The fundamental purpose of competition law is twofold: it seeks to encourage a dynamic economy and to enhance consumer welfare by promoting competition and controlling practices that could restrict it. The telecommunications sector is no exception to the need for competition regulation, and the end consumer's interests is underscored by the fact we all rely on telecom services in daily life.

The telecommunications sector in Bahrain has witnessed significant developments in the past two decades, although it is necessary to provide a backdrop its history prior to that. In 1981, Bahrain's first telecommunications company was founded, Batelco, which enjoyed its monopoly in the sector until 2003, when the Telecommunications Regulatory Authority (TRA) (established by Legislative Decree No. (48) of 2002 Promulgating the Telecommunications Law) granted MTC Vodafone (today operating as Zain) a license to operate in the Kingdom. Today, three major telecommunications operators exist: Batelco, Zain and stc (a subsidiary of the Saudi stc Group). As of Q1 2021, their mobile market shares are 37%, 28% and 35%, respectively.

In the past two decades, five laws and regulations have been enacted to safeguard fair competition, and four of these are targeted at telecom service providers. These are:

  • Legislative Decree No. (48) of 2002 Promulgating the Telecommunications Law (“the Telecom Law”)
  • Resolution No. (17) of 2017 by the Telecommunications Regulatory Authority on the Issuance of the Regulations for the Protection of Telecom Service Consumers (“2017 Regulations”)
  • Law No. (31) of 2018 on the Issuance of the Competition Promotion and Protection Law (“Competition Law”)
  • Resolution No. (72) of 2019 by the Ministry of Industry, Commerce and Tourism Regarding Economic Concentration Transaction (“2019 Regulations”)
  • Telecommunications Mergers and Acquisitions Regulation issued on 24 September 2004. (“M&A Regulations”)

This article provides an overview of the abovementioned legal instruments and its impact on telecommunications licensed operators. However, as the fundamental purpose of competition regulation is to protect consumers as well as to encourage a dynamic economy, the article will also cover prohibited practices by Service Providers which target consumers. It is here where references to the published decisions and determinations by the TRA is warranted. The article shall also refer to the M&A Regulations and the primary obligations arising from it.

Anti-Competitive Conduct

Service Providers are prohibited from engaging in anti-competitive conduct. This means they cannot do or refrain from doing anything which materially prevents, restricts or distorts competition.

Under Article 65 of the Telecom Law, they cannot:

  • Abuse their Dominant Position in the market or in a substantial part of it;
  • Conclude any agreement, enter into any arrangement or understanding or undertaking any concerted practice which materially prevents, restricts or distorts competition in the market; and
  • Cause anti-competitive changes in the market structure, particularly anti-competitive mergers and acquisitions in the telecommunications sector. (see section “Economic Concentration”).

Service Providers also subject to the Competition Law which contains more specific prohibitions. In accordance with Article 3, they cannot:

  • Affect the prices of products, subject matter of the dealing, by increase, decrease, fixation, simulated or fictious transactions, or any other form;
  • Limit production or marketing, technical development or investment, or controlling any of these;
  • Share markets or sources of supply;
  • Publish knowingly incorrect information about products and their prices;
  • Engage in collusive biddings or tenders, auctions, or Mumarasa, and influencing the price of offers for the sale and purchase of products;
  • Create a sudden abundance of products that leads to trading therein at unreal prices that affect the rest of the competitors; and
  • Collude to refuse to buy, sell or supply from a particular establishment to prevent or impede the exercise of its activities.

Each of the above amount to ‘competition hinderance' under the Competition Law, however, the Competition Authority, currently the Consumer Protection Directorate in the Ministry of Industry, Commerce and Tourism, may make an exception where it finds that the arrangement in questions leads to a significant improvement in the production/distribution of products, or where consumers are given a fair share of the benefits arising from it, by virtue of Article 4 of the Competition Law. In practice, it is doubtful how often this exception may be used.

Abuse of a Dominant Position

If a Service Provider achieves a Dominant Position in the Telecommunications sector, under Article 9, they are prohibited from:

  • Directly or indirectly imposing sale and purchase prices or other trading terms;
  • Limiting production, markets or technological development, thereby harming consumers;
  • Discriminating in agreements or contracts of any kind, concluded with suppliers or customers when their contractual positions are similar, whether it relates to the price, the product quality or other conditions of dealing;
  • Suspending the conclusion of agreement relating to a product on the condition of acceptance of obligations or products that do not relate to the original agreement's subject matter;
  • Concluding an agreement for the sale or purchase of a product with any establishment at a price less than its actual cost, without reasonable justification;
  • Completely suspending a transaction with another establishment which excludes a competing establishment from the market or causes it to incur losses that prevents them from continuing their activities.

