The South African Competition Appeal Court has upheld the decision of the Competition Tribunal in favour of Orion Telecom Networks Inc., regarding Telkom SA Ltd.’s withholding of the terms of its “secret” deals with Standard Bank Group and Edgars Consolidated Stores Ltd. for the provision of telephony and related services.
In what Orion says is a landmark complaint lodged against the telecommunications monopoly, Orion Telecom claimed that Telkom had unlawfully induced Standard Bank and Edgars to end their contractual relationships with Orion Telecom for the provision of cellular least cost routing services. The company feels that, in light of the impending liberalization of the telecommunications market in SA, its victory is a high-profile showpiece for the government’s plans to clamp down on anticompetitive behavior. Telkom is offering very select deals to only a few major corporations, while the rest of the SA corporates and the public still have to pay high prices for telephony and subsidize Telkom’s clandestine dealings with select large corporates. These deals are then used by Telkom to kill off competitors.Don Tredoux>Text
Says Don Tredoux, MD of Orion Telecom: “In spite of Telkom’s attempts to hide the proverbial smoking gun, the Competition Appeal Court saw through Telkom’s ruse and affirmed that the agreements were not confidential.” Tredoux says that he received the two unmarked confidential contracts between Edgars and Standard Bank and Telkom Tuesday morning and says that they basically confirm Orion’s claims in terms of the matter against Telkom of “stealing” Orion’s customers.
On Dec. 10, 2004, seven days before the Competition Appeal Court’s ruling, Absa in a letter to Orion also cancelled its contract with the company and announced its departure for Telkom’s services. In line with the Competition Appeal Court’s decision to force Telkom to reveal the terms of its previous agreements, Orion Telecom has now requested the terms of the Absa deal from Telkom and, in the event that Telkom is found to have unlawfully induced Absa, Orion intends to refer Telkom’s behavior to the competition authorities.
“The terms of the Standard Bank and Edgars agreements strongly support our case, and we expect the terms of the Absa agreement to do the same. Telkom is offering very select deals to only a few major corporations, while the rest of the SA corporates and the public still have to pay high prices for telephony and subsidize Telkom’s clandestine dealings with select large corporates. These deals are then used by Telkom to kill off competitors,” Tredoux said. He adds: “We are currently completing our final affidavit, which is about 90 percent done, to be handed to the tribunal, and, with the new information contained in the documentation, will add to it, in order to sustain our claims.”
While Telkom maintained until the ruling that the contracts in their entirety did not contain any inducement, and that the contracts were confidential, Tredoux states that even the sections of the contracts Telkom had initially handed over were sufficient to show illegal inducement. “Of significance,” he says, “is the fact that the Standard Bank contract contains a clause specifically inducing Standard Bank to discontinue trading with Orion Telecom and to move all of its business to Telkom for an across-the-board discount. Clause 5.7, which is not confidential per the Competition Tribunal and Appeal Court, states that ‘(Standard Bank) undertakes to use Telkom for all fixed-to-fixed and fixed-to-cellular calls for the term of this agreement.’
Accordingly, for the bank to receive the benefits of the Telkom offering, they would have had no choice but to cancel with Orion Telecom. This is in fact what happened and is one of the bases of complaint which Orion Telecom placed before the Tribunal.”
He notes that it is funny that it is the inducement clause in both these contracts that has been changed, whilst much of the two contracts stayed the same. “And this is even evident from the marked copies that are, under the terms of the ruling, public domain.”
Orion Telecom argues that Telkom is cross-subsidizing competitive services with services for which it already has a monopoly, and intends to prosecute the matter to the full extent of SA Competition Law. In a newly competitive telecommunications environment, Orion Telecom claims Telkom should not be able to hide its anti-competitive behavior behind a veil of confidentiality, to the detriment of local corporates, and, ultimately, the consumer.
Naturally Tredoux could not comment on any of the classified information within the contracts, but says: “We are pleased that we went the extra mile and stuck it out, to get the documents.” Does this statement indicate that what is contained in those documents could aid Orion in its future actions?
Telkom had not responded to our enquiries at the time of going to press, but said it would get back to us with comment as soon as possible.