Mauritius: The Supreme Court Of Mauritius Concludes That A Regulatory Authority Can Be Held Liable For Damages For Unfair Competition By Market Players

Last Updated: 1 November 2017
Article by Shalinee Jeerakun

In the recent case of Emtel Ltd (Emtel) v (1) The Information and Communication Technologies Authority (ICTA), (2) Mauritius Telecom Ltd (MT), (3) Cellplus Mobile Communication Ltd (Cellplus), (4) The Ministry of Telecommunications (2017), the Supreme Court of Mauritius ordered MT together with its subsidiary Cellplus as well as ICTA (in its capacity as regulatory authority for the  telecommunications sector) to pay to Emtel jointly and in solido the sum of Rs 554,139,900 as damages together with interests and costs.

Synopsis of facts

Emtel considered itself to be the pioneer in the mobile radio cellular telephone services in Mauritius and was in fact granted a 7 year period of exclusivity by the regulatory authority until 31 December 1995.

MT was the sole provider of land line services within Mauritius as well as international communications to and from Mauritius. MT applied for a licence to operate a GSM Digital Cellular System (a more advanced technology) as from 1 January 1996 to the then regulatory authority which was ultimately succeeded by ICTA. MT incorporated a fully owned subsidiary, Cellplus to operate its mobile cellular services. The licence was however granted only on 5 September 1996. Cellplus was also granted exclusive rights to use GSM technology to operate a cellular mobile telephone service for a period of three years. One of the imposed conditions of the licence was that the same terms applying to Emtel would also be applied to Cellplus. The aim of such a provision was to encourage fair and healthy competition and so that Cellplus would not benefit from any cross-subsidisation.

Emtel complained that:

i. Cellplus' proposed prices were substantially lower and such prices could not be practiced having regard to the interconnect charges which Emtel was already paying and for Cellplus, as a separate company from MT, to recoup its investment;

ii. Cellplus had started commercial operations even before it had obtained its licence;

iii. Cellplus had started operating GSM services before the end of its exclusivity period;

iv. MT had abused of its dominant position and had cross-subsidised Cellplus;

v. Cellplus had breached its licence conditions and as such, both MT and Cellplus were guilty of unfair competition.

Emtel's argument was premised on the fact that the low prices offered by Cellplus could only be possible if it was cross-subsidised or did not face high charges as Emtel was facing. It further alleged that by failing to ensure that the conditions of the licence of Cellplus were complied with and failing to protect Emtel from unfair competition, the regulatory authority had "tolerated" the tortious act of both MT and Cellplus and committed a "faute lourde" (gross negligence). Emtel was consequently forced to cut its tariff by half (even though its tariff was allegedly reasonable having regard to economic costs of telecommunications service) to remain competitive in view of the low tariff of Cellplus, and in the process, sustained massive losses.

Legal basis for action and application of law to the facts

Emtel pleaded "faute" of all defendants under Article 1382 of the Mauritian Civil Code, which is the governing provision for liability in tort for unfair competition. To succeed in a claim for damages for unfair competition, the claimant must prove:

  1. An act giving rise to the liability for damages;
  2. The damages; and
  3. The causal link between the act and the damages

For an act to be tantamount to unfair competition it must be tortious and this includes any act which results in inequality in competition. The Court found that while the operating licence granted to Cellplus prohibited any economic and financial cross-subsidisation by MT, Cellplus was not required to pay interconnection fees in the same manner as Emtel. MT did not raise invoices for the interconnection fees of Cellplus each month as was the case for Emtel but in fact such fees were included in their intercompany balances which afforded a financial benefit to Cellplus because it had  more time to settle the bills and such intercompany account bore no interest. Furthermore the capital expenses on infrastructure were also being met by MT through a lease agreement between MT and Cellplus. The lease charges were also accounted for through the intercompany account according to the Court. This amounted to a breach of conditions against cross-subsidisation on the part of both MT and Cellplus which is equivalent to tortious act and in the words of the Court "intentional breaches".

The Court further found that in order not to lose its share of the market and its customers, Emtel was forced to reduce its tariff in order to match the lower price offered by Cellplus, which was only possible owing to the breach of its licence condition. Consequently the loss suffered by Emtel had a direct link with the tortious act committed by Cellplus and MT.

The Court also concluded that by not taking any action in order to ensure compliance of the conditions of licence by Cellplus, ICTA was guilty of "tolerance" of the breach of the conditions. The authority had clearly failed to take any action to prevent the cross-subsidisation and was therefore guilty of "faute lourde".

Commentary

In the above case, the Court considered that when a competitor's acts cause damages to another player, this constitutes unfair competition that attracts sanctions by the Court. It emphasised the crucial role played by the regulatory authority. Its responsibilities do not end with the issue of a licence, but in fact, it has a duty to ascertain that there is strict compliance of the conditions it imposes, thereby ensuring that there is fair competition in the market. Failure to do so would engage its own liability.

It is to be noted that MT, Cellplus and ICTA have appealed against the decision of the first instance Judge.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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