However, in accordance with Article 7 of the Competition Law, the Ministry of Industry, Commerce and Tourism may issue a decision after consulting the Competition Authority and Council of Ministers to approve the arrangement in question for a specific or renewable period where it is in the public interest to do so.

The achievement of a Dominant Position is not in itself an offence, but the abuse of that position by imposing predatory pricing, for instance, would amount to an abuse of that position. In practice, however, given the fierce competition that pervades the sector, it is unlikely that one of the Service Providers in Bahrain would engage in such pricing strategies given the consumer's freedom to switch to another telecom operator.

Economic Concentration

Mergers and acquisitions in the telecommunications sector may present unwelcome implications for other Service Providers such as the achievement of a Dominant Position, which is why the Competition Law and the 2019 Regulations attempt to regulate activities that cause an economic concentration.

Article 11 of the Competition Law indicates that an Economic Concentration occurs when there is a change in control arising from:

  • A merger of two or more independent establishments; or
  • Either an establishment or one more persons controlling an establishment exercises direct or indirect control over an establishment; or
  • A joint venture intended to carry out all functions of an autonomous establishment.

By virtue of Articles 12 and 13 of the Competition Law and Article 2 of the 2019 Regulations, Service Providers must obtain the approval of the Competition Authority by applying at least 30 days prior to commencing the transaction. The application must include:

  • The Memorandum of Association of both establishments;
  • The contract implementing the transaction amounting to an economic concentration;
  • Financial reports of both establishments for the past two years which has been approved by a licensed auditor;
  • A list of all shareholders and partners of each establishment and their respective share of ownership; and
  • A report clarifying the likely positive impact of the transaction.

Telecommunications Mergers &  Acquisitions Regulations 2004

On 28 September 2004, the TRA issued the Mergers & Acquisitions Regulations applicable to the telecom sector. Under these regulations, Service Providers are obliged to notify the TRA where the transaction in question is a “Qualifying Transaction” within Article 1, and to do so in the manner envisaged by Article 2 where a sum of BHD300 is payable.

A Qualifying Transaction exists where there is a change in control arising from:

  1. The merger of two or more previously independent Persons or parts of Persons, at least one of which is a Licensee;
  2. The acquisition by one or more Persons whether by share or asset purchase, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other entities where at least one of the parties is a Licensee; or
  3. The creation of a joint venture which constitutes a Qualifying Transaction within (b) above.

Regulatory Action  & Consumer Protection

Service Providers ought to be cautious of their practices not only amongst other competitors in the sector, but also their commercial practices directly targeting consumers. In a protective stance, the 2017 Regulations aim to enable consumers' reasonable and informed decision-making. This section highlights the major obligations of Service Providers under these Regulations.

As a result of the general obligations imposed under Article 6(1), they commit to:

  • Publish fair, truthful and accurate advertisements which do not directly or indirectly mislead or confuse any consumer;
  • Disclose all terms, conditions and information prior to the point of sale (or to at least indicate “Terms and conditions apply” or another phrase to that effect);
  • Notify consumers in advance where the price of a product or service hinges on purchasing another product or service;
  • Refrain from prejudices against race, religion, gender, politics, and psychological conditions and disturbances; and
  • Refrain from exploiting a consumer's lack of knowledge or inexperience.

In accordance with Article 7, Service Providers cannot publish misleading advertisements, particularly where it concerns the:

  • Existence or nature of a certain product or service;
  • Price, or the means of determining which;
  • Existence of a price advantage (if applicable);
  • Primary characteristics of a product or service, the method or date of manufacture, delivery, quantity, or fitness for purpose; and
  • Need for a service, part, replacement or repair.

Note that Article 11 prohibits the use of terms such as “free” or “unlimited” where it misleads the consumer. This falls within the scope of Article 6(1) and has already been the subject of regulatory action, therefore caution is warranted (see section “Misleading Advertising”).

How Does Regulatory Action Take Form?

Service Providers invoke Article 72 of the Telecommunications Law, which states:

“The [TRA] shall investigate the complaints submitted to it with respect to breach of the provisions of this Law or breach of the regulations or decisions issued for the implementation hereof, and shall issue the appropriate decision with respect thereto within the limits of its duties and powers as provided for in this Law […].”  (Emphasis added).

As such, the 2017 Regulations clearly fall within TRA's investigatory scope.

