Telkom ‘bullied’ the competition

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Copy of ca p23 biz telkom done (27647983) INDEPENDENT NEWSPAPERS File image - Telkom received a downgrading by rating agency Standard & Poor's on Tuesday. Picture: David Ritchie

Cape Town - Bullying, or, to use a more formal business term, “leveraging its upstream monopoly in the facilities market to advantage its own subsidiary”, has landed Telkom a fine of nearly half a billion rand.

Telkom SA was fined R449 million by the Competition Tribunal on Wednesday for “bullying” its competitors.

“Telkom bullied its downstream competitors into line,” the tribunal said, adding that it also exploited a grey area in the regulations to its own advantage.

This brings to close an eight-year saga after the matter was first referred to the tribunal in 2004 by the Competition Commission.

The telecommunications giant has to pay half the penalty within six months and the balance within 18 months of the ruling.

The Competition Commission referred the matter to the tribunal on February 24, 2004, after receiving a complaint from the SA Vans Association and 20 other internet service providers.

In its complaint referral, the commission alleged that Telkom refused to supply essential access facilities to independent value added network service (Vans) providers.

This included “inducing their customers not to deal with them, charging their customers excessive prices for access services and discrimination in favour of its own customers by giving them a discount on distance related charges which it did not advance to customers of the independent Vans providers”.

The ruling found that Telkom had abused its dominance in the telecoms market between 1999 and 2004, when it was the monopoly provider of facilities to Vans providers.

The tribunal concluded that Telkom’s conduct caused harm to competitors and consumers, and impeded competition and innovation.

A report by the tribunal stated that Telkom challenged the referral on various fronts, including jurisdictional grounds, in the courts.

It added that Telkom sought to bypass the regulator, which was entrusted with enforcement of the Telecommunications Act, in order to obtain for itself the additional protection of private law remedies.

The tribunal found that Telkom refused to supply essential facilities to independent Vans providers and induced their customers not to deal with them, conduct that resulted in a substantial lessening of competition in the Vans market.

Telkom did not deny its actions, but argued that it was justified in doing so because, by providing certain value added services, the Vans providers were engaged in illegal conduct.

Telkom had also sought to bypass the regulator entrusted with enforcing the Telecommunications Act, to obtain for itself the additional protection of private law remedies.

Telkom did not deny that it had acted in this way, but argued that it was justified in doing so.

Telkom conceded that its illegality defence would fail if the tribunal were to find that its interpretation of the regulatory framework was incorrect.

It also conceded that the facilities bought by Vans from Telkom amounted to “essential services” as contemplated in the Competition Act.

DA MP Marian Shinn, the party’s spokeswoman on communications, said in a statement yesterday that the government should learn from Telkom’s punishment by the Competition Tribunal.

“The fine, which is considerably less than the R3.5bn originally asked by the Competition Commission in February, must come as a relief to Telkom.

“I urge it not to appeal the fine and focus on becoming a market-friendly collaborator within the communications market.” - Staff Reporter and Sapa


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