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Regulator appeal rejected on Telecom 0867 package

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Sept 1 NZPA - The Supreme Court has unanimously rejected a Commerce Commission appeal over Telecom's introduction of the 0867 dial-up prefix in 1999.

Telecom imposed the 0867 prefix on competitors such as Clear Communications so it could stem its losses under existing contracts on dial-up internet calls.

When the commission sought leave to appeal to the Supreme Court a year ago, commission general counsel Peter Taylor said the law, as it currently stood, was affecting the commission's ability to fulfil its role in enforcing section 36 of the Commerce Act.

Section 36 is aimed at preventing firms with market power from taking advantage of that power to deter competition.

Both the High Court and the Court of Appeal rejected the commission's contention that, Telecom used its dominant position in the market for a prohibited purpose with the 0867 package.

The Supreme Court said it today had unanimously dismissed the commission's appeal against the other courts' decisions.

The court said it had concentrated its attention on what constituted "use" of a dominant position in a market.

It decided that the question of use or taking advantage should be determined by comparing what a dominant firm had done in an actual market with what a similar firm would have done in a hypothetically competitive market; that was, in a market in which it did not possess a substantial degree of market power.

To establish use or taking advantage of market power, it must be shown that the allegedly contravening firm would not have acted in the hypothetical market in the same way as it did in the actual market, the court said.

The commission had failed to show that Telecom would not have introduced its 0867 package in a market in which it lacked dominance. Hence the commission failed to show that Telecom had used its dominance when it introduced the 0867 package.

The Supreme Court decision said the introduction of the 0867 package followed an unanticipated and substantial expansion of residential internet dial-up usage.

Telecom's network started to become congested, and the traffic was essentially one-way -- from residential customers to internet service providers (ISPs).

If the ISP was on the network of Telecom rival Clear Communications and the customer was on Telecom's network -- as nearly all were -- Telecom had to pay termination charges on a per minute basis to Clear.

NZPA WGT mjd gt

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