S.L. 399.48 Art. 64Functional separation. Cap. 418.

(1) Where the Authority concludes that the appropriate obligations imposed under regulations 56 to 61 have failed to achieve effective competition and that there are important and persisting competition problems or market failures identified in relation to the wholesale provision of certain access product markets, it may, on an exceptional basis, in accordance with regulation 55(4), impose an obligation on vertically integrated undertakings to place activities related to the wholesale provision of relevant access products in a business entity operating independently:

Provided that such business entity shall supply access products and services to all undertakings, including to other business entities within the parent company, on the same time scales and terms and conditions, including those relating to price and service levels, and by means of the same systems and processes.

(2) When the Authority intends to impose an obligation of functional separation, it shall submit a request to the European Commission that includes:

(a) evidence justifying the conclusions of the Authority as referred to in sub-regulation (1);

(b) a reasoned assessment concluding that there is no, or little prospect of effective and sustainable infrastructure-based competition within a reasonable time-frame;

(c) analysis of the expected impact on the Authority, on the undertaking, in particular on the workforce of the separated undertaking, and on the electronic communications sector as a whole, and on incentives to invest therein, in particular with regard to the need to ensure social and territorial cohesion, and on other stakeholders including, in particular, the expected impact on competition and any potential resulting effects on consumers;

(d) an analysis of the reasons justifying that this obligation would be the most efficient means to enforce remedies aimed at addressing the competition problems or the AND SERVICES (GENERAL)

markets failures identified.

(3) The draft measure shall include the following elements:

(a) the precise nature and level of separation, specifying in particular the legal status of the separate business entity;

(b) an identification of the assets of the separate business entity, and the products or services to be supplied by that entity;

(c) the governance arrangements to ensure the independence of the staff employed by the separate business entity, and the corresponding incentive structure;

(d) rules for ensuring compliance with the obligations;

(e) rules for ensuring transparency of operational procedures, in particular towards other stakeholders; and

(f) a monitoring programme to ensure compliance, including the publication of an annual report.

(4) Following the decision of the European Commission taken in accordance with regulation 55(3) on the draft measure referred to therein, the Authority shall conduct a coordinated analysis of the different markets related to the access network in accordance with the procedure set out in regulation 54. On the basis of that analysis, the Authority shall impose, maintain, amend or withdraw obligations, in accordance with the procedures set out in article 4A of the Malta Communications Authority Act and in regulation 21.

(5) An undertaking on which functional separation has been imposed may be subject to any of the obligations referred to in regulations 56 to 61 in any specific market where it has been designated as having significant market power in accordance with regulation 54, or any other obligations authorised by the European Commission pursuant to regulation 55(3).