CCP’s Appellate Tribunal upholds penalty against telecom operators for non-competitive practice

Upholding the Competition Commission of Pakistan’s (CCP) decision of penalty against the Pakistan Telecommunication Company Limited (PTCL) and other Long Distance International (LDI) operators, the Competition Appellate Tribunal (CAT) has directed the companies to deposit the fine within 30 days.

The commission had in its decision noted that while incoming call volumes fell by 70% after anti-competitive International Clearing House (ICH) agreement of telecom operators — from 1.9 billion minutes in September 2012 to 579 million in February 2013 — LDI revenues jumped 308%, from $8.37 million to $59 million.

The tribunal upheld the CCP’s findings but reduced the penalty to 2% of turnover generated from the ICH arrangement. It ruled that if the operators fail to pay within 30 days, the original 7.5% penalty will be reinstated.

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The CCP had imposed penalties of 7.5% of annual turnover on each LDI operator including the PTCL for entering into an anti-competitive ICH agreement.

In 2012, the LDI operators including PTCL entered into an agreement wherein all incoming international calls were routed through a single gateway operated by PTCL as head of an LDI consortium. The arrangement fixed a uniform termination rate of around 8.8 US cents per minute — up from about 2 cents previously — and allocated revenue shares and traffic quotas among LDI operators. Competing networks were closed, and prices for overseas callers increased.

The CCP declared the ICH a cartel arrangement involving price-fixing and market-sharing. In April 2013, it imposed penalties of 7.5% of annual turnover on each LDI operator and directed the Pakistan Telecommunication Authority (PTA) to restore pre-ICH competition.

The order rejected claims of “state compulsion” or Ministry of Information Technology directives, stating that records showed LDI operators themselves sought and secured the policy directive for ICH.

The tribunal affirmed that the Competition Act, 2010, applies to government bodies and regulators, noting that even PTA could be held liable for restricting competition. It dismissed arguments that the CCP lacked jurisdiction because the calls were incoming and free to local consumers, stressing that the agreement restricted market entry and competition.