The Independent Consumer and Competition Commission (ICCC) wishes to inform key stakeholders and the general public that the ICCC has granted Authorization to Air Niugini Limited (Air Niugini) to enter into and give effect to a code-share agreement with Fiji Airways Limited on the Port Moresby (PNG) to Nadi (Fiji) route via Honiara.
ICCC Commissioner and Chief Executive Officer, Mr. Paulus Ain said that on the 14th December, 2017, the ICCC received an application for Authorization from Air Niugini for it to enter into and give effect to a code-share agreement with Fiji Airways for a period of three years.
“The application was made pursuant to Section 70 of the Independent Consumer and Competition Commission Act 2002 (ICCC Act). This code-sharing arrangement is the first between Air Niugini and Fiji Airways since their existence. Air Niugini will be operating the services between Port Moresby and Nadi.” Commissioner Ain said.
In assessing this application, the ICCC conducted a wider public consultation. The ICCC also released its Draft Determination for public and stakeholders’ comments on its assessment of the application and its reasoning for its proposed decision. The views of industry participants as well as other interested stakeholders were taken into consideration in finalising this Determination.
Commissioner Ain said: “The ICCC has considered the principal market to be the market for the provision of air passenger services between Port Moresby and Fiji. It is also considered that the services from Australian ports to Fiji may have some competitive pressure on the principal market. For the purposes of assessing this application, the ICCC has considered the relevant market is the provision of regular air passenger services between PNG and Fiji, in particular, the Port Moresby and Nadi ports.”
Currently, only Air Niugini is servicing the Port Moresby/Nadi (POM/NAN) route (via Honiara). Therefore, the ICCC believes this code-share arrangement would provide an opportunity for another carrier in Fiji Airways to enter the market through partnering with Air Niugini; and eventually grow its market share on the route; and may enter into a more competitive form of code-share arrangement or enter the market as an independent carrier.
In its assessment of the public benefits this code-share is likely to generate, the ICCC has considered that the following would be achieved in the long run:
- Travellers’ choice of marketing carriers would be increased (from one to two as currently it is only Air Niugini);
- The arrangement would develop the route and make Port Moresby as a transit hub for passengers from New Zealand, United States, Honiara, Fiji and other Pacific Island nations to Asia and vice versa. This would increase traffic volume through Port Moresby and make it possible for more frequent services therefore, reducing passenger flight times to Asian destinations. This outcome would also lead to cheaper fares in the long run as a result of increased passenger volumes;
- The possibility of Fiji Airways (and other Pacific carriers) to enter PNG market independently after growing its market share on this route; and
- Provision of direct and increased frequency services.
Besides other likely detriments that may result from this proposed code-share, the ICCC also noted that the ‘free sale’ code-share arrangement does not promote strong competition between the code-share partners.
Hence, to minimise any potential anti-competitive effects and other related detriments to the public, the ICCC has imposed certain conditions to the Authorization. Amongst others, the following are the key conditions;
- Air Niugini must price and sell its code-share services independently of Fiji Airways;
- Air Niugini must revise its wholesale prices offered to Fiji Airways down once profitability is reached through increased passenger and freight volumes;
- If, during the period of the Authorization, either of the parties increases airfares excessively without any valid justification on the code-share services, the ICCC will review the Authorization, pursuant to Section 80 of the ICCC Act, as such events may undermine the likely public benefits that this Authorization is based upon. The ICCC will then consider whether the balance between public detriment and public benefit still favours net public benefit;
- Air Niugini is to submit annual code-share passenger and freight traffic volume reports to the ICCC, for the POM/NAN route; and
Commissioner Ain said: “Overall, the ICCC is satisfied that this code-share will result in more benefits to the public outweighing the potential detriments to competition in the market and other detriments. The ICCC therefore granted Authorization for a period of three years.
The Independent Consumer and Competition Commission (ICCC) has recently become aware of the proposed merger between Majestic Food Corporation Limited and Frabelle (PNG) Limited through a report in The National newspaper dated 14th May, 2018.
As part of its competition role, the ICCC has informed the parties to this proposed transaction that Section 69 of the Independent Consumer and Competition Commission Act 2002 (ICCC Act) prohibits business mergers or acquisitions that would have, or would be likely to have, the effect of substantially lessening competition in a market in Papua New Guinea.
However, Section 81 of the ICCC Act allows for the parties to seek Clearance from the ICCC. Alternatively, Section 82 of the ICCC Act allows the ICCC to grant Authorisation to parties should the ICCC form a view that the proposed transaction would result in net public benefits despite its likely harm to competition.
A Clearance or Authorization from the ICCC safeguards the transaction from being challenged for potential breach of Section 69 of the ICCC Act by aggrieved third parties.
ICCC Commissioner and Chief Executive Officer, Paulus Ain said that although notifications for Clearance and Authorization are currently voluntary, the ICCC can investigate any business acquisitions in any market(s) in PNG should it form a view that the business transaction may have harmful implication(s) to competition.
“It is therefore, prudent that the parties seek either a Clearance or an Authorization from the ICCC, to protect this proposed transaction from future investigation and potential litigation action under the ICCC Act.” Mr. Ain said.
