Page 186 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

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

Competition law may empower both sectoral regulators and competition authorities. This approach also allows
for market investigations and inquiries to determine if an entity has what is termed dominance or has SMP
based on its market size and other market factors.
Even if the regulator or competition authority determines that a certain entity does have SMP, the question is
whether the entity is abusing this SMP to the determinant of other smaller entities, and what remedies and/
or punishments are then necessary or appropriate.

3.3 Competition-related regulatory responses possible or seen in DFS Markets

3.3.1 Sectoral regulators

There are a number of methods - which do not apply to competition authorities, who have very different
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tools and times to intervene - which sectoral regulators possessing competition-related competencies have
employed to date to approach or resolve competition issues.

The country examples in this study demonstrate that the following methods, described stylistically below, have
been used to intervene in competition issues: 27
• Regulatory forbearance: Here the responsible regulator(s) - aware of a competition issue and having the
power to intervene - instead allow the market to come to a solution. 28
• Use of moral suasion: The responsible regulator(s) use a light-touch and coordinated approach to
persuade the market participants to come to a satisfactory resolution to their competition dispute(s) on
their own, and at the risk of the regulators stepping in to mandate a solution if they do not. 29

• Intervention: If the parties are unable to, or will not, resolve their disputes, the responsible regulators
may intervene. The intervention may, for example, relate to pricing and/or access rights by competitors
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to a specific service. The regulator may also intervene unilaterally, based on policy precepts without a
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competition issue necessarily being raised with them. 32
• Blunt instrument: Here the regulator may employ a blunt instrument approach, by breaking up an
entity - that a study has shown that has been abusing its vertically-integrated market power - into two
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independent entities, say, for infrastructure and services. The newly-independent infrastructure entity
would then have to provide services to all market participants at FRAND terms. Similarly, the newly
independent services entity is in the same position as all other market participants, and must now obtain
its access from the new infrastructure entity at market-related prices. 34

26 For an overview of the potential tools available to regulators to deal with competition issues, see Sitbon, E (2015) Addressing
Competition Bottlenecks in Digital Financial Ecosystems, available at https:// ssrn. com/ abstract= 2673637
27 The list below and terminology used is stylized and descriptive, and does not necessarily use terms of art usually associated with
regulatory powers in competition-related matters.
28 This has been the approach to date for example in Uganda. However the UCC appears to be set for a more interventionist
approach.
29 ibid. In Jordan, the Bank of Jordan (BOJ) has embarked on a collaborative effort with current and prospective DFS market partici-
pants to participate on a non-discriminatory basis, particularly in respect of participation in the JoMoPay interoperability switch.
30 This may involve the financial regulators or telecommunications regulator.
31 The telecommunications regulator and competition regulator have both intervened in the Kenyan market in response to the
dominance of MNO Safaricom and its M-PESA DFS service.
32 See India and Zimbabwe as examples of implementation of price controls for telecommunications access in DFS.
33 A determination of SMP involves competition law principles. It may be that an entity with SMP abuses that SMP to the detriment
of competitors. The abuse is what usually triggers regulatory intervention.
34 Kenya’s ICT secretary was quoted as saying he supports the breakup of Safaricom. A bill was published for public comment,
and a companion market study on SMP was launched. See Nation (2015) Matiang’i Backs Airtel In Push To Break Up Safaricom,
available at https:// goo. gl/ Va7QK8; The Kenya Information And Communications (Fair Competition And Equality Of Treatment)
Regulations, 2015, available at https:// goo. gl/ MnKnEy

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