Complaints submitted to the TRA are based on Article 6, 7 and 11 and are predominantly based on allegations of misleading advertising and comparative advertising, and these are the two aspects that regulate Service Provider's competitive practices.

Misleading Advertising 

An advertisement is misleading under the 2017 Regulations where it “[…]  contains information, statements, or visual presentation which directly or by implication is likely to mislead or deceive the Consumer about [a] product or service […].”

Service Providers may mislead consumers in a variety of ways that are not always found in fine-print in the bottom corner of an advertisement, or through the use of disclaimers, but also with the use of selling points such as “free” or “unlimited”. The former has been the subject of regulatory action under the TRA's Decision No. (2) of 2020 following a complaint filed by stc against Batelco.

Batelco was found to be in breach of the 2017 Regulations where it used the term “free” to induce customers' belief that they could all receive 1.5TB of data for free upon renewal of their fibre broadband package, when in fact this only applied to customers subscribed to the highest Superfast Fibre Package. The use of the term “free” in its purest sense means that customers will receive something for no money or consideration, and the TRA found the advertisement in question to be misleading and factually incorrect in breach of Articles 6(1) and 11 of the 2017 Regulations.

Service Providers' advertisements are typically published in both Arabic and English to appeal to as many customers as possible. However, Decision No. (1) of 2020 by the TRA (in a complaint filed by Batelco against stc) underscores how consumers may be misled where there is a difference between the Arabic and English text of an advertisement. In this complaint, stc used an advertisement with the term “upgrade” in its English version whereas the Arabic used “join”. TRA concluded that the advertisement does not make clear that it targets existing stc subscribers, which was misleading within Article 6. It further stressed that it is not necessary to establish that the advertiser intended to deceive or confuse customers; as long as there is some scope for ambiguity, the advertisement may be deemed misleading.

Article 4 of the 2017 Regulations indicates that one of the main purposes of the regulations is to enable consumers' informed decisions. A disparity between the Arabic and English text is therefore likely to impact the decision ultimately taken by consumers as they have adopted a specific understanding that differs from the intended meaning of the text, and this was underscored by Decision No. (1) of 2020.

The same advertisement was problematic another ground: the non-disclosure of important pricing information. Here, the TRA confirmed that the non-disclosure and partial disclosure of price information may be deemed misleading. In the advertisement subject to complaint, stc led consumers to believe that all of its subscribers could benefit from 1.3TB of data for an additional BD5 per month. However, as stc failed to indicate that this only applied to customers under a specific subscription, the advertisement was deemed to be both misleading and inaccurate in contravention of the 2017 Regulations.

Being the “fastest” in the telecommunications sector is key. It is a coveted quality all consumers seek from their Service Providers. In Decision No. (6) of 2020 (following a complaint filed by stc against Batelco), the TRA clarified how purporting to be the fastest in an advertisement may be deemed misleading within Article 6. It cited an established legal principle that the burden of proof lies with the party making a claim, and yet Batelco failed to present evidence that it offered the fastest internet service to its subscribers in both the advertisement and to the TRA after the complaint. As such, the unsubstantiated claim of being the fastest was misleading.

Asterisks feature in almost every advertisement we encounter daily. However, while the common person may view these disclaimers as a shield used by Service Providers, Decision No. (7) of 2020 demonstrates that it is not always the case. In its fairly protective determination, the TRA examined stc advertisements containing the phrase “the fastest terabyte you'll ever stream” where it was also stated in small print in the bottom corner “among and depending on stc plans”. TRA maintained that the reasonable consumer may not establish the link between this disclaimer and the claim “the fastest terabyte you'll ever stream”. In accordance with Article 12(a) of the 2017 Regulations, “footnotes, disclaimers, words, or symbols qualifying or excluding products or services made in an Advertisement shall be readily visible, audibly apparent and legible.”

The advertisement was also found to be in breach of Article 12(c), which states “references to detailed terms and conditions in an Advertisement shall not have the effect of contradicting, materially qualifying or otherwise altering the basics of any claim made or implied in the Advertisement.”  TRA stressed, citing an earlier decision, that the inclusion of an asterisk or fine-print disclaimer in itself does not preclude the possibility of having misleading headline. It noted that the fine-print disclaimer did not override the impression given to the consumer that stc claims to offer faster speeds than its competitors, and in doing so, presented the advertisement based on a subjective assessment (against its own packages) rather than objectively (ie based on empirical network speed evidence).

