Telecom hit with record 'price squeezing' fine

The High Court in Auckland has imposed a $12 million penalty against Telecom for breaching section 36 of the Commerce Act in the so-called ‘data tails’ case.

The penalty is the highest imposed under the Commerce Act, which was amended in 2001 to increase the fines available for anti-competitive conduct.

The case dates back to October 2009, where the High Court determined that from 2001 to 2004 Telecom unlawfully leveraged its market power to charge downstream competitors disproportionately high prices for wholesale access to its network, preventing them from offering competitive services.

In the penalty judgment issued today, Justice Rodney Hansen said that the exclusionary effects of Telecom’s conduct "were injurious to competitors, brought significant benefits to Telecom and were damaging to the competitive process.”

The Judge noted that "[t]he breach was the result of a deliberate strategy, apparently sanctioned at the highest levels of Telecom, to price data tails at a level that would preclude price competition between Telecom and other [telecommunications service providers]”.

Hansen said that the penalty should reflect the size and financial circumstances of Telecom and its position in the industry.

Telecom has appealed the judgment and the hearing is scheduled for September.

In a statement about the penalty, Telecom said that the ‘two data tails’ breach was technical and unintentional, and this is the basis of its appeal.  "While today’s judgment notes that Telecom’s pricing strategy was deliberate, it emphasises that Telecom did not engage in a 'flagrant or willful' breach of the Act.

The full penalty judgment is on the Commission’s website.