Notes on the Fair Trading Commission v Digicel Jamaica decision

The Judicial Committee of the Privy Council (the “Board”) recently rendered a high profile decision in Fair Trading Commission v Digicel (mirror) where it confirmed the far reaching power of the Fair Trading Commission to intervene in proposed mergers of telecommunications providers. The decision will likely give telecommunications providers further cause for pause in future bids to takeover or merge with competitor firms in the Commonwealth Caribbean.


The Fair Trading Commission (the “FTC”) is empowered by the Fair Competition Act (the “FCA”) to serve as the competition authority responsible for regulating uncompetitive market practices in Jamaica.

The Board’s decision arose against the background of a 2011 merger of two of Jamaica’s three mobile voice and text providers, at the time: Digicel  and Claro. Following a complaint by the third competitor in the telecoms space – LIME (now, Flow) the FTC launched an investigation and concluded that the proposed merger would lessen competition and, ultimately, consumer choice would suffer. Importantly, the FTC also found that the benefits arising from the merger would not offset the anti-competitive effects.

Following the publication of its findings, the FTC launched  proceedings in the Jamaican Courts seeking an injunction to prevent the merger from going forward, the imposition of financial penalties and a declaration that the merger was anti-competitive.

The FTC, in approaching the courts, was, in effect, moving to enforce section 17 of the FCA which prohibit actors in a market from entering into an agreement with the effect of lessening competition.

Digicel and Claro took the position that their merger fell outside of the ambit of the FCA as they were telecoms operators and so, only the Telecommunications Act applied to their dealings. They also took the view that section 17 of the FCA did not specifically deal with mergers and so the FTC could not proceed on that basis.

The court dispute could, therefore, be reduced to three specific issues:

  1. Does the FTC have jurisdiction to intervene in the market for telecommunications services?
  2. Does section 17 of the FCA  apply to mergers at all?
  3. Does section 17 of the FCA apply to transactions approved by the Minister under section 17 of the Telecommunications Act?

On point 1, the High Court found (pdf) that the two regimes of the FCA and the Telecommunications act, acted in parallel. The Court of Appeal (pdf), in a decision authored by Harris JA, agreed. On point 2, the Court of Appeal disagreed with the High Court’s finding that section 17 of the FCA was not limited to anti-competitive conduct effected between independent entities and extended to those resulting in the elimination of a competitor in a market. On the third point, the Court of Appeal also reversed the High Court judge’s decision that section 17 of the FCA also applied, even though the relevant government minister had given his permission pursuant to section 17 of the Telecommunications Act.

Privy Council Decision

Before the Board, Digicel argued that they were governed, primarily by the ambit of the Telecommunications Act and not the Fair Competition Act and so, in the absence of a reference under section 5 of the Telecommunications Act, no jurisdiction resided in the FTC to review the decision of Digicel to merge with CLARO. They further argued that section 17 of the FCA did not, in any event, apply to mergers. Digicel also argued that the consent of the relevant government minister with authority for telecommunications was sufficient to prevent the intervention of the FTC.

The Board disagreed with Digicel and found favour with the arguments of the FTC on all three points.

Jurisdiction of the FTC
Firstly, it considered that although the Telecommunications Act was specific and the FCA was a general act, in order to prove that the specific act applied, Digicel would have to demonstrate incompatibility between both frameworks. In the view of the Board, although both acts had their own competition mechanisms, the two acts were not in fact at odds with each other but were, in fact, complementary. The Board also considered the reference mechanism in section 5 of the Telecommunications Act and deemed this confirmation of the fact that both acts operated in parallel to each other. The Board, on this basis, concluded that the jurisdiction of the FTC, pursuant to the FCA, did extend to the telecommunications market.

Applicability of section 17 of the Fair Competition Act

In respect of the argument that the scope of section 17 of the FCA did not apply to the merger between Digicel and Claro, the Board found that it did apply. The Board considered that section 17 of the FCA serves to forbid any agreements which contain provisions that have as their purpose the substantial lessening of competition, or have or are likely to have the effect of substantially lessening competition in a market.

Digicel and Claro made a novel argument: upon merging, both companies would become part of one enterprise and, therefore, could not be guilty of concerted conduct with itself. The Board took the view that section 17 of the FCA did not only apply to concerted conduct *after* the agreement was entered into between the parties. Rather, at the point when the agreement to merge is contemplated, so long as the effect falls within section 17, it is open to review by the FCA.

Importantly, also, the Board, inline with case law from the European Union, reasoned that section 17 of the FCA, despite not mentioning mergers expressly, did, in fact, apply to mergers.


Effect of Minister’s approval of a licence under the Telecommunications Act

Finally, Digicel argued that to the extent that section 17 of the Telecommunications Act was the only provision in either act that expressly dealt with mergers, once Digicel had complied with that provision, there was no scope for the FTC, which was operating under the ambit of the FCA to intervene in the merger. Unsurprisingly, given its reasoning on prior issues in its decision, the Board found that the minister’s approval under the Telecommunications Act did not operate in isolation and compliance with the FCA’s regime was also a necessary prerequisite to approval of its merger activities.

Final Thoughts

Following the decision, Digicel has already taken the view that the merger was not anti-competitive and so, it has no case to answer.

By confirming that the FCA operates in parallel with the Telecommunications Act, the Board’s decision necessarily means that, going forward, operators in the telecommunications space in Jamaica must be mindful of the contents of both statutory schemes when potential mergers and acquisitions are being contemplated.

More broadly, the decision is valuable for confirming the broad-based authority of competition authorities, with similarly broad statutory backing to Jamaica’s FCA. If a merger agreement is being contemplated between significant actors in a market, that agreement can lawfully come within the purview of the competition authority, even if the relevant statutory framework does not expressly provide for this power.

In essence, regardless of market, all firms operating in the jurisdiction are bound by the same competition framework.

It may be argued that the Board has taken a broad, purposive reading of the FCA and, in doing so, ascribed to the FTC, powers over mergers which it did not expressly have before. Even if true, this would only serve to bring Jamaica inline with the modern, accepted approach in developed market-driven jurisdictions  to the interpretation of similar statute.  This is a hard position for most to argue against.