Comparative Advertising 

  Decision No. (11) of 2020 (in a complaint filed by stc against Batelco) is a good reference when examining how comparative advertising may violate the 2017 Regulations and to depict the interplay between misleading and comparative advertising. Article 1 defines “comparative advertising” as “Advertising in which one Advertiser draws a comparison between an Applicable Product or Service and that of another.” Said advertising is permissible where it fulfills the criteria in Article 8. These are:

  1. The advertisement is not misleading (see above);
  2. The Service Provider distinguishes its offerings by highlighting real benefits, innovations and genuine distinguishing factors;
  3. The advertisement does not unfairly criticize, discredit or disparage a competitor its products and services; and
  4. The Service Provider does not issue advertisements that unfairly denigrate a competitor's quality of service so as to diminish public confidence in the products and services offered by that competitor.

Having examined the advertisement, TRA concluded that Batelco failed to satisfy all of the Article 8 criteria. Where a Service Provider makes a claim in its advertisement without providing any evidence to substantiate it, the Service Provider has engaged in misleading advertising. Note that the intention of the advertiser is irrelevant here.

Importantly, the Service Provider need not explicitly refer to the name of a competitor in its advertisement in order to be considered a comparative advertisement. Furthermore, by deliberately featuring colors used by stc in their marketing (despite the fact no intellectual properties existed in that respect), Batelco's contention that it did not engage in comparative advertising was regarded as untenable at best. The fact stc referred to six comments posted below the advertisement on Instagram where commentators detected Batelco's allusion to stc rendered Batelco's position all the more assailable. TRA was particularly vocal in its rejection and criticism of Batelco's arguments. This was not mitigated by the fact the purple box stated: “Don't trust everything you see… even salt looks like sugar”, which was clearly a bad faith gesture contravening criterion (c) and (d).

TRA adopts a protective approach to its determinations. It situates the end consumers' perspective as the main principle to guide its decisions. This was evident in examining the ‘impression' given by the ad (which is a term often used by TRA) and to use inferences where it can, such as (i) the purple color in Batelco's ad and the presence of very few competitors in the market, and (ii) the fact that stc was the only other competitor offering 5G services at the time.

Its approach was equally apparent in its decisions concerning misleading advertising where no objective evidence underpins the claims being made in the advertisement. Consumers may subconsciously be swayed into taking a decision that is based on unsubstantiated subjective claims, and this is precisely what the 2017 Regulations aim to prevent.

Sanctions

Where a Service Provider violates the competition provisions in the Telecom Law, the TRA may under Article 65(f) impose a fine on the Service Provider that does not exceed 10% of its annual revenue and direct the Service Provider to either do or cease to do something to remedy a breach of this Article.

Violations of the 2017 Regulations are primarily based on misleading advertising by a Service Provider. Whilst reserving its right to impose a fine as above, the TRA may ask the Service Provider to withdraw the advertisement, vary it in line with the decision or amend the Arabic version of the advertisement to ensure it corresponds with the English version, or vice versa.

The TRA publishes all decisions it has issued in response to complaints submitted under Article 72 of the Telecom Law. Its decisions (all in English) contain a comprehensive assessment of the advertisements that are a subject of complaint. In 2020 alone, seven complaints were filed by a Service Provider against another for an alleged breach of the 2017 Regulations due to misleading advertising, and one has been filed alleging an abuse of a Dominant Position in the fixed wired and fibre broadband market. This indicates that regulatory action is common in the telecommunications sector, and as most of the TRA's determinations have centered on the 2017 Regulations, they have been the main instrument which police competitive practices in this sector.

Concluding Remarks

People are seemingly inundated with advertisements on a daily basis whether these are displayed on billboards by the highways of Bahrain, on newspapers, television or on social media platforms. It may not occur to everyone that some of these advertisements violate telecommunications marketing regulations. This article has mainly delved into the instances where competition law seeks to protect consumers from the billboards or social media advertisements we encounter everyday, although competition law policy goes well beyond that as is the case with the Competition Law, the 2019 Regulations and the 2004 M&A Regulations, which are targeted on a more transactional level (ie – matters consumers do not perceive).

The Consumer Protection Directorate which is currently designated as the Competition Authority has not publicised any investigation carried out regarding any (alleged) abuse of a dominant position. The TRA is therefore a more vocal regulator by publishing its determinations in detail and always refers to the Service Provider by name without redaction. However, as this article has demonstrated, much of the published regulatory action in this field has centred on the 2017 Regulations, which is the primary legal instrument for non-transactional competition issues, whereas some regulations were targeted at a more transactional level,  covering issues such as M&A and economic concentration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.