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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