The High Court has sent a clear message to the market on the consequences of abuse of dominance and demonstrated its readiness to uphold fair competition. While framed majorly as a contract dispute, the heart of the case in VAS Garage v MTN Uganda lay in the anti-competitive practices by MTN, and the consequent harm suffered by VAS.
A brief
VAS had an agreement with MTN that allowed it to deliver mobile content to MTN customers through a content management platform operated by VAS. However, MTN assumed control of the platform and subsequently expired/deleted VAS's databases, citing a Uganda Communications Commission ("UCC") Do Not Disturb ("DND") directive. The directive was intended to safeguard customers from receiving unsolicited messages via SMS.
VAS filed a complaint with UCC claiming, among others, that while MTN had expired its subscription database, it had not expired its own parallel MTN Play services. MTN, under its MTN Play service, continued broadcasting its messages without including opt-out instructions for customers. MTN denied the claims of unfair business practices and stated that a clean-up of all existing customer subscriptions was done for all content providers and not targeted at VAS.
UCC found that it was not true that the profiled databases of subscribers were to be deleted/expired. UCC also found that MTN had misused its dominant position to frustrate VAS's business. UCC directed MTN to remedy the losses suffered by VAS. However, VAS claimed that MTN did not comply with the UCC decision, which prompted the case before the High Court.
Anti-competitive practices findings
The court found that MTN's unilateral decision to expire VAS's subscriber databases, particularly while maintaining its own similar services undermined fair competition and was an abuse of its dominant position. The purpose and effect of MTN's actions was to cause VAS, a rival, to exit from the market.
The court agreed with UCC's decision and found that MTN had violated the Communications (Fair Competition) Regulations, 2005. MTN had effectively foreclosed competition by granting itself the power to either allow or disallow a new entrant in the market, which was not only harmful to the spirit of competition but also caused VAS considerable business loss.
In determining the damages due to VAS for unfair competition, the court found that they should not only provide adequate compensation for the loss suffered but also be adequate to deter anticompetitive conduct. Resultantly, the court awarded VAS approximately USD 374,000 as damages for both conversion and unfair competition.
The Competition Act (Cap.66)
The court relied on the Uganda Communications Act (Cap.103) and the Communications (Fair Competition) Regulations, 2005, which govern competition in the telecommunications sector. Although the Competition Act (Cap.66) was not applicable to the case, given the recent enactment, the case illustrates the concerns that the Act is designed to address. Notably, the Act prohibits abuse of dominance, including conduct that restricts market access or discriminates against specific competitors.
Unfortunately the regulations necessary to operationalise the Competition Act are long overdue. The regulations were expected to be presented to Parliament by 21 October 2024 but to date, this has not been done. The delay in enacting these regulations is hampering full implementation of the Act and potentially allowing unfair competition practices to go unchecked, particularly in sectors without sector-specific competition regulations.
Takeaways
This case serves as a cautionary tale for dominant players in the telecommunications sector and other markets to avoid leveraging their control to the disadvantage of smaller players. This decision is a welcome addition to the small but growing body of precedents on competition law in Uganda, while we await the regulations under the Competition Act.
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