MDPPACPB Regulations

Page 49 of 127
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(b) The obligations and prohibitions herein shall become binding on a licensee 
upon receiving written notification of such a determination from the Authority. 
 
(2) General Prohibition  
(a) A licensee subject to this Regulation is prohibited from using revenues, 
profits, or cost advantages derived from its regulated monopoly or dominant 
market activities to subsidise its operations in any competitive market segment.  
 
(b) Conduct is prohibited where such use: 
(i) results in predatory or below-cost pricing; 
(ii) gives an undue competitive advantage over non-integrated or 
independent competitors; 
(iii) leads to exclusion, foreclosure, or a distortion of competition; or 
(iv) constitutes discriminatory pricing or margin squeeze. 
 
(3) Transfer Pricing Obligations 
(a) All transactions between affiliated entities or between business units within 
an integrated licensee shall be conducted on a transparent, arm’s-length 
basis in accordance with sections 170, 206(1) and 212(2) of the Act. 
 
(b) Internal transfer prices shall: 
(i) reflect prudent and efficiently incurred costs used in the provision of the 
relevant activity; 
(ii) incorporate a reasonable return on capital in accordance with section 207 
of the Act where applicable; 
(iii) be consistent with the disaggregated, cost-reflective and non-
discriminatory pricing principles in section 170(a)–(d); 
(iv) not discriminate between affiliated and unaffiliated parties under 
comparable commercial and operational circumstances. 
 
(c) The Authority may prescribe or approve methodologies or benchmarks for 
intra-group transfer pricing including refinery-to-wholesaler transfers, pipeline 
transportation charges, depot handling fees, storage or jetty charges, and any 
other relevant intra-group transactions. 
 
(4) Prohibition of Cross-Subsidisation 
(a) A licensee shall maintain systems demonstrating that regulated activities 
and competitive activities are financially and operationally independent to 
the extent required under this Regulation. 
(b) Without prejudice to the generality of sub-paragraph 3(a), a licensee shall 
not: 
(i) allocate the costs of competitive activities to a regulated activity; 
(ii) cross-fund competitive activities using tariff-regulated revenues; 
(iii) conceal subsidies or cost-shifting through internal transfer prices; 
(iv) provide internal discounts, rebates, or advantages not available to 
unaffiliated parties on equivalent terms.