ICH Scandal: Competition Penalty Upheld, 30 Days Deadline

ISLAMABAD: The Competition Appellate Tribunal has upheld the Competition Commission of Pakistan’s (CCP) decision to penalize Pakistan Telecommunication Company Limited (PTCL) and other Long Distance International (LDI) operators for entering into an anti-competitive International Clearing House (ICH) agreement. The companies have been directed to deposit the fine within 30 days.

The ICH agreement, signed in 2012, routed all incoming international calls through a single gateway operated by PTCL as the head of LDI consortium. All other LDIs assigned their termination rights to the consortium, and traffic and revenues were shared on a quota basis rather than through competition. The arrangement fixed termination rates at around 8.8 US cents per minute, up from about 2 cents earlier, effectively eliminating competition and reducing consumer choice.

Data from the Pakistan Telecommunication Authority (PTA) showed that incoming call volume dropped by 70 percent, from 1.9 billion minutes in September 2012 to 579 million minutes in February 2013. Despite the sharp decline in traffic, LDI operator revenues surged by 308 percent.

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In April 2013, the CCP declared the ICH a cartel arrangement involving price-fixing and market sharing. It imposed penalties of 7.5 percent of annual turnover of on each LDI operator (approximately 11 billion) and directed PTA to restore competition to pre-ICH levels. The ICH policy was subsequently withdrawn in June 2014.

During the proceedings, LDI operators claimed they entered into the ICH agreement under directives from the Ministry of Information Technology (MOIT) and PTA, arguing that non-compliance would have risked the loss of their licenses. However, the Tribunal found no genuine state compulsion and ruled that records showed LDI operators themselves had lobbied for the ICH policy. The MOIT had no authority under the Telecom Act, 1996, to issue directives to operators; its powers were limited to issuing policy directives to PTA.

The Tribunal noted that even if directives had been given, operators were fully aware that the ICH violated competition laws, as evidenced by their earlier application for an exemption under Section 5 of the Competition Act. The agreement, it held, restricted competition, prevented new entrants, and clearly fell under the jurisdiction of the CCP.

The ruling reaffirmed that the Competition Act, 2010, applies to all undertakings, including regulators and government bodies. The Tribunal stated that even PTA could be held liable if found guilty of restricting or reducing competition.

PTCL had argued that CCP should have conducted an inquiry before issuing a show-cause notice. The Tribunal rejected this, holding that an inquiry is not necessary in every case, particularly where facts are admitted. LDI operators had already acknowledged the existence of the ICH agreement, which was the root cause of the violation.

While upholding the CCP’s findings, the Tribunal reduced the penalty from 7.5 percent to 2 percent of turnover generated from ICH-related activity. It directed the operators to deposit the penalty within 30 days, warning that failure to do so would automatically reinstate the original 7.5 percent fine.

The Tribunal’s ruling reinforces CCP’s mandate to combat collusion and protect market competition. It also sends a clear message that no undertaking, whether private or regulatory, is above competition law.