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Summary

Introduction

1. Ofcom has imposed regulation on some companies it has found to be dominant, requiring them not to unduly discriminate, to prevent them from using their dominance to the detriment of competition and consumers.
2. This consultation proposes how Ofcom may investigate potential contraventions of these requirements. The current approach was designed before the Communications Act 2003 was made law and we consider that the approach should be reviewed in light of our experience of enforcing the Act^(-1-).
3. The consultation will be of interest to:
   
   
   • SMP Providers^(-2-) that are subject to a Requirement not to unduly discriminate; and
   • the customers and competitors of those providers within the markets affected; and
   • other stakeholders who are interested in the effectiveness of competition within communications markets.

4. This consultation does not cover Ofcom's approach to investigating potential exploitation of customers on equality or fairness grounds that may be prohibited by the same requirements; or other discrimination prohibitions imposed under the Act; or investigations of compliance with the Competition Act 1998.
5. Feedback on these proposals is welcomed. Please send your response to katie.miller@ofcom.org.uk by 5pm on 8th September 2005. Further details on how to engage with this consultation are set out in annex 3.

Summary

6. This consultation considers Requirements not to unduly discriminate between customers, on competition grounds, imposed on providers that Ofcom (the Office of Communications) considers to have significant market power ( SMP providers).
7. A typical Requirement not to unduly discriminate, imposed on SMP providers under section 45 of the Communications Act 2003 (the Act) reads:

   The Dominant Provider shall not unduly discriminate against particular persons or against a particular description of persons, in relation to [Network Access].

Section 4 sets out the legal basis for Requirements not to unduly discriminate.

8. The approach to investigating compliance with these requirements, which is proposed in this consultation, has two parts.
9. Firstly, in all cases, the proposal sets out the questions that may be considered during an investigation. This would not prevent Ofcom from considering each potential contravention on the facts of the case.
   
   
   • Ofcom will consider whether any differences in transaction conditions (e.g. the product, its reliability, timing of provision, information about the product) offered to two customers reflect relevant differences in the customers' circumstances; or
   • whether any relevant similarities in customer's circumstances are reflected in transaction conditions offered to two customers.
   • Ofcom will consider whether any differences (or similarities) in transaction conditions that are not objectively justified by relevant differences (or similarities) in the customers' circumstances might harm competition.
     

10. In determining whether any differences (or similarities) identified might harm competition Ofcom will consider:
    
    
    • the capability that the behaviour had to harm competition; and
    • the capability that the behaviour has to harm competition; and
    • the capability that the behaviour will have to harm competition if it is allowed to continue.

11. Secondly, Ofcom proposes that differences in non-price transaction conditions^(-3-) offered by an SMP provider in favour of its own downstream business (a vertically integrated SMP provider) should be treated as a special case.
12. That is, Ofcom may presume undue discrimination when a vertically integrated SMP provider offers the same price, but different non-price transaction conditions to an external wholesale customer, when compared to a downstream business owned by the SMP provider.
13. The SMP provider will then have the opportunity to provide evidence demonstrating that differences are objectively justified, and Ofcom will consider any evidence provided in light of the questions above.
14. The reasons for reviewing our approach and the benefits of guidelines are addressed in section 2. The meaning of undue discrimination and the reasons why non-price differences offered by vertically integrated providers are considered a special case are covered in section 3. The proposals are contained in section 5. A description of some non-price transaction conditions that may lead to undue discrimination are given in annex 1.

 

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Footnotes:

1.-Throughout this document the Act refers to the Communications Act 2003

2.-SMP providers means providers Ofcom considers to have significant market power

3.-non-price transaction conditions mean features of a product other than price (see Glossary)

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