2.1 The text of the condition is set out in Annex A. The condition is simple in concept, and is modelled closely on the principles of European competition law which have been tested in European markets for over thirty years, and have led to the development of a wide body of jurisprudence from which the UK can learn. The same principles have now been introduced into the competition laws of the majority of individual EU Member States. In applying similar principles, Oftel is adapting a well understood body of law to the particular features of the UK telecommunications market, within the framework of the Telecommunications Act. This Act does not give the regulator or the courts power to impose fines, so (in contrast to a breach of the competition provisions in the EC Treaty), breach of the new condition could not result in retrospective fines, nor in the availability of rights of action for third parties, until the Director General has taken action to enforce the condition by order and a further breach is then perpetrated.
2.2 The new condition prohibits any abuse of a dominant position by a supplier in a telecommunications market, and any anti-competitive agreement between undertakings which materially affects competition in the UK market. In both cases the judgment of whether particular behaviour falls foul of the condition will depend not only on the precise form of the behaviour but also on an analysis of the economic effects of the activity. Breach of the condition could result in an enforcement order which, in turn, enables third parties to take action for any damages suffered if the licensee fails to comply with the order. The requirement that an adverse effect on competition be shown (whether resulting from an abuse of a dominant position or a restrictive agreement) is not as onerous for BT's as some existing tests currently contained in BT licence. Typical examples of practices caught by the condition are:-
2.3 In many cases, well-known competition law principles and existing jurisprudence from the application of UK and EU competition rules will mean that the likely effect of particular behaviour will be easy to foresee. In other cases detailed analysis will be necessary. The condition provides that before the Director General determines that the prohibition in the condition applies he must provide a reasonable opportunity within which to hear the views of the licensee and interested parties. Following the initial determination, a licensee can ask the Director General to look at the issue again, before he makes a final determination. An enforcement order can be issued at any time after an initial determination is made.
2.4 The condition has been designed to prohibit abusive activity only by those with dominance (or restrictive agreements entered into by those whose combined activity can have a material effect on the market). It is unlikely therefore to have a significant impact on the great majority of UK licensees for some time.
2.5 The proposed condition is designed to give all concerned confidence in Oftel's ability to take enforcement action where it becomes aware of anti-competitive behaviour. Oftel also believes that the condition shifts some of the responsibility for ensuring licensees are compliant with their licence obligations back onto licensees themselves. The general condition will require licensees to take commercial decisions in the context of the overriding need to trade fairly or face the consequences under the condition.
2.6 Against this backdrop, and in the light of the success of telecommunications liberalisation policy to date, the Director General considers that in certain areas of telecommunications regulation the time is now right for a dismantling of some of the detailed prescriptive rules in existing licence conditions. The deregulatory aspects of the Director General's proposals will apply (where appropriate) to all licences, not just that of BT. Where a licence contains the proposed new condition the Director General will propose the deletion of existing licence conditions equivalent to those proposed below in relation to BT's licence.
2.7 Annex B to this Statement contains two lists of current BT licence conditions which Oftel believes should be reviewed in the light of the proposed new condition. List A contains 17 conditions which Oftel believes could be deleted from licences without delay; List B contains 11 further conditions which Oftel proposes to review. Subject to representations, Oftel intends to begin statutory consultation on List A in March 1996. Discussions will also begin very soon on List B with a view to consultation as appropriate on some or all of this list by the middle of 1996.
2.8 Some of the conditions in these lists have been important in the past in promoting effective competition. Nevertheless, Oftel does not consider that it is necessary to maintain these prescriptive rules once the proposed new condition is in place. In some cases, the conditions will be replaced with guidelines on similar lines. The effect will be to maintain the (pro-competitive) objective of the detailed licence conditions, while allowing more flexibility for licensees in meeting this objective, and also ensuring that the objective cannot be evaded by means of slight variations in the precise form of the behaviour in question.
2.9 A proposed amendment to Condition 17A of BT's licence was the subject of consultation earlier this year. It is now proposed that the condition be deleted. The modification consulted on in July will not now proceed.
2.10 Consultees are invited to comment on the content of Lists A and B. For List A in particular, Oftel would need to know precise reasons why consultees believe the behaviour described in any of the conditions in this list would not be caught effectively by the proposed new condition, and why such behaviour still needs to be prevented. Any suggestions for further conditions not included in Lists A or B which might be deleted without causing detriment to the telecommunications market would also be welcome.
2.11 The telecommunications regime must be flexible and responsive to changes in market conditions. These changes can and do occur at a remarkable pace in this dynamic market. The regime must also be even-handed in its treatment of licensees. Some of the newer licences contain a condition which enables the Director General, in certain circumstances (for example where the licensee has an international connection authorisation in a foreign country) - but without having to prove dominance - to take action where it appears to him that "as a result of any act or omission of the Licensee either by itself or with or through any Associated Person competition in the provision of any telecommunication service or any particular description of telecommunications services in the United Kingdom is being or is likely to be restricted, distorted or prevented". Licensees subject to this licence condition include:-
and certain other individual licensees authorised to provide International Simple Resale.
2.12 This condition is similar, but not identical, in effect to the new condition proposed for BT's licence. Oftel considers that the proposed new condition is to be preferred because of its clear reference to dominance and the more direct relevance of the body of case law derived from application of the EC competition rules; and because of the more comprehensive scope and more direct enforcement procedures provided under the proposed new condition. Oftel therefore proposes that the new condition be introduced into all significant Telecommunications Act licences over a specified period of time. A suggested timetable for this process is set out in Annex C. It is proposed that the condition will be in the same form as that proposed for BT, and that the existing condition in the licences above be modified accordingly. The draft Guidelines will apply to all licences with the new condition. Simultaneously with the introduction of the condition into other licences, any detailed licence conditions which will no longer be necessary will be deleted, as for BT. Comments are invited both on the principle of including this condition in other licences, and on the proposed timetable.
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