Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies

Jamaica: Report on Developments and Enforcement of Competition Policy and Laws (1993 - 1996)

I. Recent Developments and Changes in Law or Policies

The legislation which articulates the competition law of Jamaica is the Fair Competition Act ("FCA"). The FCA was enacted on March 9, 1993 and came into effect on September 9, 1993. In addition to delineating the proper conduct of businesses to ensure fair competition in Jamaica and the sanctions for improper conduct, the FCA also establishes its administrative body, the Fair Trading Commission (FTC). As is sometimes the case with new legislation, subsequent to a period of implementation requiring interpretation and practical use, it becomes apparent that certain provisions need refinement. Consequently, the Commission's staff has suggested an expanded definition of certain key terms in the FCA, such as, "goods" and "services" among others, in an effort to extend the FTC's jurisdiction to encompass areas which have, since our implementation, needed clarification.

One extremely crucial proposed amendment to the FCA, is the removal of the necessity to show that an enterprise's abuse of its dominant position has had or is having the effect of lessening competition substantially in a market. The Commission proposes to amend the sections to include the words "an enterprise shall not abuse its dominant position," thus eliminating the additional requirement of showing the significant impact on competition. In other words, the abuse of dominance will be sufficient to trigger sanctions.

The staff has also proposed suggestions which would affect the Commission's internal procedure, in an effort to distinguish actions by the Commission's staff as opposed to actions taken by the Commissioners themselves. These submissions were made to the relevant Ministry in January of 1996 and approval has not yet been granted.

II. Enforcement of Competition Laws and Policies

A. Anticompetitive Practices

1. Summary

Since the FTC's inception, it has received a total of one thousand eight hundred and ninety-four (1,894) complaints. Of this number, seventy-five percent (75%) or one thousand four hundred and eight (1,408) cases fell within the purview of the FCA. The other twenty-five percent (25%) were mainly matters of breach of contract or matters which fall for regulation by some other governmental agency. The majority of the complaints received by the FTC raise the issue of Misleading Representation (§ 37 of the FCA). This amounts to approximately fifty-seven percent (57%) of the total number of com plaints. Over the past three years the Commission has also received complaints alleging Price Fixing, Sale Above Advertised Price, Restrictive Practices and Double Ticketing. Of the total number of complaints received over the period September 1993 to August 1996, only two hundred and sixty-one (261) remain open. To the FTC's credit, this reflects a resolution/closure rate of approximately eighty-six percent (86%).

2. Significant Cases

As a matter of policy, the Commission attempts to resolve complaints through negotiation and ultimately, by way of out-of-court settlement. As a last resort, where the enterprise fails to co-operate with the Commission or where attempts to negotiate an amicable settlement regarding substantive issues have failed, the Commission takes the entity to Court.

a. Cases have gone to Trial on Procedural Issues
i) R v. Jovor Limited

In this matter, the FTC received a complaint alleging misleading representation. The company, Jovor Limited, was purported to have sold a defective product. The complainant was unable, after numerous attempts, to receive redress from the company. The staff attempted to intervene in an effort to amicably resolve the matter. However, its attempts met with resistance. This was brought to the Commissioners' attention, and as a result, a Notice of Examination was prepared and sent to the company.

The Notice was ignored , and as a direct consequence of this, the Commission felt it necessary to take the matter to Court, to publicly demonstrate the seriousness with which the FTC approaches the enforcement of its mandate under the FCA. Section 45 of the FCA gives the Court the power to impose a criminal sanction with regard to persons who fail to attend and give evidence at the request of the Commission. As the company insisted that it did not receive the summons and the Commission was unable to adequately refute that charge, no sanctions were imposed. Eventually, the company did comply with the FTC's request and the matter was settled.

ii) R v. Michael Vaccianna and the Caribbean Housing Finance Corporation (CHFC)

The staff of the FTC received a complaint from an Attorney who stated that she wrote to Caribbean Housing Finance Corporation (CHFC) and gave an undertaking to pay the outstanding balance on her client's mortgage account. The company's response was a refusal to accept an undertaking from her firm. On inquiry by the firm, the attorney was informed that her firm was not on the panel of attorneys from whom the company would accept undertakings.

The position of the Commission is that there should be some reasonable and ascertainable criteria for inclusion on the panel, and further, that such panels should be reviewed periodically. The staff of the Commission contacted CHFC by letter requesting information on the procedure (if any) used for formulation of such a panel. In addition, a meeting was held with representatives of the company, pursuant to a Notice of Examination.

