Supreme Court dismisses Commission's case against Telecom

Final decision on dial-up case

The Supreme Court has ruled that the Commerce Commission failed to show Telecom misused its market dominance in a case dating back to 1999.

The Commission claimed that Telecom breached section 36 of the Commerce Act when it launched a dial-up internet package known as the 0867 package. It was introduced following an interconnection agreement between Telecom and Clear Communications, and is described in the judgement as follows:

“Telecom’s residential customers were to be charged two cents per minute for all internet calls beyond 10 hours connection per month. However, if customers used a dial-up number with the prefix 0867 (or if their ISP was Xtra, an arm of Telecom, or another ISP hosted by Telecom) they would not be charged for their internet calls. Customers and ISPs thus had a substantial incentive to adopt the 0867 solution,” the judgement reads.

“The 0867 package was designed to encourage residential customers and ISPs based on Clear’s network to ¯migrate to Telecom and to encourage Clear to adopt the 0867 prefix for ISPs on its network, thereby reducing the termination costs payable by Telecom. It is also of moment that Telecom’s introduction of 0867 enabled it to manage better the flow of voice traffic on the PSTN network when customers opted to use 0867. This reduced the need for further capital expenditure on that network.”

In a statement the Supreme Court said the decision hinged on whether Telecom would have introduced the 0867 package in a market in which it did not have substantial market power.

“The Commission 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 0867.”

The case was rejected by both the High Court and the Court of Appeal before being considered by the Supreme Court. The Commission has been ordered to pay Telecom costs of $50,000 plus disbursements.

Telecom released a statement today from group general counsel Tristan Gilbertson welcoming the decision.
“This decision reinforces the robust test for anti-competitive conduct that has applied in New Zealand for over a decade. The Court has recognised the importance of avoiding changes in the law that would blur the line between legitimate and illegitimate business conduct and dampen competitive intensity in the market,” he says.

“This preserves commercial certainty and, most importantly, the robust competition the Commerce Act is intended to promote.”