Discussion on the Concurrent Jurisdiction
Provision in the Competition Amendment
Bill
30 July 2008
Summary of Recommendationsons
 A clearer appreciation of the policy imperatives underlying both ex
ante and ex post regulation ought to clarify the respective
regulatory functions of the Authority and the Competition
Commission
 Prevailing legislation in the form of the ECA and the Competition
Act do not satisfactorily and explicitly distinguish ex ante
regulation from ex post regulation
 However, were the ECA to be understood within the policy
framework which it operates, it is clear that its primary
preoccupation concerns ex ante regulation of competition matters
 Therefore, in principle, the ECA and Competition Act ought to be
read in a harmonious fashion rather than as being in conflict with
one another
Summary of Recommendations
 Ch 10 of the ECA sets out an ex ante framework designed to
address structural problems inherent in the liberalization of the
sector. Ex post only insofar as it relates to enforcement and
compliance of ex ante rules.
 The management of concurrent jurisdiction should facilitate the
stated policy imperatives which underpin the objective of
regulation. Replication of jurisdictional competence should be
avoided.
 The Authority should be vested with exclusive ex ante regulatory
powers as contained in section 67(4) of the ECA.
 The Competition Act and the Competition Authorities should be
vested with ex post competition regulation powers. To this end,
the Authority will seek an amendment to have section 67(1)-(3) of
the ECA repealed. We are engaging with DOC in this regard.
Summary of Recommendations
 Section 67(9) of the ECA should be amended to replace the words “subject to”
with the words, “despite” or “notwithstanding”. Alternatively, the provision should
be amended with a view to clarifying the respective roles and asserting
jurisdiction in this regard.
 The Authority is uncomfortable with the inclusion of section 3(3)(c) of the draft
Competition Amendment in its current form. Although it represents a laudable
attempt to create certainty regarding jurisdiction it may in fact lead to
uncertainty and provide an avenue for legal game playing, forum shopping and
– ultimately - regulatory evasion.
 The provision in the Competition Amendment Bill regarding conflict or
inconsistency (section 3(3)(c)) should be removed or replaced with an
alternative provision that makes clear the distinction between the roles of the
regulators rather than attempting to establish primary jurisdiction of one over
the other in the case of potential conflicts that are not defined in the legislation.
Overview
 Background
– Underlying policy imperatives of the ECA
– Other relevant provisions of the ECA
 Section 67 (4) of the ECA
 Distinction between ex ante and ex post
 Implications for concurrent jurisdiction
 Comments on the Competition Amendment Bill
 Recommendations
Background
Underlying policy imperatives of the ECA
 ECA espouses the policy imperative of managed
liberalization of the broader electronic communications
market through the application of certain regulatory
mechanisms
 Managed liberalization entails the introduction of facilitiesbased competition and services-based competition
 Provision for an ex ante regulatory framework to “manage”
the introduction of competition and alleviate market failure
Background
Other relevant provisions of the ECA
Chapter 7 of the ECA
 Mandatory interconnection
 Promulgation of a regulatory framework to facilitate the conclusion
of interconnection agreements
 Mandatory interconnection intended to promote the attainment of
the positive network externality
 Interconnection charges are to be determined in accordance with
the principles of ex ante regulation detailed in Chapter 10 of the
ECA
 Ex ante regulatory framework enable the Authority to intervene in
the determination of appropriate interconnection charges where the
pricing structure for interconnection translates into an observable
market failure which affects the competitiveness of a market
Background
Other relevant provisions of the ECA
Chapter 8
 Mandatory leasing of electronic communications facilities, including essential
facilities
 Promulgation of a regulatory framework to facilitate the conclusion of facilities
leasing agreements
 Mandatory facilities leasing intended to promote the efficient utilisation of
electronic communications facilities and the promotion of service-based
competition
 Facilities leasing charges are to be determined in accordance with the
principles of ex ante regulation detailed in Chapter 10 of the ECA
 Ex ante regulatory framework enables the Authority to intervene in the
determination of appropriate facilities leasing charges in the case ofmarket
failure
Section 67 (4) of the ECA
 Chapter 10 generally provides for the regulation of competition matters over
commercial activity which is licensed by the Authority
 Section 67 (4) is more specific in the manner in which the regulation of
competition matters is to occur
 Section 67 (4) envisages the promulgation of a regulatory framework which
the Authority would have recourse to in justifying its intervention in the
functioning and performance of relevant markets
 Regulatory framework envisaged in clearly ex ante and not ex post
 Not concerned with intervening in markets where the observable market
behaviour may be characterised as horizontal coordinated practices, vertical
restraints or abusive unilateral conduct
Section 67 (4) of the ECA
 Rather, section 67 (4) is concerned with detailing the instruments for
regulatory intervention which the Authority may have regard to in seeking to
take corrective measures in markets structures which exhibit market failure,
such as:
– excessive wholesale or retail charges,
– discriminatory charges,
– cross-subsidisation which evades regulatory detection etc.
 Section 67 (4) also carries forth the rationale for managed liberalization and
the introduction of effective competition
 Allows for the identification of those markets where there exists enduring
market failure and imposing appropriate corrective remedies aimed at
simulating the conditions of effective competition
Distinction between ex ante and ex post
regulatory frameworks
ex ante
 Structural conditions and historical incidents may contribute to
enduring market failure that is incapable of being corrected through
adequate competitive process.