At that time an undertaking was orally given by them to supply the staff of the Commission with the following information: (I) details of the procedure and criteria applied by the corporation for review of Panels of Attorneys, and (ii) details on the criteria for deciding whether an undertaking from an Attorney-at-Law will be accepted.

The Chairman of the company contacted the Commission to inform the staff that they were awaiting instructions from Counsel but would inform the staff of their position in two (2) weeks. No further response was received in that time and again the staff of the Commission contacted CHFC requesting that they apprise us of the position within five (5) days.

Still, the staff received no response and subsequently, a letter was written requesting a response within a set time. A response was subsequently received earlier this year after legal proceedings were instituted by the Director of Public Prosecutions for the company's failure to comply with the requests of the staff of the Commission in violation of sections 42 and 43 of the FCA. The matter is set for trial in March of next year.

b. Cases have been tried or filed in the Courts

i) FTC v. Air Jamaica Limited

The FTC received several complaints from members of the public alleging misleading representation, based on the company's non-disclosure of charges in addition to the quoted cost of the "Love-a-Fare" package. The staff's investigation revealed that there were charges, which were not told to the customers before they attempted to pay for the package. The FTC brought suit against Air Jamaica. However, the matter was settled before a determination could be made by the Court. Air Jamaica agreed that passengers who could prove that they traveled within the period that the "Love-a-Fare" package was offered, would be eligible for special upgrades on subsequent flights taken. Costs were also paid to the Commission.

ii) FTC v. Broadway

The FTC received a complaint alleging Misleading Representation based on a customer's inability to purchase, for the sale price, a particular item advertised by the company as being on sale. The staff's investigation revealed that in response to an advertisement, the complainant went to the store and inquired about the item only to be told that although it was prominently displayed in the advertisement, the item was not in fact on sale. A trial date was set but the company's attorneys expressed a desire to settle the matter. Negotiations have been unsuccessful and so the matter has been reset for trial in early 1997.

iii) FTC v. C.O. Jacks

In this matter, a housing scheme was advertised with an estimated date of completion. The completion date was changed several times and the purchasers were being forced to pay the penalties for the delayed completion date, in the form of price escalations. The Commission investigated and found that the company engaged in Misleading Representation as the completion dates given were not reasonable in the circumstances. A trial date was set but the defendant ultimately agreed to settle with the complainants out of court and to pay costs to the Commission. The Commission, for its part, removed the matter from the court list.

iv) FTC v. Moore's Transport

Moore's Transport contracted with a taxi driver for his services. A certain salary was agreed upon in exchange for those services. However, when the driver attempted to collect his salary, he was given only a portion of what he was promised. He was allegedly told that the remainder had to be taken in gas from a designated station. The FTC was made aware of these allegations and determined, after investigations, that this company's conduct was in violation of section 17 (2)(c) of the FCA which prohibits Tying Arrangements. The matter is set for trial in early 1997.

A number of matters investigated by the Commission have been the subject of national media coverage and public debate. They are:

v) The Baking Industry

The Commission initiated an investigation, sua sponte, to determine whether industry members were engaged in price fixing. While investigations revealed no concrete evidence of concerted action, it was somewhat disturbing to note that prices tended to be uniform. One explanation is our country's history. In other words, against the backdrop of Jamaica having been subject to a centrally planned economy for most of its economic history, most manufacturers set their prices by identifying the industry leaders and simply charging the same prices they do. The Commission determined that periodic review of this industry is necessary because although there is no direct evidence of conspiracy, the Commission would like to encourage members to behave in a more individualistic fashion and thereby stimulate competition within the industry.

vi) The Banking Industry

The FTC initiated an investigation of this industry when it was brought to its attention that documents issued by banks to their clients were not written in "reader-friendly language," so that the average consumer was not comprehending the crucial terms of the transaction being entered into. The FTC arrived at an agreement with the Jamaica Bankers Association covering the following areas:

Clarity in banking documents

It was agreed that a fact sheet in layman's language would be attached to the face sheet of all loan documents for individual consumers. The fact sheet would contain information that the average person would consider material. The sheet would detail, at the very least, the effective interest rate, whether or not there are prepayment penalties and the total amount of the loan.

The posting of the exchange rate

The banks would indicate whether or not these rates were opening rates only. In other words, the consumer should be put on notice if the rate stated could vary throughout the day. If that indication is not given, the consumer is entitled to assume that the rate given is the set rate and should be sold foreign exchange at that rate.

