The Impact of Competition Law on Bahraini Telecom Operators

22 Jun 2022

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:

  • Legislation Decree Number 48 of 2002 declares the Telecommunications Act ("Telecom Act")
  • Resolution Number 17 of the Telecommunications Regulatory Authority for Issuance of Restrictions on Telecom Service Consumers (Rules 2017). 
  • Law Number 13 of 2018 for the issuance of Competition Promotion and Protection Act (Competition Law)
  • Resolution Number 72 of 2019 on Economic Concentration Transaction by the Ministry of Industry, Commerce, and Tourism (Rules 2019)
  • M&A Regulations were issued on 24 September 2004. 


Anti-Competitive Conduct

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,

  • They cannot abuse their dominant position in the market or its significant segment,
  • They cannot terminate any agreement, adopt any compromised system that engages in, understands, or physically prevents, restricts, or distorts market competition, and
  • They cannot lead to anti-competitive changes in the market structure, especially anti-competitive mergers and acquisitions in the sector of telecommunications. 


Service providers are subject to competition law that covers more specific restrictions. According to Article 3, they cannot:

  • Influence the price of the product, subject of the transaction, by way of increase, decrease, fixed, simulated or imaginary transaction or any other form;
  • Control production or marketing, technological development or investment, or any of these;
  • Stock markets or supply sources;
  • Intentionally publishing wrong information about products and their prices; 
  • Involve in match-fixing bidding, tenders, auctions, or Mumarasa, and influence the price of offers to buy and sell products;
  • Generate a rapid abundance of products that trade at unrealistic prices that affect the rest of the competitors; and
  • Collaborate to prevent or impede the activities of a particular organization or to refuse to buy, sell or distribute from it.


Abuse of Dominant Position

  • If a service provider dominates the telecommunications sector, under Article 9, they are barred from:
  • Direct or indirect imposition of prices for sale and purchase, or other trade terms;
  • Causing harm to consumers by restricting production, markets, or technological development, 
  • When their contract positions with suppliers or customers are similar, it discriminates in any type of contract or agreement, regardless of price, product quality, or other terms of the transaction;
  • Suspends the conclusion of a contract relating to a product on the condition of acceptance of obligations or products not related to the subject of the original contract; 
  • Terminate a contract with any firm for the sale or purchase of a product at a price lower than the original price, without reasonable justification;
  • Suspending a transaction completely with another entity that excludes a competing entity from the market or causes losses that prevent them from continuing their operations.


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.


Economic Concentration

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:

  • Merging of two or more independent entities, or
  • Either an institution or a person controlling an institution also exerts direct or indirect control over the institution, or
  • Where a joint venture aims to perform all the functions of an independent institution.


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.


Merges and Acquisitions Regulations 2004

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.


Consumer Protection and Regulatory Action

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:

  • Publish fair, honest, and accurate advertisements that do not mislead or confuse any customer, directly or indirectly,
  • Disclosure of all terms, conditions, and information before the sale or at least indicate "Terms and Conditions apply" or another sentence thereon,
  • Inform customers in advance where the price of the product or service depends on the purchase of another product or service,
  • Avoid prejudice against race, religion, gender, politics, etc., and
  • Avoid exploitation of ignorance or inexperience of the customers.


Misleading Advertising

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.