Proceedings against Telecom over loyalty offers

Commerce Commission to issue proceedings against Telecom over loyalty offers

The Commerce Commission is issuing proceedings alleging that three separate loyalty offers made by Telecom Corporation of New Zealand Limited’s Wholesale business unit between December 2008 and July 2009 are likely to have breached its obligation not to discriminate between service providers under the Telecom Separation Undertakings.

The Commission considers that breaches of Telecom’s Separation Undertakings have the potential to seriously harm competition in telecommunications markets and undermine or deter efficient investment in telecommunications infrastructure. The Commission has therefore decided to issue proceedings against Telecom in the High Court to seek remedial orders and/or monetary penalties in relation to the loyalty offers.

The Commission’s investigation followed receipt in August of the Independent Oversight Group’s (IOG) findings that Telecom Wholesale’s loyalty offers constituted a breach of Telecom’s Undertakings. The Commission also separately received complaints on the matter.

As the proceeding will be before the courts, there will be no further comment at this time.

As part of its investigation into this matter, the Commission consulted on the meaning of ‘discrimination’ in clause 56 the Undertakings. In light of submissions, the Commission intends to provide Telecom and the industry further guidance on Telecom’s obligation not to discriminate.

Background
The Separation Undertakings have effect as a deed given by Telecom to the Crown under Part 2A of the Telecommunications Act 2001 (Act) on 25 March 2008.

The purpose of Operation Separation is set out in Section 69A of the Act:
a) to promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services in New Zealand; and
b) to require transparency, non-discrimination, and equivalence of supply in relation to certain telecommunications services; and
c) to facilitate efficient investment in telecommunications infrastructure and services.

Clause 56 of the Undertakings provides that:

56 Wholesale Unit will not discriminate.
56.1 When doing or omitting to do anything in respect of the provision of a Relevant Wholesale Service, the Wholesale Unit (including its Employees, agents and contractors) will not discriminate between Service Providers and Retail Units or between Service Providers.
56.2 For the avoidance of doubt:
(a) clause 56.1 does not prevent the Wholesale Unit from doing or omitting to do something in respect of the provision of a Relevant Wholesale Service that is different for different recipients of that service where those differences reflect the different requirements of the recipients;
(b) clause 56.1 is subject to clause 6; and
(c) this clause does not limit clauses 47 to 49.
The Separation Undertakings required Telecom to establish an Independent Oversight Group (the IOG) to monitor Telecom’s compliance with the Undertakings. The IOG’s decisions are not binding on the Commission.

The Commerce Commission is responsible for enforcing the Undertakings.

Penalties. While the Commerce Commission can take enforcement action for a breach of the Undertakings, it is up to the courts to set appropriate penalties. The High Court may impose penalties of up to $10 million for each breach. In addition, the High Court may issue orders on any terms and conditions the High Court thinks appropriate, including to restrain Telecom or to require Telecom to undertake specific actions.

The Commission has published guidelines for handling operational separation complaints. These guidelines can be found on the Commission’s website www.comcom.govt.nz under Industry Regulation/Telecommunications/Operational Separation of Telecom

Commission media releases can be viewed at www.comcom.govt.nz

ENDS

© Scoop Media