Page 185 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

3 Roles and responses of regulators in competition matters in DFS

3.1 Remits of regulators related to competition matters

The DFS ecosystem usually touches on a number of regulatory domains and may involve multiple regulators
or authorities: For example, the telecommunications regulator, central bank , payments regulator , financial
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intelligence unit, and a competition authority. Generally, for DFS, the financial services regulator is the lead
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regulator, and is usually the central bank. Telecommunications regulators usually act in a supporting role, with
their jurisdiction mostly limited to issues related to the telecommunications channel.
There are multiple theories about how competition-based precepts should be applied to the digital economy,
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but generally competition-related jurisdiction and power is founded through sectoral regulations and national
competition law.
Not all countries have a competition law or competition authority. Often, the competition powers are found in
sectoral regulation, such that each of the sectoral regulators may have mandates that allow them to intervene
in their sector if there is a competition-related concern.
In some jurisdictions, competition policies or laws are available to guide sector regulators to help them deal
with competition-related issues. Because of jurisdictional conflicts, coordination on competition issues has
been found to be useful in preventing regulatory arbitrage. This has usually taken the form of a memorandum
of understanding (MOU) between the regulators which has outlined who has jurisdiction over a specific issue
or sets of issues and the remedies available, if any. Or, the legislature may intervene to specifically carve out
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competition-related roles. 23

3.2 Application of regulatory remits

Sectoral regulations may contain competition provisions which apply prior to the occurrence of actions that
may require intervention to ensure a fair and level playing field. These are termed ex ante. For example,
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regulators have intervened to provide access to a USSD channel at FRAND terms.

Competition law is usually termed ex post, meaning that the competition authority or regulator has set rules
in place to prevent and deal with anti-competitive behavior after or when it takes place. It applies after an
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infringement, possibly leading to a fine and remedies imposed on the infringers.

18 This is typically the banking regulator. There may be dual remits on aspects of DFS. For example: In Indonesia between financial
regulators (2011), the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, (OJK)) replaced Bank Indonesia as the
supervisory body for financial institutions, which includes Indonesian banks and domestic branch offices of foreign banks.
19 This may or may not be independent of the central bank and the banking regulator.
20 In Kenya, Uganda, Peru, Bangladesh, Colombia, and Jordan, the telecommunications regulators – often in concert with the cen-
tral bank – have devised or are devising policies on wholesale pricing for USSD access.
21 For good overviews on competition policies, see GSMA (2015) Competition Policy in the Digital Age, available at https:// goo. gl/
Q2Ceyc ; and GSMA (2016a) ibid.
22 In Malawi, for example, there are MOUs between the Competition and Fair Trading Commission and other DFS regulators outlin-
ing their respective jurisdictions.
23 For example, the Communications Authority (CA) of Kenya (the telecommunications sector regulator) lost its competition powers
to independently monitor dominance and act against its abuse, leaving it with a narrow mandate of licensing new players and
allocating frequencies. Under the new legal regime, the CA must consult the Competition Authority of Kenya (CAK) when assess-
ing critical industry factors, such as SMP, before making a declaration of dominance. See Asoko Insight (2016) Communications
Authority Of Kenya Loses Power To Regulate Dominant Telcos, available at https:// goo. gl/ OR5D14. In some jurisdictions such as
India, consultations between sector regulator and competition authority are not mandatory but at the discretion of regulator in
charge of the issue.
24 As noted by Bourreau and Valletti, ex ante regulation is used when a regulatory or other relevant authority establishes that
absent such ex ante intervention, the abuse of a dominant position some or other market failure will occur. See Bourreau, M &
Valletti, T (2015) Enabling Digital Financial Inclusion through Improvements in Competition and Interoperability: What Works and
What Doesn’t?, available at https:// goo. gl/ jAcViG .
25 Although in regards mergers and/or acquisition that create entities with large overlapping market share, the competition author-
ity may need to be notified prior to being implemented.

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