Commission Closes Investigation Into Telecom

Commission Closes Investigation Into Telecom

The Commerce Commission has today closed its investigation into allegations that Telecom had squeezed the margins of its competitors, through bundling and a price discount, and affected their ability to compete, in breach of the Commerce Act 1986.

In early 2004, Telecom introduced a $10 discount for customers who purchased all of a bundle of services, comprising their Homeline, toll calls (calling) and broadband internet services, from Telecom.

After an investigation, during which the terms of the bundled discount changed several times, the Commission has concluded that Telecom’s bundle did not breach the Commerce Act. This was because the Commission found that efficient competitors could earn positive margins over the combined calling and broadband offering when they sold similar bundles.

“Although, in this particular case, the Commission did not find the bundle to be anti-competitive, it will continue to monitor bundled discounting closely to ensure that bundles benefit consumers without damaging competition,” says Commission Chair Paula Rebstock

In some cases the selling of a bundle of products at a discount can provide benefits to consumers and increase competition. However, some companies that have market power may be able to use that position to offer discounts on some bundles of products to limit competition.

Ms Rebstock says “For example, bundles in which discounting of competitive products, such as broadband, are not offset by higher margins from other services, such as calling, remain a matter of concern to the Commission, as would situations where competitive services are bundled with those that lack competition.”

“The Commission is likely to be concerned when firms offer bundled discounts so as to artificially raise entry barriers and limit the size of the market available to competitors and thereby adversely affect competitors’ ability to compete,” says Ms Rebstock.

ENDS

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