ICH Agreement Annulled by CCP

The Competition Commission of Pakistan (CCP) in a bench comprising Chairperson Ms. Rahat Kaunain Hassan, Member Dr. Joseph Wilson and Member Shehzad Ansar passed an order to annulled the International Clearing House (ICH) Agreement by the 14 LDI operators. The order also imposed a huge penalty of 7.5 percent of annual turnover of each LDI for violation of Sec 4 of the Competition Act, 2010. The penalty amounts to billions of rupees as only the penalty of Rs 8.309 billion, Rs 534 million and Rs 189 million has been imposed on PTCL, WorldCall and Telecard respectively.

The penalty amount was based on the data provided by Pakistan Telecommunications Authority (PTA) which states that number of incoming international calls in September 2012, before establishment of ICH, was 1.9 billion minutes which reduced to 579 million as in February 2013.

Despite decrease in the number of incoming calls by 70 percent, the estimated revenue of LDI Operators for the month of September 2012 before ICH was $8.37 million which elevated to $59 million in October 2012 and currently stands at $34 Million in February 2013 marking an increase of 308 percent in Post ICH period. The main reason of increase in Revenue was that incoming call charges were increased to 8.8 cents/minutes from rates around 2 cents/minute pre ICH.

The order states that the monthly APC received/ receivable by the PTA, has decreased from $24.33 million to $16.78 million in the month of February 2013 (Decrease of 31 percent).

The Bench said that the ICH agreement was the reason for reduction in incoming calls, causing an inequality and disrupting the healthy competitive environment of the market. It had also been the reason by FCC had ordered US telecom operators to stop payments to Pakistani LDI operators. LDI operators have been directed not to enter any such agreement in the future again and restore the competitive environment amongst each other that existed prior to implementation of the ICH Agreement.

For failure to comply with the earlier order passed by the Commission requiring the LDI operators to seek clearance if at any point of time they intend to enter into ICH arrangement, a penalty of Rs 1,000,000 (one million) has been imposed on all the LDI Operators… For any loss resulting from illegal gains received by LDI Operations under the ICH Agreement, the aggrieved parties can claim compensation from the LDI Operators before the court of competent jurisdiction in pursuance of this Order.

The LDI operators pleaded during the proceedings that that they entered into the ICH Agreement on the directives of the Ministry of Information Technology (MOIT) and PTA.

However, in view of the settled principle of law that a policy directive cannot override or prevail expressed provisions of the statute passed by the legislature, the Bench held that no protection or immunity can be sought from the application of the Competition Act by the undertakings under the umbrella of such a policy directive