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Guidelines
MALAYSIAN COMMUNICATIONS
AND MULTIMEDIA COMMISSION
GUIDELINE ON DOMINANT
POSITION IN A COMMUNICATIONS MARKET
RG/DP/1/00(1)
| 5. |
Policy objectives for the
determination of dominant position
| 5.1 |
The establishment and maintenance of competitive
communications markets is closely related to many of the objectives above. The Commission's
powers under the provisions of the Act (sections 137 to 139) which deal with a dominant
position are potentially a powerful instrument for this purpose. These powers go
beyond the general competition provisions of Sections 133 to 136 of Chapter 2 of
Part VI of the Act. They are designed to address situations where the market power
of licensees is so extensive that competitive processes are incapable of restraining
their conduct in a communications market. In these cases intervention is necessary
in order to achieve effective competition. |
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| 5.2 |
The Commission has adopted this view because
the objectives of economic regulation, as set out in the Explanatory Statement, include
the promotion of competition. The Commission's view is that this includes
action to remove impediments to competition where market conditions such as the dominant
position of a licensee in a communications market may prevent the natural development
of competition. |
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| 5.3 |
Although the dominant position of a licensee
is qualitatively different from the possession of market power, the two concepts
are closely linked. A dominant position reflects a degree of market power so great
that its possessor can operate largely independently of its competitors and customers.
Market power alone does not necessarily confer this independence. |
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| 5.4 |
The Act provides for the Commission to direct
a licensee in a dominant position in a communications market to cease conduct which
has the effect of substantially lessening competition. This "effect" test
sets a different trigger for Commission intervention than the "purpose"
test of section 133. The Commission therefore need not prove the intention of the
dominant licensee. This test is needed to address the greater potential for a dominant
licensee to inflict harm upon the extent of competition in the marketplace, even
where such harm is unintentional. |
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| 5.5 |
In this situation, only direct regulatory
intervention can protect the interests of end users and ensure the ultimate development
of competitive markets. The Commission will exercise its power to determine the dominant
position of a licensee in a market where it considers that such intervention is likely
to facilitate the achievement of the objects of the Act, particularly the objective
of competitive communications markets. |
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| 5.6 |
As a dominant position is eroded by the combination
of regulatory intervention and competitive rivalry, it will be appropriate for the
Commission to re-examine the relevance of a determination of a dominant position.
This will occur by means of the revocation of the original determination of a dominant
position under section 56 of the Act. |
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| 6. |
Proposed analytical process
The Commission proposes to adopt the following three-step approach in determining
whether a licensee is in a dominant position in a communications market. This approach
will provide clarity and transparency to the process of determination, and ensure
consistency in the consideration of issues related to the dominant position of a
licensee. It is to be noted that this process as defined is intended as a conceptual
and analytical framework within which evidence can be organised. While it identifies
areas of evidence which are relevant to the case in question, the Commission may
be constrained by the extent of evidence available. The objectives and details of
this process are illustrated in the Exhibit 1.
Exhibit 1 Proposed analytical framework for determining
dominant position
| 6.1 |
Define the Context
| a. |
This step requires an initial assessment of
the relevance of the "dominant position" criteria to the issue or situation
at hand, prior to conducting a full assessment under section 137. The Commission
will consider matters such as the purported importance of the issue or situation,
the circumstances in which it has arisen (including whether a complaint has been
made, and by whom), the likelihood that Commission intervention is required to address
it, and the likelihood that the benefits of intervention will outweigh the costs. |
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| b. |
The determination of whether a licensee is
dominant in a communications market arises only in the context of section 139, although
a range of consequences may flow from such a determination in other sections. |
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| c. |
The matters that the Commission will consider
when defining the context for a process of determining whether a licensee is dominant
include:-
- the initial likelihood that the licensee
will be found to be in a dominant position;
- whether any person has informed the Commission
of any loss or damage allegedly due to conduct by a dominant licensee;
- whether such conduct has ceased or is
continuing, and whether the conduct is likely or unlikely to recur;
- whether the relevant market is significant
from the perspective of the objects of the Act;
- whether the likely benefits of Commission
intervention outweigh the likely costs of intervention; and
- whether the licensee is willing to give
an appropriate undertaking regarding its conduct in the market.
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| d. |
The Commission may seek an undertaking from
a licensee rather than proceed to a full determination of whether the licensee is
in a dominant position in the relevant market. Any such undertaking will be proportionate
to the nature and effects of the conduct under examination. The Commission will normally
only consider such a course if it is satisfied that an undertaking can address the
issues raised by the market power of the licensee. The lodgment of such an undertaking
would not prevent the Commission from making a subsequent determination that the
licensee was in a dominant position in the relevant market, but this would normally
only occur where an undertaking had not been met or if new issues arose which the
undertaking did not address. |
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| 6.2 |
Communications market definition
| a. |
Assessing whether a licensee is dominant in
a communications market crucially depends on the definition of the relevant market.
As a basis for market definition, the Commission will carefully identify the relevant
services which are exchanged in that market. This identification will include consideration
of factors such as service functionality, quality, price, inputs, costs, and principal
customer groups, all in the light of the purpose to which the service is being put
by customers. |
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| b. |
The Commission's criteria for identification
of a communications market has been extensively discussed in the Commission's Guideline
on Substantial Lessening of Competition. The Commission will have regard to the view
it developed in that Guideline in identifying markets for the purpose of determining
whether a licensee is in a dominant position. |
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| c. |
The Commission notes that the Act defines
a communications market to be an economic market for:-
- a network service;
- an applications service;
- goods or services used in conjunction
with a network service or an applications service (eg., television and telephone
equipment, or billing services); or
- access to facilities used in conjunction
with a network service or an applications service.
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| d. |
A market definition within this framework
reflects the emergence of network facilities, connectivity and applications markets.
Determination of market boundaries involves the use of the economic concept of "substitutability"
as the basis for market definition within the definitional framework of the Act. |
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| e. |
The Commission shall have regard to the wider
market for services which are substitutable (or potentially substitutable) with networked
services (eg., postal services). The relationship between the activities under the
Commission's jurisdiction (and therefore potentially subject to licensing) and the
wider services markets which it shall have regard to, is illustrated in the Exhibit
2:-
Exhibit 2 Market and services structures in the
convergence sector |
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| f. |
This structural approach to market definition
is characteristic of the Malaysian "convergence" regulatory system. As
a consequence, precedents drawn from "dominance" regimes in other jurisdictions
must be used with care. While the concept of a dominant position is generally understood,
it must now be applied across a new set of market definitions. Licensees who might
be regarded as dominant in a narrowly defined market may face significant competitive
threats, now or in the foreseeable future, as convergence enlarges markets and brings
traditionally separate industry operators into competition. |
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| 6.3 |
Assessment of a "Dominant Position"
Once the market has been defined, the Commission will determine whether a particular
licensee is in a dominant position in that market. |
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