Competition Law in the Communication Sector in Saudi Arabia - Assignment Example

Competition law The research aims and questions This research study is based on the area of competition law and in particular, the competition law in the communication sector of the Kingdom of Saudi Arabia. The researcher is tasked with the aim of identifying the role that has been played by competition law in the telecommunication sector in Saudi Arabia since its inception and the impact that it has created in this sector, which is of great significance to the economic and social aspect of Saudi Arabia. The research will also analyse how the consumers have benefited as a result of the introduction of competition law in Saudi Arabia. From a broader perspective, the research study will also look into ways and means by which competition law been enforced in this county and who plays the major role in enforcing antitrust law and making sure that it sees the light of the day. The research will also try and analyse the overall impact of the antitrust law on the telecommunication sector and also on the economy at large. Based on this aims the objectives below have been set as well as the corresponding research questions. Objectives of the study The study will be based on the following objectives. i. To identify the roles and impact of competition law in Saudi Arabia. ii. To identify means of enforcing competition law and the body in charge of the enforcement in Saudi Arabia. iii. To analyze the impact of competition law to the growth of Saudi Arabia economy. iv. To ascertain the benefits of competition law to consumers in Saudi Arabia. Research questions a) What is the role and impact of competition law in Saudi Arabia? b) Using which strategies or ways can antitrust law be enforced in Saudi Arabia? c) Is competition law capable of influencing the economy in terms of growth and development in Saudi Arabia? d) What are the benefits that have come to the consumers as a result of the competition law in Saudi Arabia? Literature review Competition should be very fair to each and every player or participant in the market so as to ensure that the playing ground is level to all. This will put a check in place to any firm that might want to use or apply unscrupulous means in the market for instance charging extremely high prices in the market or by offering substandard goods and services. And this is the reason why the law has to come in to protect the consumer and also ensuring that there is fair competition in the market. Evans et al (2008) stated that competition should protect and promoted because it is very significant to the customer.1 The European commission (2005), pointed out that protecting and encouraging competition, the end user or the customer will be the sole beneficiary.2 The benefit of competition is that it provides the consumer with variety of products and services to choose from. This eventually will result to a decrease in prices of goods and services in the market. , Richardson, ( 1987) noted that competition law normally targets to safeguard competition in the market as a way of promoting the end-users welfare and also making sure that resources are allocated efficiently. It can be argued that to some degree, competition law mostly put a lot of emphasis on the consumers’ interest though in an indirect way, hoping that the consumer will gain as a result of competition law being in place.3 There is a general growth towards the combination of consumer and competition laws in a systematic and a meaningful manner by outlining the importance of the two policies being harmonized and working together, since legislation on competition law must be design to benefit the customer and consumer policy has to embrace competition as its main aim (John Vickers, 2005).4 Competition can thus be said to be a tool which help in controlling competition in the market by regulating unjust competition practices of companies (Martyn, 2006).5 These regulations can be carried out by either the private or public enforcement (Cartel Damage Claim, 2014)6 Competition law operates under three principles which include; stopping agreements that can restrain fair business activities among the competing companies or firms in question and in specific to check on actions of cartels. The second principle is gagging of unwanted conduct of a company controlling the market, or engaging in uncouth actions that may result to the firm being dominant which can make it act or behave like a monopoly. Lastly, it also manages the acquisition and merges with regard to the larger corporations. Business activities that are seen to cause havoc to the competition process can be stopped. History of competition law Competition law has evolved through many stages, and the stages are the roman legislation (early stage) the middle age, and lastly the modern legislation. They are known as the history of competition law. Roman legislation begun as early as 50 BC, there was an enactment of competition law in the roman republic and its main objective was to safeguard and maintain the trade in grains. Wilberforce (1966, p.20)7 noted that heavy penalties were sanctioned to people who interfered with the trade in any way. Other legislations were also constituted during this regime that could even land one to death should he/she violates the law. After the early legislation, it was followed by the middle ages law. Laws to check practices and to manage monopolies were in place in England many years ago. An agitation for prices to be fair made the authority to control the market and a law was eventually passed in 1266 as pointed by Schumpeter (1942).8 Fines were put in place for anyone who went contrary to what was expected of him or her under the legislative act (Wish, 2008).9 The last stage of the history of competition law is the modern competition law. Canada was the first nation to constitute what is believed to be the pioneer competition law in the recent times. A year on after being