Merger in danger of being overturned as FTC challenge goes ahead

The Jamaica Supreme Court has thrown out a petition by Digicel opposing the suit filed by the FTC challenging the merger between the Digicel and the now defunct Claro.

KINGSTON, Jamaica, Thursday May 17, 2012 – Last year’s deal that allowed Digicel to increase its stronghold in Jamaica could be undermined if the Jamaica Fair Trading Commission (FTC) determines that the transaction could lead to anti-competitive business environment in the country.

The FTC was cleared to make this determination on Tuesday (May 15) when the Jamaica Supreme Court threw out a petition filed by Digicel that contended that the FTC did not have the jurisdiction or authority to challenge the December 2011 transaction between the Jamaica-based telecommunications company and its Latin American counterpart América Móvil, which saw Digicel divest itself of operations in Honduras and El Salvador in exchange for the now defunct Claro in Jamaica.

In late December, the FTC weighed in to try to stop the deal, filing suit against the transaction while arguing that if government approved the transaction, prices would likely "return to the levels that pertained before Claro entered the market" in April 2007.

However, in its petition to stop the FTC’s suit, Digicel contended that the Fair Competition Act (1993) does not apply to the agreement between it and Claro or the resulting merger, and therefore the FTC had no jurisdiction in the matter. Digicel argued that it was in fact the Telecommunications Act (2000) that governed the agreement. Furthermore, the Irish-owned telecommunications company argued that the FTC did not have the authority to examine the Digicel/Claro deal because it was the Office of Utilities Regulation, (OUR) that was the regulatory body which oversees the telecommunication industry. It said in the absence of the OUR inviting the FTC to examine the deal, the Commission’s challenge to the agreement should be dismissed

However, in Tuesday’s decision, Justice Almarie Sinclair-Haynes held that the Fair Competition Act does apply to the agreement between Digicel and Claro as the latter company would be exiting the Jamaican market. The court also held that the FTC has jurisdiction in relation to the transactions.

FTC lead counsel Dr Delroy Beckford praised Justice Sinclair-Haynes’ decision and revealed to the media that this was the first time the FTC had prevailed on a jurisdiction point whereby its jurisdiction was challenged with respect to alleged anti-competitive conduct.

The ruling now clears the way for the FTC to proceed with its challenge against the merger which was completed March. However, Digicel says it intends to appeal the ruling.

Digicel began operations 10 years ago in Jamaica and expanded into some 32 countries over the decade and has 11 million customers mostly in the Caribbean and Central America.

The company last year reported US$2.23 billion in revenue and a subscriber base of more than two million in Jamaica.

According to figures from the Mobile World analysts, the combined market share of the merged Digicel and Claro in Jamaica comes to 80%, leaving Lime with the remaining 20%. Click here to receive free news bulletins via email from Caribbean360. (View sample)