Ugandan court penalises MTN for malicious business conduct
Friday November 20 2015
Malicious, egregious, vindictive, oppressive and high-handedness. These are some of the words used by High Court Judge Henry Peter Adonyo to describe the conduct of MTN Uganda towards EzeeMoney.
On November 6, MTN Uganda, the largest telecom company in Uganda, was found guilty of aggressively adopting anti-competitive measures towards EzeeMoney in a case that is traced as far back as 2013.
EzeeMoney was awarded damages of Ush2.3 billion (about $682,502), but MTN has since appealed the ruling.
In March 2013, EzeeMoney launched its services in Uganda to tap into the growing mobile money market. At the time, MTN Uganda was – and still is – the leading mobile money service provider in the country.
EzeeMoney had made the entry to tap into a market where it could provide third party mobile money services to people without handsets. To do this, the company needed an agent network around the country.
That agent network is dominated by MTN Uganda, which by 2013 was totalling about 15,000 agents. The two worked together until mid-2013 when MTN is said to have terminated a contract with EzeeMoney service.
EzeeMoney then sued MTN for unfairly denying them the ability to connect an aggregator to its network, withdrawing its line called E1, and subjecting its agents to such harassment and denial of support and services.
EzeeMoney contended that MTN Uganda breached the statutory duty imposed on it to unfairly restrict competition from them when they denied an aggregative platform offered by Yo! Uganda Ltd and agency services which was contrary to the Communications Act.
The Communications Act provides that an operator shall not engage in any activities which have or intended to have the effect of unfairly preventing, restricting or distorting competition in relation to any business activity relating to communication services.
EzeeMoney argued that MTN Uganda was supposed to provide a level playing “which made it easy for the competitors” to access mobile money services.
In their submissions, EzeeMoney argued that the exclusion by MTN Uganda led to serious loss of business.
MTN had, on the other hand, rebutted that the cited provisions of the Communications Act when read in its entirety, would be found to actually ‘not prohibit competition’ as such but ‘unfair competition’.
MTN added that the breach should have been committed by a licenced entity against a similarly licensed entity with both entities being engaged in the provision of telecommunications, data, radio and postal communications including broadcasting as defined by the cited section, but EzeeMoney was not licenced to that effect.
Justice Adonyo in his verdict observed that section 53 (1) a, when read in its ordinary meaning, seems to imply that the non-requirement of one to be a licenced communications service provider before one can prove being unfairly excluded from business as for in the law, the phrase used is ‘any other party’.
The judge went on to explain that if this is the case, then the issue of whether EzeeMoney was licenced or not would be mute for it has shown that it fell under the category of any other party.
“The denial of the use of MTN’s platform by EzeeMoney would thus be an act which is prohibited within the meaning of section 53 (1) a of the Act for it limited competition,” ruled the judge.
EzeeMoney had entered agreements with several agents some of whom already had contracts with MTN. These contracts, at the time, were open.
However, in court, it was learnt that MTN forced the same agents into exclusive agreements. The agents, according to the judgement, had their contracts with MTN terminated if they continued to operate EzeeMoney services.
When agents went to inquire why their services were terminated, “they were made to apologise” for having signed up with EzeeMoney. The apologies were handwritten and produced in court. Witnesses did state that the exclusive agreements deterred agents from maximising their business potential.
In his ruling, Justice Abonyo referred to MTN has having “acted outside the law,” when it signed exclusive “lopsided agreements.” The method of enforcing the agreements was also noted to have been “coercive.”
In court, EzeeMoney had revealed to the judge that as a result of exclusive agreements signed by MTN, the number of EzeeMoney agents dropped from 52,155 to 10,906.
Furthermore, EzeeMoney argued that due to MTN Uganda blocking all its services, they had to replace SIM cards for more than 200 terminals that were originally operating with MTN’s SIM cards which process necessitated the halting of the business for some time and led to a decline in service delivery as many customers after failing to get services from them, deserted them or viewed them as not trustworthy.
The other element of loss pleaded in the case was that after EzeeMoney had launched its services, within a space of six weeks, it had signed up more than 1,000 agents with the majority of them being those already having connections with MTN.
The judge, in his verdict on this issue, held that there was no doubt that the actions of MTN were intentional and made in such a way to expressly deny its agents from operating with EzeeMoney, which actions the judge said were intentional and unlawful as several of these agents were forced to break their contractual relations with EzeeMoney.
“I would find that the defendant (MTN Uganda) committed a tort of wrongful interference with actions of third parties in which the plaintiff (EzeeMoney) had clear economic interest and that interference led to the plaintiff (EzeeMoney) making substantial loss…” held Justice Adonyo.
In resolving this issue, court said anyone including private individuals who suffer loss as a result of a breach of statutory duty can recover damages.
The judge then went on to hold that since the court had made a finding that the actions of MTN caused damage to EzeeMoney when it signed illegal exclusivity agreements with its agents, a move that saw a good number of agents cutting business with EzeeMoney as they feared setbacks from MTN, it was liable for the loss.
The judge awarded punitive damages to a tune of Ush1.5 billion (about $445,110) to punish and deter the express outrage of MTN’s high-handed, malicious, vindictive and oppressive conduct towards EzeeMoney.
“I find that by virtue of the defendant (MTN Uganda) being a dominant position in the business which the plaintiff (EzeeMoney) was also involved, decided to act maliciously, high-handedly, egregiously, vindictively and oppressively towards the plaintiff (EzeeMoney) when it withdrew its telecommunications services for no valid reasons in addition to actually deploying illegal harassment tactics against a mobile money agent who had freely signed up with EzeeMoney in the belief that this is a free economy.” held the judge.