Bully blocked
IF TELKOM GOT AWAY with being a bully in the past, it’s less likely to be able to do so in future. That’s because South Africa will soon amend the Electronic Communications Act in line with the proposed Competition Amendment Bill to ensure the Competition Tribunal – not regulator Icasa – has the ultimate jurisdiction to rule on competition matters with regard to telecommunications.
Deputy Telecommunications Minister Roy Padayachie announced that as part of the department’s recent Budget vote speech in Parliament. He said the change was “likely to have a significant bearing on costs issues within the information and communication technology sector”.
Outgoing Vodacom CEO Alan Knott-Craig welcomed the decision, describing SA’s competition authorities as “one of the best regulatory bodies. They do a very competent job and are very experienced. Icasa doesn’t have the resources to deal with competition issues.”
However, while the legislators go about the business of changing the law as it will apply to future matters, there are a number of unresolved historical complaints that fell beneath the murky waters of the so-called “concurrent jurisdiction” between Icasa and the competition authorities.
Padayachie said in his speech that the Commission found this situation of concurrent jurisdiction to be “seriously problematic”. For example, in 2004 the commission referred a complaint laid against Telkom by the SA Value Added Network Services Association (Sava) to the Competition Tribunal on the grounds that Telkom had abused its dominance by way of a number of practices.
Telkom essentially replied that the tribunal didn’t have the authority to rule on competition matters in telecoms and the case recently went to court. The judge has yet to make a ruling. A “guilty” ruling by the tribunal could subject Telkom to a fine of 10% of turnover (excluding subsidiaries and joint ventures) in the year prior to the complaint.
However, Telkom said as part of its most recent results the commission had yet to impose the maximum penalty on any offender. Its statement in that regard preceded a long list of other complaints laid against it with the commission as part of note 21 to the financial statements on Telkom’s contingencies. It doesn’t set aside any money for any of the six complaints, among them the Sava matter, Omnilink, Orion, the Internet Service Providers Association (Ispa), M-Web and Internet Solutions, as well as a separate complaint by M-Web, in which Telkom is also challenging the tribunal’s jurisdiction to rule on the matter.
Ispa representative Ant Brooks says the Communications Department’s clarification on the matter was very welcome. Ispa represents Internet service providers and has also previously laid complaints against Telkom with the commission.
But even though the commission has teeth, it takes a very long time to obtain relief on a specific matter. For example, Sava’s complaint was referred to the Competition Tribunal back in 2004 (Sava was subsumed into the Communications Users Association of South Africa (Cuasa) at some point).
Ispa’s big success was in its role in opposing Telkom buying Business Connexion, which the tribunal blocked. Brooks says it had been resolved quickly because Telkom wanted it done.
But with regard to any of the other complaints against it, Brooks says Telkom hadn’t paid a cent and was still engaging in some of the practices the commission had found it guilty of.
The Competition Amendment Bill was released in draft format on 27 May this year. It should still go through a process of public responses, which Deneys Reitz Attorneys said in a note at the time it hoped would be detailed, given the importance of the issues at stake.
Apart from clarifying concurrent jurisdiction matters for regulatory authorities such as Icasa, the Bill also proposes imposing criminal sanctions on directors and managers. Those include proposed fines of up to R500 000 and/or a prison sentence of up to 10 years for directors and managers responsible for, or who knowingly participate in, fixing prices and trading conditions, as well as market division and collusive tendering.
In the wake of the recent penalties imposed in the bread price-fixing and collusive tendering by Tiger Brands subsidiaries Albany and Adcock Ingram Critical Care, it’s already clear the tribunal has significantly sharpened its teeth and is aggressively eliminating cartel behaviour.
The Bill, if implemented in its current form, should strike additional fear into the hearts of corporate bullies and at least prevent such behaviour.
If applied retrospectively (which isn’t normally the case), I’d be a very worried Telkom shareholder.
Finweek
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