“In view of the above, the parties are requested, as responsible corporate citizens, to formally seek Clearance under Section 81 of the ICCC Act. If a valid Clearance application is submitted, the ICCC will review and give a decision within 20 days after the date of receiving and registering the application.”
The ICCC welcomes the Government’s recent decision to extend the deadline for SIM card registration by another two and a half months to July 31.
ICCC Commissioner and Chief Executive Officer, Paulus Ain said that the ICCC was encouraged by the fact that the Government and the Minister for Communications, Information Technology and Energy, Hon. Sam Basil share the same concerns that consumers in the rural and remote parts of PNG would have been adversely affected because they, for some valid reasons, may have not been able to register their SIM cards to date.
Commissioner Ain said: “The ICCC understands that registration of SIM Cards still require people to personally appear and present identification documents in order to register/purchase a SIM card. The majority of Papua New Guineans live in villages in far and remote places to nearby towns, and a significant number of our people do not have basic identification documentation like birth certificates, National Identification Cards, Passports, drivers licenses, school ID cards or other acceptable forms of identification. However, these same people have utilized and benefited from the advancement of telecommunications in their locality through the use of mobile phones.”
“We also welcome Minister Basil’s call for all telecommunications service providers Digicel PNG Limited, BeMobile-Vodafone and Telikom PNG Limited to comply and undertake this SIM cad registration and to work with NICTA and the PNG Council of Churches in this process.” Commissioner Ain said.
“The ICCC supports this call and maintains the view that these operators have a commercial incentive to act; including a moral obligation not to leave anyone behind from the SIM card registration exercise.”
“Given the new deadline for registration of SIM cards the ICCC is also urging consumers in rural PNG to contact their mobile service providers to find out how they can register their SIM cards at a location nearest to them; and to show up at designated registration locations.”
Commissioner Ain has assured that the ICCC will continue to meet with NICTA, the telecommunications service providers, and the Department of Information and Communication to support their efforts where necessary to ensure consumers with mobile phones in rural PNG are provided an opportunity to conveniently have their SIM cards registered.
The Independent Consumer and Competition Commission (ICCC) wishes to inform participants in the telecommunications industry, key stake holders and the general public that the ICCC has granted Authorization to allow the proposed merger of Telikom PNG Limited (Telikom) and PNG DataCo Limited (DataCo) to proceed.
KCHL and Telikom jointly applied to the ICCC for Authorization to proceed with the Proposed Merger of DataCo and Telikom. The application was lodged on 05th April, 2017. KCHL also applied for Clearance together with this Authorization application; but subsequently withdrew it. As a result, the review of this Authorization application did not proceed until on 30th January, 2018, when KCHL formally advised the ICCC to recommence the assessment of its Authorization application.
ICCC Commissioner and Chief Executive Officer, Paulus Ain said this decision relates to the Authorization application.
Authorization is a statutory process under the Independent Consumer and Competition Commission Act 2002 (“ICCC Act”) that allows a business to seek exemption to proceed to engage in a business conduct that may otherwise raise competition concerns for the ICCC such as the acquisition of assets or shares of another business that would seriously harm competition.
Commissioner Ain said, “The Authorization test is that the net benefits to the society must be greater than the detriments likely to result from the conduct subject of an Authorization application; in this case the Proposed Merger of Telikom and DataCo”.
“The ICCC may grant Authorization for the Applicants to proceed with the merger if it is broadly satisfied that the benefits will result, or will be likely to result, from it will outweigh any detriments to the community.”
Commissioner Ain further said that the proposed merger has been carefully considered consistent with these requirements and it has been conducted through a transparent consultation process by seeking the views and comments from industry participants, players, stakeholders and the general public. Based on this thorough process and the ICCC’s own independent assessment of the telecommunication’s industry market, the ICCC has considered that the Proposed Merger will affect the following relevant markets:
- The market for provision of international data transmission and connectivity which supports dark fibre, bit-rate and managed data services (that is, all three layers 1, 2 and 3 services);
- The market for provision of domestic data transmission and connectivity which supports dark fibre, bit-rate and managed data services.
In its consideration of the likely effects on competition if the Proposed Merger proceeds, amongst others, the ICCC has formed the following conclusions:
- the ICCC considers that, although DataCo may be an “insignificant” player now, it can be a sustainable and effective competitor in the future, should sufficient investment is made in it hence it is considered that this merger will eliminate a potential competitor;
- the ICCC also considered that the barriers to entry are high, hence the market position of the merged firm would be greatly enhanced because it would control the essential network infrastructures currently available in PNG;
- although satellite is an available substitute, usage of fibre optic cables is a more efficient and better means of carrying traffic because it significantly reduces signal latency for voice calls and its bandwidth can be more easily enhanced over time;
- the ICCC also considered that there is a real likelihood of the merged entity engaging in discriminatory pricing. However, the ICCC and NICTA has agreed to work together to address this concern. Appropriate regulatory measures will be put in place to address this concern.