The advertising of interest rates

Where "add-on" rates are used, they will be designated as such. However, it was generally agreed that it would be more useful to state the effective rate of interest when advertising, as the add-on rate is deceptively lower. This will minimize confusion and the average consumer will be better able to compare rates among banks. The JBA and the FTC plan to continue dialogue as there are other issues which need to be addressed. These issues involve the use of panels of professionals which raises the spectre of tied arrangements which are illegal under the Act.

vii) Media Association of Jamaica (MAJ)

Prior to the advent of the FCA, media houses by means of the so-called Recognition Agreement, would pay a fixed commission and extend credit to only "recognized" agents. To be "recognized" an agent had to apply to the MAJ and satisfy it as to certain billing and other structural capabilities. Having been duly satisfied, the MAJ would then pay a fixed commission of 18% to that agency in addition to extending it a credit period for advertisements placed in the various media. Should the agency fail to pay its bills timely to even one media house, all media houses would deny that agency credit.

It was the view of the staff of the FTC that under the FCA those portions of the agreement were illegal. The collusion of the media houses to fix the amount of the commission, in the view of the staff, constituted both a conspiracy to restrain competition and price-fixing. Conspiracy was also apparent when media houses acted in concert to deny an agency credit. The very tone of the agreement was philosophically inconsistent with the newly-enacted free-market regime.

The unequal treatment of the unrecognized agents also invited the scrutiny of the staff, for while the MAJ could certainly put in place reasonable standards for recognition, it was anti-competitive to penalize media houses who chose to extend credit and pay commissions to those agents who did not happen to meet those standards. It is beyond cavil that commercial entities must not be deprived of their ability to engage in independent decision-making vis-a-vis trading partners.

In light of the staff's views, the MAJ entered into negotiations with a view to arriving at a form of Agreement which would not offend the terms of the FCA. The parties developed a Recognition Agreement which conforms to the terms and spirit of the FCA. The MAJ has agreed, as part of the settlement with the FTC's staff, that it would institute a 90-day period for the processing of applications for recognition and, should an application be denied, that denial may be appealed to a three-person panel unconnected to the media.

Also under the new arrangement, there would now be the possibility of provisional recognition where an agency, new to the marketplace, would nonetheless be afforded the legal benefits of a recognized agency. Provisional recognition would automatically expire at the end of one (1) year, at which point the agency could apply for full recognition.

viii) John Crook Limited

Acting on complaints which alleged that John Crook misled their customers by selling 1989 Ladas to the public as 1993 vehicles, and 1993 Subaru Justys as 1994 models, the FTC was able to broker a settlement in favour of the complainants. The settlement package arrived at saw the company paying out a total of approximately four million dollars ($4,000,000) to complainants who had purchased the automobiles in question. The company was made to pay the difference between what the car should have been worth as opposed to what was actually charged at the time of purchase.

ix) Caribbean Cement Company (CCC)

A complaint was made against CCC charging that its practice of constantly raising prices was an abuse of its dominant position. The Commission retained an outside consultant to examine the company's business practices in order to ascertain whether or not the price increases resulted from inefficiency or were otherwise justifiable.

The Consultant opined that there was an under-utilization of assets and that the company was not taking advantage of modern technology available in the marketplace which could substantially increase its efficiency. He further advised that major capital expenditure would be required to effectuate improved productivity which would hopefully lower cost in the long run. The upshot would be a lower price to the consumer.

The company did not completely agree with the consultant's findings but overall was amenable to reviewing its operations. Given that undertaking, the Commission decided to suspend its investigation but has continued to monitor the company's operations.

x) National Water Commission

The FTC's staff investigated this state corporation seeking to determine whether the company was abusing its dominant position by passing on its inefficiencies to the consumers in the form of increased rates. Evidence of abuse was found by the staff. Eventually, the staff and the company arrived at an agreement, wherein the company agreed to the Commission's continuous monitoring of its operations. Additionally, the Company assumed the duty of providing the Commission with quarterly reports regarding the implementation and progress of certain programmes in the many areas of weakness that were identified, namely, meter replacement, leak detection and repair, revenue enhancement, collections, operational strategies: including the billing cycle and standpipes, preventative maintenance and plant improvement, and cost reduction strategies.

xi) Petroleum Corporation of Jamaica

This state monopoly was investigated because it was alleged that the company was engaged in unfair pricing. The Commission's investigation revealed, however, that although the company was indeed a monopoly (it being the only oil refinery in the country) it was not dominant as that term is defined by the FCA. The latter defines a dominant company as one being able to act unconstrained by competition. Given that there is potential competition from existing marketing companies, the company's conduct is being constrained. In other words, the present company is mindful that if prices are raised beyond a certain level, others will enter the market. That forces them to keep their own prices competitive. The investigation was terminated.

