EDITORIAL - Clarifying competition rules

This newspaper believes in free enterprise and that markets work best when they are free of interference from governments. But we concede that there are circumstances when regulation is necessary, especially in cases when monopolies or oligopolies control critical services, or firms are capable of abusing their dominant position in markets.

It is against this backdrop that we note the Government's decision to sanction the acquisition by the cellphone service provider, Digicel, of the smaller of its two rivals, Claro. We, however, have arrived at no final position in the absence of better particulars.

Digicel, which claims around two million mobile-phone subscribers in a country of 2.6 million people, is, by a substantial margin, the largest player in Jamaica's telecoms market.

Obviously, though, Prime Minister Bruce Golding, who has formal responsibility for telecommunications, did not concur with Digicel's other rival, LIME, that a merger might open the door to a de facto new monopoly. LIME, of course, should understand more than a thing or two about mono-polies. It occupied such a position until Jamaica's telecoms market was liberalised a decade ago.

In so far as is discernible from Prime Minister Golding's letter of approval for the acquisition, Digicel will not be required to do anything special for this takeover, except honour Claro's obligations under its existing licences. This ought not be particularly burdensome given Digicel's larger network and its plans for upgrading. If, and how, these might impact consumers, however, is probably more clearly defined in the proposed network integration and build-out plans that were submitted by Digicel.

Disclosure necessary

These documents, unfortunately, are not public and, therefore, cannot be easily and readily commented on. The administration and Digicel, therefore, should move quickly to provide the public with the specifics of these processes to allow informed discussion and avoid the wild speculation that too often burdens serious discussion.

Indeed, this issue suggests to us the need for legislative clarity to address the issue of monopoly power and/or behaviour in the Jamaican market.

Utilities are policed by the Office of Utilities Regulation. But that agency does not pronounce on mergers or similar developments between telecoms firms. What now prevails, as with the Digicel-Claro merger, is that the appropriate minister sets the terms for the transfer of one party's licences to another, but without specific rules arriving at this determination.

While the Fair Competition Act speaks to dominant position and the abuse thereof, the legislation does not especially address the implications, or regulation, of monopolies in the event of mergers and acquisitions. It does, though, partially attack the issue through a back door by giving the courts the power to strike down agreements that are specifically designed to lessen, or could have the effect of lessening, competition in the market.

As Jamaica integrates deeper in the global economy and domestic firms take over each other, the pathways to, and implications of, such ventures will demand greater predictability as we balance the interests of consumers and firms - and not just in a case such as Digicel and Claro. For example, NCB Capital Markets, a subsidiary of the island's largest bank, and Jamaica Money Market Brokers (JMMB), the largest brokerage, as well as their clients, should be reasonably certain about the response of regulators of NCB's acquisition of 29 per cent of JMMB.