 The identification of the relevant markets susceptible to ex ante
regulation is premised on the following criteria:
– Where the market exhibits high and non-transitory barriers to entry,
– There exists observable durable market failure in the relevant market, and
– Ex post competition law enforcement is inadequate to remedy the enduring
market failure.
 The nature of the remedy imposed is intended to proportionately
alleviate the observable market failure in the least intrusive and
justifiable manner
 Essence of the remedy to be imposed is corrective i.e. remedial of
the observable market failure
Section 67 (4) of the ECA
ex post
 Analysis concerns historic market conduct which has an anti-competitive
effect in a relevant primary or adjacent market
 Investigation of the market conduct may occur where there is a complaint
regarding the market conduct i.e. the analysis is not prospective and forwardlooking
 Analysis mainly concerns behavioural market conduct of a particular nature,
and does not necessarily concern itself with the structure of the relevant
market
 Importantly, the nature of the remedy is confined to an administrative penalty
aimed at serving as a behavioural deterrent.
Section 67 (4) of the ECA
ex post
 Ultimately, the nature of the remedy is not intended to actively prevent the
harm in the first place. Rather it is applied ex post or “after the fact” to
penalise such conduct and establishes precedent for the type of conduct
which would be prohibited
 ex ante remedies, on the other hand, are applied prospectively to determine:
– The pricing structure to be adopted i.e. cost orientation remedy – Long Run Incremental
Cost method, Long Run Average Incremental Cost method, Fully Allocated Cost method,
price cap etc.),
– Reporting obligations to be adopted i.e. separation of accounts remedy compels the
submission of reporting information in a differently aggregated manner (e.g.COACAM) and
also compelling a firm to adopt a particular accounting methodology,
– Behavioural commercial conduct to be adopted i.e. Non-discriminatory and reasonable
access, transparent pricing, equitable and fair treatment
 ex post remedies do not go as far as ex ante and are fundamentally different
in their nature due to the different policy objectives associated with ex ante
and ex post regulation
Framework for Ex-Ante Regulation
ACCESS
Inteconnection
Facilities Leasing
Essential Facilities
Infrastructure
Non-discrimination/transparency/terms and conditions/dispute resolution
MARKET FAILURE
Inteconnection
Facilities Leasing
Essential Facilities
Services
Chapter 10
Remedies
Remedies
Periodic Review of remedies
Remedies
Implications for Concurrent Jurisdiction
 A clearer appreciation of the policy imperatives underlying both ex
ante and ex post regulation ought to crisply delineate the respective
regulatory functions of the Authority and the Competition Commission
 Prevailing legislation in the form of the ECA and the Competition Act
do not satisfactorily and explicitly segregate ex ante regulation from ex
post regulation
 However, were the ECA to be understood within the policy framework
which it operates, it is readily discernable that its primary
preoccupation concerns ex ante regulation of competition matters
 Therefore, in principle, the ECA and Competition Act ought to be read
in a harmonious fashion rather than as being in conflict with one
another
Implications for Concurrent Jurisdiction
 Understood in this manner, concurrent jurisdiction then entails concurrency in
as far as there exists two different regulatory institutions regulating for
competitive conditions in the same area of commercial activity
 However, the regulatory instruments at their disposal are substantially
different, and so are their respective areas of regulation
 This is due to the policy underlying the different focus area of each regulatory
institution
 Furthermore, the regulatory outcomes from each institution are substantially
different
 Therefore, the MOU is intended to facilitate mutual cooperation and technical
assistance between the two institutions, and not act as a legislative instrument
for the resolution of jurisdictional competence between the Authority and the
Competition Commission
Comments on The Competition Amendment Bill
 The Competition Amendment Bill (“the Bill”) provides for concurrent
jurisdiction by way of ‘an agreement between the Competition
Commission and that other regulatory authority’
 We agree with this in principle insofar as it will facilitate a constructive
working relationship between the two institutions
 In the case of inconsistencies or conflict the Bill provides that the
provisions of the Competition Act prevail to the extent of the conflict or
inconsistency - unless there is a relevant agreement that sets out the
manner in which concurrent jurisdiction is to be exercised.
 We are concerned that the consequences of the wording may be far
reaching and may provide an avenue for legal opportunism by firms
attempting to avoid being subject to regulation by one or other regulatory
institution. We believe that the provision as currently worded does not go
far enough to provide for the distinction between ex ante and ex post
regulation, thus providing for the inherent harmonious coexistence of the
two Acts.
Recommendations
 The distinction between ex ante and ex post regulation, properly
understood, would make the current wording of the Bill providing for
concurrency redundant.
 This is because there ought not to be any inconsistencies in the
interpretation of either the Competition Act and the ECA since each
statute concerns itself with a different aspect of regulating the broader
electronic communications market.
 However, the only caveat here is the current wording of section 67 (1),
(2) and (3).
 For an even clearer distinction between ex ante and ex post
regulation, it may be necessary for sections 67(1), (2), and (3) to be
removed from the ECA as they may not be consistent with an ex ante
framework.
Recommendations
The provision in the Competition Amendment Bill regarding
conflict or inconsistency (section 3(3)(c)) should be removed
or replaced with an alternative provision that makes clear the
distinction between the roles of the regulators rather than
attempting to establish primary jurisdiction of one over the
other in the case of potential conflicts that are not defined in
the legislation.