The Competition Commission recently examined whether Wateen Telecom Limited had resorted to a tie-in arrangement for analogue TV (ATV) services provided to a housing scheme (Phase V of Defence Housing Authority Lahore), restricting consumer choice and abusing its dominant position in violation of Section 3(1) read with Sections 3(2) and 3(3)(c) of the Competition Act 2010.
Section 3(1) of the Competition Act prohibits the abuse of a dominant position while Section 3(2) states that "an abuse of dominant position shall be deemed to have been brought about, maintained or continued if it consists of practices which prevent, restrict, reduce, or distort competition in the relevant market".
Pursuant to Section 3(3)(c) of the Competition Act, 'practices' include tie-ins where the sale of goods or services is made conditional on the purchase of other goods or services.
Wateen provides converged communication/telecoms services, including TV, multimedia, voice, internet and enterprise solutions to residents and business organisations.
The residents of Phase V of Defence Housing Authority Lahore filed a complaint that Wateen had denied them ATV services on a standalone basis unless they subscribed to a bundle which included digital TV and internet services. The complaint was as a result of a notice that Wateen had issued to its customers informing them that they would be unable to access ATV services after a specific date unless they signed up to 'dual play' or 'triple play' service packages. The notice was issued under the directions of the Pakistan Electronic Media Regulatory Authority (PEMRA).
The commission enquiry report concluded that:
- the relevant market in the case under review was the hybrid fibre coaxial (HFC) based ATV service market; and
- Wateen was in a dominant position in this market.
As such, the enquiry report found that Wateen had restricted consumer choice by introducing a tie-in arrangement in the relevant market and it was issued a show cause notice.
The Competition Act defines a 'relevant market' as the relevant product (goods or services) market and the relevant geographic market in which an undertaking operates.
The enquiry report identified the provision of ATV services based on HFC technology as the relevant market based on the characteristics, quality and price differences of HFC-based ATV services compared with the other types of ATV and DTV services being offered. The relevant geographic market was defined as Phase V of Defence Housing Authority Lahore, as Wateen was involved in the supply of pay-TV services in such phase of Defence Housing Authority.
Further, Defence Housing Authority Lahore's administration authority confirmed that other pay-TV service providers provided services in Phases I to V of Defence Housing Authority Lahore. The geographic market could therefore not be restricted to Phase V of Defence Housing Lahore alone. As a result, the commission concluded that the enquiry report had erred in establishing the relevant product and geographic market.
Dominant position The enquiry report established that Wateen held a 100% market share in the relevant market which had been denied by Wateen. However, the commission found that this conclusion was untenable and rejected it due to an erroneous demarcation of the relevant market.
Abuse of dominant position Section 3(3)(c) of the Competition Act prohibits the abuse of a dominant position through tie-ins. In this regard, the commission relied on the definition of tie-ins set out by the European Commission in Microsoft v Commission ( ECR II 360):
- the tying and tied products are two separate products;
- the undertaking concerned is dominant in the market for the tying product;
- the undertaking concerned does not give customers a choice to obtain the tying product without the tied product; and
- the practice in question excludes competition.
The commission found that the pay-TV market could not be subdivided into ATV and DTV, as DTV was merely a further development of ATV. Moreover, the digital evolution of pay-TV services through the transition from gradual replacement to complete supersession of ATV did not justify segmenting ATV and DTV into two separate sub-markets within the pay-TV services market. Hence, the question of a tie-in of substitutable services within the same relevant market did not arise.
Regarding the second condition, there was no evidence to suggest that Wateen held a dominant position based on the correct identification of the relevant market as pay-TV services in Phases I to V of Defence Housing Authority Lahore.
With reference to the third condition, the TV broadcasting sector is evolving with the transition from ATV to DTV services based on PEMRA's guidelines. The commission concluded that this was PEMRA and not Wateen's decision. Hence, even the third condition was not satisfied.
As regards the fourth condition, the data that the Defence Housing Authority Lahore supplied underlined that there were numerous pay-TV companies providing their services to residents, making it a competitive market. Hence, the market was not foreclosed.
Accordingly, no case for abuse of dominance was found.
The Competition Commission found that the original enquiry report had erroneously defined the relevant market. Due to lack of sufficient data and evidence, therefore, it could not be conclusively determined whether Wateen was in a dominant position in the relevant market. As a result, the show cause notice issued to Wateen was set aside.
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