EzeeMoney vs MTN: That discussion on the competition law is necessary

Creativity is one of the last remaining legal ways of gaining an unfair advantage over the competition. – Ed Mc Cabe.

Sammy Mwathi thought after taking signing an agreement with EzeeMoney, he had expanded his business. Little did Mwathi know he had stepped on the path filled with ants. For being an EzeeMoney agent, he had made a mistake – at least that is the impression. He would be forced to sign an exclusivity agreement to only transact business for MTN Uganda. That’s just the start. On top of signing this agreement, he had to write an apology to MTN Uganda for taking on EzeeMoney business. As he testified in the commercial court division of the High Court, he declined any new business for EzeeMoney “out of fear” that MTN Uganda would terminate his contract. The fear, as other witnesses testified, was being cut-off by MTN Uganda, the largest mobile money services provider.

In 2009, mobile money was introduced in Uganda by MTN Uganda. It has turned out to become a huge success with the amount transacted closing in on Shs24 trillion from Shs11.7trillion with nearly 18 million users. Of these MTN has about 8 million subscribers. The rest Airtel, UTL, and Africell share the other 10 million. MTN also transacts at least Shs16.8trillion of the Shs24trillion annual transactions of mobile money in Uganda.

EzeeMoney, a little-known company, sought to tap into this market by offering third party services by using mobile money. Before they could even take off, MTN used its dominant position to block EzeeMoney from tapping its wide network of 15,000 agents at the time. This was in 2013. It has taken two years for the Commercial Court to reach a decision on a case that EzeeMoney brought to its attention.

“I find by virtue of the defendant being in a dominant position in the business which the plaintiff was also involved decided to act maliciously, high-handedly, egregiously, vindictively and oppressively towards the plaintiff when it withdrew its telecommunications services from the plaintiff with no valid legal reasons, in addition, to actually deploying illegal harassment tactics as against mobile money agents who had freely signed up with the plaintiff in the belief that this is a free market economy where healthy economic competition is allowed…,” Justice Henry Peter Abonyo ruled in a judgment issued on November 6, 2015.

From the court proceedings, MTN Uganda –with a net profit of Shs230bn at the end of 2014 – used its dominant position to keep EzeeMoney off its turf. The gist of MTN’s argument has been that EzeeMoney is not a licensed telecommunications company with the permission to carry out mobile money and communications transactions. A letter drafted by the lawyers of MTN Uganda, Kampala Associated Advocates (KAA), the same point was emphasized.

“MTN respects the decision of the court but fundamentally disagrees with it. MTN is aggrieved by the judgment primarily because EzeeMoney is not a licensed communications provider. MTN cannot be in breach of the law that prohibits anti-competitive conduct with regard to licensed communications service providers when EzeeMoney is not licensed and does not provide communications,” KAA said in a statement.

Uganda has no competition law. Cabinet and parliament have avoided this law as it would establish the Uganda Competition Commission. The role of the commission would be to monitor and punish any anti-competitive behavior.

MTN argues that since EzeeMoney is not a licensed communications provider, the Communications Act doesn’t provide them cover to sue. Any communications company would use the Fair Competition Regulations, 2005 and Sections 2(e) and 4 (s) of the Communications Act to seek legal redress if they feel there are anti-competitive tendencies.

In essence, MTN insists its actions were justified because EzeeMoney was not a licensed communications company. This is the argument that MTN is emphasizing as it appealed the decision of the commercial court. Undoubtedly, MTN Uganda has created thousands of jobs, directly and indirectly, invested in the country and also paid taxes. It has morphed into one of the largest corporates in Uganda with annual investments averaging nearly $90m. That sort of investment needs to generate a return and MTN protected its turf by keeping out EzeeMoney.

Jeff Mbanga, the business editor at The Observer, explains in an article on why Uganda needs fair competition.

“The case offers Uganda a perfect opportunity to discuss the issue of fair competition, especially where large transnationals are involved. Companies that dominate the sectors in which they operate have become so big that new entrants are finding it hard to operate there comfortably,” Mbanga writes.

The debate among policymakers is how to protect the “small investors” from the big players without necessarily hurting the business sentiment. Perhaps the private sector hasn’t made much noise about this law. It is perhaps not yet such an important issue for the country to discuss.

 

 

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