Telecom breach could cost $10m

[UPDATED] Telecom could face a $10m fine after it was found to have breached the Commerce Act by the High Court today.The court determined that, between 2001 and 2004, the country’s dominant telco used its substantial market power to prevent and deter competition in high-speed data transmission markets, in effect contravening section 36 of the Commerce Act.The Commerce Commission’s case against Telecom claimed the company’s retail pricing undercut it’s pricing to wholesale customers competing in the high-speed transmission services market – which was estimated to be worth $120 million per year when the Commission issued its proceedings in March 2004.The High Court determined Telecom leveraged its position to charge downstream competitors disproportionately high prices for wholesale access to its network, thus preventing a competitive marketplace.Any firm that contravenes section 36 of the Commerce Act may be order to pay penalties of up $10 million, or three times the value of any commercial gain resulting from the breach.Telecom has 20 working days to appeal the decision.Commerce Commission chair Dr Mark Berry is pleased with the court’s decision.“Today’s judgment is a timely reminder that the Commerce Act prohibits those with substantial market power from taking advantage of their position for anti-competitive purposes,” he says. “This important prohibition can apply even in regulated industries, to the extent that such firms are not constrained by the regulatory regime in question.”UPDATE: While Telecom stated this afternoon that it was “disappointed” with the High Court ruling in favour of the Commerce Commission, it was still undecided on whether it would continue with legal action in regards to the case.Telecom group general counsel Tristan Gilbertson says the case stems from the introduction of retail and wholesale pricing of data services more than a decade ago, and that the regulatory and competitive climate of the market then “was very different from today’s”.“The Commission’s claim related to pricing that was superseded in late 2004 by regulated data transmission service pricing,” he says. “Further regulation and, more recently, operational separation has meant that market conditions at the relevant time also no longer exist and have not existed for more than five years.”Telecom is currently reviewing today’s judgment before settling on a plan of action.“We have to focus on the future, not the past, and in that spirit we will now carefully consider whether we should continue legal action.”