B. Mergers and Economic Concentrations

Economic concentrations are analyzed under the FCA in terms of dominance. However, an enterprise that is found to be dominant without more has not breached the FCA. An enterprise must, by its conduct, abuse its dominant position in such a way that the conduct has had or is likely to have the effect of lessening competition substantially in the marketplace. (Please see comment on the issue, supra.)

There is no requirement that the Commission be notified prior to the occurrence of a merger. This is contrary to what occurs in most countries but Parliament felt, when drafting the law, that the country's limited economy did not justify such a requirement, and indeed might have a chilling effect on investment.

1. Summary

Between September 1993 and August 1996, abuse of dominance cases represented approximately 1.7 % (or 34 complaints) of the total number of complaints received. Of the thirty-four (34) complaints, fourteen (14 or approximately 40%) of those were lodged against Telecommunications of Jamaica (TOJ). This, now privately owned, provider of telecommunications services was once controlled by the government. In developing countries, over the past two (2) decades, a trend has developed where state-owned enterprise holdings of key natural resources and infrastructure are being privatized.

As part of its divestment package, the private company, that is now TOJ, was granted a twenty-five (25) year exclusive license for the provision of certain essential telecommunications services. Constrained as the Commission is, by the FCA, which places "activities expressly approved or required under any agreement to which Jamaica is a party" outside of the FTC's jurisdiction, it has still managed to extract from the TOJ, agreements intending to, as much as is possible within boundaries of the license, promote competition within the market for the remaining telecommunications services.

The Commission often receives complaints concerning certain state-owned essential services like the potable water, and electric utilities but as those entities have not been privatized the FTC can only recommend changes and monitor their activities.

2. Significant Cases

Only two complaints alleging abuse of dominance have gone to trial.

a. Jamaica Stock Exchange v. FTC

The FTC received a complaint against the Jamaica Stock Exchange (JSE) alleging that its conduct amounted to an abuse of its dominant position in the marketplace. After investigating, the staff determined that the JSE's method of pricing its shares and other requirements for membership did constitute an abuse of its dominant position and proceeded to submit a complaint to be heard by the Commissioners.¹ The JSE is the only Stock Exchange in the country, and as such, its requirements were considered by the staff to be anti-competitive as it restricted unduly the number of possible entrants to the JSE.

For its part, the JSE contends that it falls for regulation only by the Securities Commission. The Securities Act, however, does not address competition issues and, therefore, it is the position of the FTC that at best both agencies exercise concurrent jurisdiction over JSE. The matter is currently before the courts.

b. FTC v. Telecommunications of Jamaica Limited (I)

After an in-depth investigation, the staff of the FTC determined that Telecommunications of Jamaica Limited (TOJ) imposed an unjustifiable access charge on its Internet users which amounted to an abuse of its dominant position in the market for telecommunications services. As a result of this, the staff lodged a complaint before the Commissioners.

TOJ brought suit against the FTC in the Supreme Court of Jamaica claiming that the Commission lacked jurisdiction because, inter alia, TOJ enjoyed certain privileges by virtue of the All Island Telephone License of 1988, an exclusive 25 year license for the provision of certain telecommunications services. This license was granted by the Government under the Telephone Act, and the FCA precludes the FTC's intervention into "treaties or agreements to which Jamaica is a party" (§ 3(f) FCA). The Court did not have an opportunity to rule on the matter as the matter settled out of court almost as soon as it began. The company agreed to roll back its charges until it received approval from the relevant Minister regarding the increase. The license requires Ministerial approval prior to rate increases.

Other abuse of dominance investigations which have not gone to court, have nonetheless been the subject of national media coverage and public debate.

c. Telecommunications of Jamaica Limited (TOJ) (II)

Following negotiations between the TOJ and the FTC, an agreement was reached whereby TOJ's residential customers were allowed to connect certain compatible equipment to the TOJ network for a reasonable price. Prior to the FTC's intervention, this had not been the case. The consumer was required to purchase all equipment from TOJ and if TOJ did not have the item in stock thereby necessitating its purchasing elsewhere, the customer was still required to pay a rental charge to TOJ. The FTC took the position that TOJ's conduct constituted an abuse of dominant position in the market for telecommunication services. TOJ agreed to the interconnection of residential equipment without admitting liability.