Competition Appellate Tribunal Upholds Penalty on PTCL, LDI Operators

The Competition Appellate Tribunal (CAT) has affirmed the decision of the Competition Commission of Pakistan’s (CCP) regarding penalties imposed on Pakistan Telecommunication Company Limited (PTCL) and other Long Distance International (LDI) operators. The tribunal has instructed these companies to remit the fines within a month.

However, CAT has reduced the penalty to less than half of the original amount levied by the CCP, subject to certain conditions. The CCP had initially penalized each LDI operator, including PTCL, with a fine of 7.5% of their annual turnover for engaging in an anti-competitive International Clearing House (ICH) agreement.

In 2012, LDI operators, including PTCL, entered into an agreement to route all incoming international calls through a unified gateway managed by PTCL, acting as the head of an LDI consortium. This arrangement established a fixed termination rate of approximately 8.8 US cents per minute, a notable increase from the previous rate of about 2 cents. Furthermore, it divided revenue shares and traffic quotas among the LDI operators. This led to the closure of rival networks and increased costs for international callers.

The CCP classified the ICH as a cartel arrangement characterized by price-fixing and market-sharing. In April 2013, the commission imposed penalties of 7.5% of annual turnover on each LDI operator and directed the Pakistan Telecommunication Authority (PTA) to reinstate competition levels prior to the ICH agreement.

The commission highlighted a significant decline in incoming call volumes, dropping by 70% after the implementation of ICH – from 1.9 billion minutes in September 2012 to 579 million in February 2013. Conversely, LDI revenues surged by 308%, escalating from $8.37 million to $59 million.

The tribunal supported the CCP’s findings but lowered the penalty to 2% of the turnover derived from the ICH arrangement. It stipulated that failure to comply with the payment deadline of 30 days would result in the reinstatement of the original 7.5% penalty.

The order dismissed claims of “state compulsion” or directives from the Ministry of Information Technology, asserting that records indicated LDI operators themselves sought and obtained the policy directive for ICH.

The tribunal reinforced that the Competition Act, 2010, is applicable to government entities and regulatory bodies, suggesting that even PTA could be held responsible for impeding competition. It also rejected arguments that the CCP lacked authority due to the calls being incoming and free for local consumers, emphasizing that the agreement restricted market entry and competition.