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Vodafone to Receive Share of Compensation Payment by Telecom New Zealand
New Zealand's Commerce Commission has reached a NZ$1.6 million (US$1.14 million) settlement with Telecom New Zealand following an investigation into complaints alleging that Telecom Wholesale's 'loyalty offers' breached Telecom's Separation Undertakings.
The loyalty offers related to Telecom Wholesale's regulated wholesale broadband service, used by competing service providers to provide broadband service to retail customers. Telecom offered substantial discounts in return for a commitment for the service providers to maintain current and future customers on Telecom Wholesale's service rather than that of a competitor.
The Separation Undertakings require Telecom not to discriminate between or against its wholesale customers. The Commerce Commission's investigation concluded that the loyalty offers were likely to constitute breaches of the Undertakings. Telecom's Independent Oversight Group (IOG) also investigated industry complaints and determined that Telecom Wholesale's loyalty offers were non-trivial breaches of the Undertakings.
"In the Commission's view the loyalty offers were detrimental to investment in telecommunications infrastructure and undermined wholesale competition. Following the IOG's decision, Telecom withdrew the offers from the market. However, had Telecom not ceased the offers there would have been significant ongoing harm to competition in the telecommunications market," said Dr Ross Patterson, Telecommunications Commissioner.
"The $1.6 million settlement means that the complainants Vodafone and Orcon have been compensated, and that further harm to the competitiveness of the market has been prevented. While the issue was serious enough for the Commission to consider issuing proceedings, we are pleased to have worked constructively with Telecom to settle this issue. The settlement avoids potentially lengthy and expensive litigation," said Dr Patterson.
Vodafone and Orcon will share the $1.6 million compensation equally. The settlement does not prevent anyone from seeking further compensation directly from Telecom. As part of the settlement, Telecom has also been warned by the Commission that it is likely that the loyalty offers amounted to discrimination in breach of the Undertakings.
The Commission also received complaints about the loyalty offers under the Commerce Act. The Commission considers that the issue has been sufficiently resolved under the Telecommunications Act and therefore further action under the Commerce Act is unnecessary.
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