constituted, the united states of America followed suit by legislating the most celebrated act of on antitrust law that was named after senator John Sherman who while referring to the new legislative act of 1980, argued that legislation doesn’t necessarily mean that a new law, but it is also much applicable to both new and old beliefs of the common of law that are enshrined in the constitution (Papadopoulos, 2010).10 Theories of competition law Theories of competition law that are also applicable to Saudi Arabia completion law especially to the telecommunication sector are as follows: The classical theory as noted by Campbell (2005, pp.601-02) are of the opinion that the state must look or find a way of curtailing monopoly, but let the market to function on its own.11 The classical opinion on competition law was that some elements and entrepreneurial activities could be unrealistic prohibition on the liberty of an individual entrepreneur to do their business. The Neo-classical theory believed in the principle of a free market, they were of the opinion that if the markets were free then distribution and processing of goods and services social welfare can be greatly maximized. Orthodox economists agree that a perfect market is unrealistic in real world and as a result people should look forward for workable competition (Clark, 1940; Wish, 2003),12 and as a result of this, should one fail to get what one ranks higher, then one should opt for next available alternative as argued by Lipsey and Kevin (1956).13 The Chicago school of economics theory proposed a different perspective as argued by Hebert (1985) to competition law on the basis that part of acts that were seen to be unjust in the past, could indeed lead to a boost in competition.14 Proponents of this theory were of the opinion that competition law was only geared towards the end-user and did not consider the competitors (Bork, 1978, p.405).15 Competition law can be enforced by the national authorities that are instituted by the governments of a given country. This can be carried out by both the private and the public that have been instituted to ensure that competition law is respected. In Saudi Arabia the communication and information technology commission is in charge of ensuring that the competition law is Saudi Arabia is upheld. This commission works under the ministry of communication and information technology. Competition law development in the telecommunication sector in Saudi Arabia According to the royal decree {M (M/25), 2004} which approved the competition law in Saudi Arabia stipulating clearly what the law entails with respect to completion law. The objectives of Saudi Arabia competition law that tries to answer the research question and aims are as follows, first the Saudi Arabia competition aims to enhance and protect fair competition as well as creating a healthy market, and ensuring that there is transparency in prices. Second, the Saudi Arabia competition law aims to curtail all monopolistic activities that can hinder fair competition in the market. The third objective of competition law in Saudi Arabia is to ensure that goods and services of high quality and varieties are available at competitive prices. The forth principle of the Saudi Arabia competition law is to promote innovation and also to enhance economic growth within the country (Saudi Arabia). The last objective of Saudi Arabia competition law is to encourage the growth of economy within the society. Analysing the objectives of the Saudi Arabia competition law above and relating it to the research study in question, the objectives above are in tandem to the research study objectives of ascertaining the impact of competition law in Saudi Arabia both to the telecommunication sector and the economy as a whole, to ascertain the benefits that the consumers in Saudi Arabia may get as a result of the introduction of competition law in Saudi Arabia in telecommunication sector. Ever since the competition law was adopted in Saudi Arabia, there has been rise of many firms in the telecommunication sector in contrast with only one firm (Saudi Telecom Company) that was in existence prior to the approval of the constitution law by the government. The government of Saudi Arabia has since privatized the former state monopoly firm of Saudi Arabia (Saudi Telecom Company). This was done in line with the requirement of Saudi Arabia competition law which aims at curtailing all monopoly activities of company so as to ensure that competition is free and fair. There has been tremendous changes in the telecommunication sector in Saudi Arabia ever since the competition law was introduced which has seen a number of telecommunications firms in Saudi Arabia emerging such as the mobily company (a member of etihad etisalat company), Saudi telecom company-STC (which has been privatised), the integrated mobile company, ZAIN mobile company, Lebra mobile company, Virgin mobile company, among other mobile companies in Saudi Arabia (Alotaibi, 2010). This as a result has given the consumers a greater extent of choice contrary to what was there before. Before the approval of competition law by the Saudi Arabia government, Saudi Telecom Company used to enjoy monopoly power and they were not really concerned with the customer satisfaction. But as a result of the introduction of the competition law in Saudi Arabia that has seen the emergence of many companies in this sector the quality of services has really improve and consumers are really gaining from this. The government of Saudi Arabia has also made it clear that any violation of the competition law will be met as per the stipulated fines. Any violator will be subjected to a fine not exceeding 10% of total turnover or not exceeding 10 million Saudi Riyals. And in any way that the case reoccurs again the fine shall be multiplied, and if this persist then the government can terminate and suspend the operation of that given company (Article 12 of the Saudi Arabia laws). Read More