intervene in the 2011 merger.

So what happened during the showdown in December 2014? The arguments presented may surprise you a bit.

Claro Jamaica-Digicel Jamaica 2011 Merger – Court of Appeal rules in Digicel’s favour

Back then in December 2014, FTC's attorney-at-law by Dr Delroy Beckford was at the time joined by Telecom Provider LIME's attorney-at-law Denise Kitson, QC in their legal battle.LIME had been granted permission to join in the matter as an interested party and prepared arguments to assist the FTC's Case.

Attorney­-at­-law Georgia Gibson­-Henlin and Michael Hylton, QC, representing Telecom Provider Digicel, faced off on the others side!

Denise Kitson, QC, had argued that Section 73(2) of the Telecommunications Act meant that any Jamaican or interested party within Jamaica, including a competing Telecom Provider, could refer the agreement to the FTC, thereby giving the FTC jurisdiction in the 2011 merger.

Attorney­-at­-law Delroy Beckford, representing the FTC, pointed out that the section of the Fair Competition Act that speaks to “non­-collusive agreements and mergers in the Telecommunications sector where these are having or are likely to have an anti­-competitive effect” was not meant to lock out the FTC, but gave them the right to intervene on behalf of any Jamaican or interested party within Jamaica who made an application to the FTC complaining about the negative effects that the Claro Jamaica-Digicel Jamaica 2011 Merger was having on them.

Digicel's attorney, Michael Hylton, QC, however, argued to the Court of Appeal that the Supreme Court Judge had erred in assuming that the FTC, via their all-encompassing Fair Competition Act, had jurisdiction in any Telecom Merger related matter. As the OUR (Office of Utilities Regulation) was the regulator for the Telecom Sector under the Telecommunications Act, they should have been the ones to make the referral or consultation as the interested party within Jamaica to the FTC.

This so that the FTC could become involved in judging whether the Claro Jamaica-Digicel Jamaica 2011 Merger was likely to have an anti­-competitive effect upon the Telecoms Sector and the people of Jamaica!

However, that had not been the case, as the FTC was acting as a guardian of the people of Jamaica, and not on behalf of the regulator, who as the most relevant interested party, should have been the main interest in the anti­-competitive effect of the 2011 merger.

Thus, in the absence of any action form the OUR as the regulator, the Claro Jamaica-Digicel Jamaica 2011 Merger was a legitimate business transaction.

The Court of Appeal Ruling – FTC disagrees paving the way for Privy Council

The Appellate Court agreed with Digicel, stating that they'd met all the GOJ (Government of Jamaica) requirements that would make the deal legally binding.

They had gotten permission and approval from the Minister of Science, Technology, Energy and Mining Phillip Paulwell and based on that approval, had entered into an agreement with Oceanic Digital Jamaica, at the time owned by America Movil, to sell their interest in the Claro Jamaica company to them.

Since the agreement to merge Claro Jamaica with Digicel Jamaica was recognized by the Ministry of Science, Technology, Energy and Mining and complied with the Telecommunications Act, it did not fall within the Fair Competition Act.

Also, within the Telecommunications Act was there no provision that restricted the right for entities to merge. The Appeals Court Judge also acknowledged Supreme Court Justice Sinclair Haynes as correct in stating that the transfer of Telecom License implied that a merger had indeed occurred.

Under the Telecommunications Act, mergers are acknowledged and recognized but there is no provision under the Fair Competition Act that recognizes mergers.

Thus, since there was no provision under the Telecommunications Act as it related to restricted the right for entities to merge and mergers were not explicitly mentioned as being apart of the FTC’s prevue in the Fair Competition Act, the FTC's could not intervene.

This was even if they'd received complaints from members of the Public who believe that the Claro Jamaica-Digicel Jamaica 2011 Merger was likely to have an anti­-competitive effect upon the Telecoms Sector and the people of Jamaica.

As for the implication that there was some collusion between Claro Jamaica and Digicel Jamaica or even America Movil and Digicel Caribbean, the FTC could not act.  Section 17 of the Fair Competition Act is aimed at allowing the FTC to go after collusive conduct, none of which had appeared in the action between any of the two (2) parties mentioned above.

To quote the judgement handed down by the Court of Appeal on Friday December 19th  2015: “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 Privy Council – History on the side of the FTC but Bigger, Better Network can still win

So now that a month later on the Court of Appeal has changed their mind and given leave for the FTC to take their appeal to the Privy Council, it'll probably be by the end of 2015 before a ruling comes from the Privy Council.

They’ll be argueing if they can intervene in the Claro Jamaica-Digicel Jamaica 2011 Merger based on Section 17 of the Fair Competition Act, especially if it appears that collusion had taken place resulting in an anti-competitive action that affected the Jamaican customer.

Most likely, they'll rule in favour of the FTC and LIME Jamaica, as the Privy Council usually rules in favour of Governments.

Being as this is a landmark case, such a ruling would garner a great deal of fame for the Justices sitting on the Privy Council.

But it’s good to note that LIME is a part of this ruling and thus will end up having their agreement heard before the Privy Council. Being as Lime is a competitor; this will make the Appeals Case look more like a Civil Suit involving two (2) competing rivals rather than one involving a Government Executive Agency vs. a Multi-National Company.

So instead of looking like a case of a multi-national unjustly taking advantage of a Caribbean country, which would make this a high profile case, it looks more like a Trade Dispute. This might make the Queen’s Council Judges in the Privy Council wonder if this was more suited for the CCJ (Caribbean Court of Justice) than Her Majesty’s Court of Final Arbitration.

Thus the case, albeit potentially a landmark ruling, would not garner much fame for the Law Lords, many of who are seeking to cement their legacy by writing wrongs created by Britain’s Colonial Past in their Days of Empire.

Thus, they’ll probably rule in Digicel's favour, seeing as they have been expanding their 3G Network and have been making more “4G” related products affordable to Jamaicans, such as the Digicel Zero as described in my blog article entitled “Digicel launches Digicel Zero - How @Digicel_jamaica is testing VoLTE vs @WhatsApp's Free Voice Calling to boost smartphone sales”.

Thus, albeit history is on the FTC's side, they might lose this historic case to the Bigger Better Network. That’s because over time since 2011 when the case first came to light, Digicel Jamaica’s actions have decidedly had a positive effect on Jamaica and have increased competition, resulting in the lowering of prices for various Telecoms Products in Jamaica and the Caribbean.


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