In its consideration of the likely public benefit claims, the ICCC took into account submissions and comments from stakeholders and interested parties. The ICCC has concluded that the following benefits will result from the Proposed Merger, should it proceeds:
- Potential for increased price competition and consequent retail price reduction to end users;
- Innovation and increased investment in new technology, hence the technical knowledge and skills gained by national employees;
- Improved backhaul networks and greater access to the use of backhaul networks for retail operators which will benefit the end users of data and voice services;
- Improved economic activity and efficiency for the parties in the long run; and
- As a result of more aggressive competition in retail service offerings, there will be greater penetration of higher bandwidth data and voice services into smaller towns and rural locations which is currently enjoyed as a near monopoly by Digicel (which provides services at a lower bandwidth).
As mentioned, the Authorization test is that, the overall benefits from this acquisition must be greater than the detriments (which includes the substantial lessening of competition). If so, then the ICCC must grant Authorization.
Commissioner Ain said that the ICCC has also concluded that the Proposed Merger, if it proceeds, will result in some serious detriments in substantially lessening competition and waste of public funds if the claimed benefits and efficiencies are not realized post-merger.
Weighing the likely benefits to the community against the potential detriments (which includes substantial lessening of competition), the ICCC has considered that there are considerable benefits to the community that will result from the merger.
To minimize potential anti-competitive discrimination and restriction of access to essential network infrastructures, bring greater efficiency benefits into the telecommunication industry, and ensure that the benefits of this transaction outweigh any detriments, the ICCC wants to see that there is sufficient access readily available to incumbents and potential new entrants who have network or ISP licenses and require wholesale data transmission services. Hence, potential new entrants may enter the market and provide sufficient competition against the incumbents; hence the realization of the benefits.
Commissioner Ain said the ICCC is working with NICTA to ensure appropriate conditions are imposed to ensure access to essential infrastructures are readily available to potential new entrants. KCHL has also agreed to ensure third party access is not unnecessarily restricted or denied.
This Authorization does not limit the ICCC in taking appropriate remedial actions in the event that, in future, the merged entity engages in any anti-competitive behavior.
Based on the above considerations the ICCC has granted this Authorization for the Proposed Merger to proceed.
The Independent Consumer and Competition Commission (ICCC) held a media conference today to provide information and clarify certain misconceptions by certain parties regarding the ICCC and ICCC’s economic regulation of the Electricity Industry.
ICCC Commissioner and Chief Executive Officer Paulus Ain said it was critical that any misrepresentation of facts and misconceptions of the regulation of the Electricity Supply Industry in PNG are corrected and assured all concerned clients and consumers that the implementation of economic regulation has remained effective and sound, relevant even when the electricity industry was having challenges.
Commissioner Ain said one of the major misconceptions is the tariffs applied by PNG Power Limited (PPL).
Commissioner Ain said: “The electricity supply industry in PNG is a vertically integrated monopoly. In 2011, the Government developed the Electricity Industry Policy (EIP) which recommended for competition in the generation sector of the electricity industry. This allowed Independent Power Producers (IPP) to compete with PPL however because PPL has an exclusive rights within 10kms radius of its transmission network, most of the IPPs had to enter into Power Purchase Agreement (PPA) with PPL to supply power for general consumption.”
Commissioner Ain added that since 2011, there are eight licensed electricity undertakers including PPL operating in the country. Of these, five are IPPs generating and supplying power to PPL. These IPPs are; ExxonMobil PNG Limited, Posco Daewoo Limited, PNG Forest Products Limited and New Britain Palm Oil Limited and Daewoo PNG Power Limited.
“During the Regulatory Contract Review undertaken by the ICCC in 2012, the findings recommended tariff increases for PPL to have PPL met its cost of operation, investment, perform competitively in the market and deliver better services to the people of PNG. These tariffs were to take effect in 2013.” Commissioner Ain said.
“The Government however made a decision in 2013 to stop PPL from increasing the electricity tariff. This decision to freeze the tariff increase has been in effect since the second quarter of 2013. PPL still has the prerogative to request the Government to rescind its decision if it feels that the tariff freeze is burdening PPL’s financial performance.”
In 2015, a mid-term review of PPL’s Regulatory Contract revealed that most of the capital projects that were planned for implementation by 2015 were not achieved. Further review of the Industry by the ICCC in 2017 also showed that PPL was yet to implemented most of its capital projects allowed for under the 2013 to 2017 Regulatory Contract.
In light of the Government’s decision to freeze tariff increase since 2013, PPL was unable to charge electricity services on cost reflective basis subsequently PPL was not able make reasonable returns to implement the planned projects.
Third Party Access (TPA) Codes and Grid Codes are administered by ICCC and basically provide guidance to power producers in terms of pricing and technical aspect of the commercial arrangements are competitive, least-cost reflective and ensure international best practice.
Commissioner Ain said that despite of set-backs from the tariff-freeze issue, the regulatory framework overseen by the ICCC through the use of TPA Codes, Regulatory Contract and Licences, amongst others have remained fruitful with the introduction of competition within the generation segment of the electricity industry.
“The ICCC has ensured that the economic regulation of the industry remained relevant and in-tuned with the prevailing market conditions. Hence the economic regulation of PPL and Electricity industry has been implemented effectively.”