The telecommunications sector in the Kingdom of Bahrain has viewed significant progress over the past two decades, and it is necessary to provide a background to the history that preceded it. The first telecommunications company the Batelco was established in Bahrain in the year 1981, and until 2003 Batelco enjoyed its monopoly in the sector when the Telecommunications Regulatory Authority (TRA) was established by Decree Number 48 of 2002 on the enactment of Telecommunication Law granted a license to Zain to operate in the Kingdom. The three main telecommunications operators currently employed in the Kingdom are Batelco, Zain, and STC (a subsidiary of the Saudi STC Group). The mobile market share of these operators in the first quarter of 2021 was 37%, 28%, and 35% respectively.
Over the past two decades, to safeguard fair competition between the operators five laws and regulations have been enacted, out of which four are aimed at telecom service providers. These laws are:
Service providers are barred from engaging in anti-competitive activities. This means that they are not allowed to do anything that physically hinders, controls, or distorts the competition.
According to Article 65 of the Telecom Act,
Service providers are subject to competition law that covers more specific restrictions. According to Article 3, they cannot:
Obtaining a dominant position is not a crime in itself, but the abuse of that position by imposing a plundering price, for example, would be tantamount to abuse of that position. However, in practice, with the aggressive competition in the industry, it is unlikely that one of Bahrain’s service providers will involve in such pricing tactics, as customers can freely change to another telecom operator.
Mergers and acquisitions in the telecommunications industry can have unfortunate effects on other service providers, such as gaining a dominant position, which is why Competition Law and the Regulations in 2019 seek to control activities that lead to economic concentration.
According to Article 11 of the Competition Law, economic concentration arises when there is a change in control due to:
According to Article 2 of the Regulations 2019 and Articles 12 and 13 of the Competition Law, service providers must attain approval from the Competition Authority by requesting at least 30 days before the commencement of the transaction.
The application must include a Memorandum of Association of both Institutions, a transaction agreement equivalent to financial concentration, financial statements of both firms for the past two years approved by a licensed auditor, a list of all the shareholders and partners of each firm, and the shares held by them, and a report that illustrates the positive impact of the transaction.
On September 28, 2004, the Telecommunications Regulatory Authority (TRA) published the merger & acquisition rules applicable to the telecom industry. Under the legislation, service providers are obligated to report to the TRA when a transaction in question is a “qualified transaction” within the meaning of Article 1, and that BHD300 must be provided in the manner envisaged in Article 2.
Service providers need to be vigilant with their activities not only of other competitors in the industry but also with their businesses directly aiming at customers. In a protective position, the 2017 Regulations are intended to allow consumers to make rational and informed decisions. This section outlines the key responsibilities of service providers under the Regulation.
Due to the general responsibilities executed under Article 6 (1), they are bound to do the following:
Article 11 forbids the use of terms such as “free” or “unlimited” which misleads the customers. This falls within the limit of Article 6 (1) and is already subject to governing action and therefore requires attention.
An advertisement may be misleading under the Regulations of 2017, which contain information, announcements, or video representations that may mislead or deceive the customer directly or through hints about the product or service. Service providers can mislead customers in several ways such as by using disclaimers, as well as by using sales points such as “free” or “unlimited” and many other ways.
If a service provider violates the competitive provisions of the Telecom Act, the TRA may, under Article 65 (f), impose a penalty on the service provider not exceeding 10% of its annual revenue and instruct the service provider to either do or stop doing something to resolve the violation of this Article.
Violations of the Regulation of 2017 are based on misleading advertisements by a service provider. When the right to impose a fine is reserved as stated above, the TRA may request the service provider to withdraw the advertisement, change it as per the decision or amend the Arabic version of the advertisement to ensure that it is compatible with the English version, or vice versa. If you need any legal assistance you can reach out to the well-qualified lawyers at Fotis International Law Firm.