Background of the Case:

The Competition Commission of Pakistan (the ‘Commission’) initiated proceedings on receipt of several complaints from the residents of DHA, Lahore, in respect of the lack of choice of service providers, other than Wateen, for provision of telecommunication and media services and the unsatisfactory quality of such services. The information provided by DHA and Wateen to the Commission revealed that there was an exclusive arrangement between the parties whereby Wateen was the only service provider entitled to provide telecommunication and media services in certain phases of the property under the control of DHA. Show Cause Notices were issued to DHA and Wateen, for prima facie contravention of Section 4 of the Competition Act, 2010, which prohibits undertakings from entering into agreements in respect of provision of services which have the object or effect of preventing, restricting or reducing competition within the relevant market unless exemption has been granted by the Commission.

During its analysis, one of the issues came up was its retrospective application to an agreement executed before the Act came into being. In this regard, the Commission responded holding that Section 4 applies to prohibited agreements that are continuing in nature and not to past and closed transactions. As such, any enforcement will not be retrospective but prospective.

In its analysis, the relevant geographic market was defined as land owned by the DHA and the product market was termed as the bundle of services collectively referred to as telecommunication and media services provided on fixed line basis through HFC network. After analyzing the agreement in detail, the Commission concluded that Clauses 3 & 4 read with Appendix I and III of the agreement have the effect of preventing, restricting and reducing competition and the said provisions violate Section 4 unless the Commission is satisfied that an exemption under Section 5 read with Section 9 is warranted.

On the question of exemption, the Commission considered Wateen’s submissions and found them to be unsatisfactory.

The Order:

The Commission’s two member Bench passed an Order on March 22, 2011 in respect of the proceedings initiated against the Defence Housing Authority (DHA) and Wateen Telecom (Pvt.) Limited for entering into a prohibited agreement by granting exclusivity, whereby a penalty of Rs. 10 million on DHA and Rs. 5 million on Wateen has been imposed for violation of the provisions of the Competition Act, 2010. Furthermore, the provisions of the agreement between DHA and Wateen, keeping in view the facts of the case, the grant of exclusivity in respect of right of way and to dig soil, have been declared to be in violation of Section 4 and thus of no legal effect. Accordingly, grant of exemption in respect of such exclusivity has been denied. The parties have been reprimanded that continuing the breach would entail serious consequences and the parties shall be liable to pay maximum penalty of Rs. 1 million for every day of the continuing violation.

Current Status:

DHA has filed a writ petition before the Islamabad High Court challenging the Order of the Commission. The matter is pending adjudication and the operation of Order has been suspended.