March 2001

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Contents

Summary

Chapter 1 - Introduction

Chapter 2 - The Telecommunications Act

Chapter 3 - The Competition Act

Chapter 4 - Who can make a complaint?

Annex A

Annex B

Summary

S.1 This document gives guidance on how to make a complaint to Oftel about possible breaches of licence conditions or anti-competitive behaviour. It is aimed primarily at telecoms businesses and their professional advisers. Advice for consumers is available from Oftel's Consumer Representation Section and Oftel is also about to publish new guidelines for consumers.

S.2 The main way in which Oftel seeks to achieve its goal of choice, quality of service and value for money for consumers is through competition. It is important, therefore, that any anti-competitive behaviour by telecommunications companies is tackled quickly and effectively. Oftel has powers to tackle anti-competitive behaviour under licences granted to operators under the Telecommunications Act 1984 as well as powers under the Competition Act 1998.

S.3 Complaints about possible breaches of either licences or the Competition Act are a key source of information to Oftel about possible anti-competitive behaviour. Oftel welcomes such complaints.

S.4 This document is designed to help those wishing to complain to Oftel about such possible breaches. It sets out the key information that complainants should submit about themselves, the company being complained about and the behaviour or practice giving rise to the complaint. It also provides a summary of Oftel's powers and procedures and explains how Oftel will keep in touch with complainants during the course of investigations.

Chapter 1

Introduction

1.1 Oftel's goal is to provide the best possible deal for the customer in telecoms markets in terms of quality, choice and value for money. We believe that the best way to achieve this is to ensure that the telecoms industry moves towards fully competitive markets in networks and services. This aim is fully in line with the Director General's duty under Section 3(2)(b) of the Telecommunications Act 1984 to `maintain and promote effective competition between persons engaged in commercial activities connected with telecommunications in the United Kingdom'. Open and fair competition will encourage innovation, offer the consumer a better choice, improve quality and, ultimately, drive prices down.

1.2 In January 2000 Oftel published a statement of its strategy - Achieving the best deal for telecoms consumers. The statement can be found on the Oftel website at http://www.oftel.gov.uk/about/strat100.htm. It sets out the regulatory approach which Oftel will use in response to the growth of competition within the UK telecoms markets. As the various markets become increasingly competitive, Oftel intends to adjust regulation appropriately. Formal regulation by means of licence conditions or rules will still have a part to play but Oftel also wishes to encourage industry members to identify and take up opportunities for self-regulation and co-regulation.

1.3 It is important, therefore, that all members of the industry are familiar with their own compliance responsibilities and recognise the responsibilities of their competitors. It follows, too, that the success of the strategy in achieving effective competition is dependent, to some extent, on firms being willing and able to complain effectively to Oftel, so that anti-competitive conduct can be identified and remedied.

1.4 Oftel commits substantial resources to investigating and, where appropriate, remedying, conduct which may be anti-competitive or breach an operator's obligations under a Telecommunications Act licence. Some of these investigations are undertaken on Oftel's own initiative but the majority come about as a result of complaints received from, amongst others, telecoms operators and service providers. We are keen to encourage such complaints and, to this end, the purpose of this guidance is to assist complainants in making their complaints in a form which will enable Oftel to examine and resolve them as quickly and effectively as possible.

1.5 Please note that this guidance is not relevant to complaints from individual consumers which are dealt with by Oftel's Consumer Representation Section. Guidance for consumer complaints can be found on Oftel's website at http://www.oftel.gov.uk/consumer/advice/contact_us. In addition, Oftel will shortly publish new guidelines in leaflet form for consumers.

1.6 Please note too that guidance on Oftel's approach to complaints about charges and other terms and conditions for interconnection is to be found in the document `Guidelines in the Operation of the Network Charge Controls' on the Oftel website at http://www.oftel.gov.uk/pricing/ncc1097.htm. These guidelines are currently being updated and the revised version will be published later this year.

1.7 As a result of a consultation exercise undertaken in September 1999, Oftel concluded that it would be appropriate for Oftel, rather than any third party, to investigate and determine on disputes concerning services made available by operators with significant market power (SMP) to providers of fixed public telephone systems or services. A Statement was issued in September 2000 and can be found on the Oftel website at http://www.oftel.gov.uk/consumer/disp0900.htm.

1.8 This guidance supersedes that published by Oftel in December 1997 - `Dealing with anti-competitive behaviour - an Oftel guide' and incorporates the main provisions of that guidance. In all cases it is important that as much relevant information as possible is provided to support the complaint and the guidance outlines the ideal way to structure and present the information. Annex A provides a checklist for complainants. The essential elements are:

• Details of complainant
• Details of target of complaint
• Summary of complaint
• Information about the relevant market and levels of competition in that market

1.9 Annex B contains details of the kind of information that Oftel often requires in order to define a market and assess levels of competition.

1.10 The Director General of Telecommunications (the DG) has powers to investigate complaints under either the Telecommunications Act or the Competition Act and will choose to act under whichever legislation is more appropriate in the specific case under consideration.

Chapter 2

The Telecommunications Act

2.1 Under the Telecommunications Act, the Director General will investigate possible breaches of licence conditions. Listed below are those conditions which Oftel most commonly uses or considers using to ensure fair trading by licensees. Broadly speaking, they fall into the following categories:

• conditions requiring the licensee to provide services to the public - eg conditions 38-42 (universal service obligation) of BT's and Kingston's licences;
• conditions requiring the licensee to publish the terms and conditions on which it provides services to the public - eg condition 7.1 of the PTO licence;
• conditions which directly prohibit anti- competitive behaviour - eg in particular condition 8 (prohibiting undue preference/discrimination) of the PTO licence where these relate to services that the licensee is obliged to provide under its licence;
• conditions giving the Director power to control the anti-competitive effects of unfair subsidy of businesses - eg condition 75 of BT's licence;
• conditions to prevent an operator reducing margins for the provision of certain services to a predatory level - eg condition 71 of BT's licence.

Enforcement action under Telecommunications Act

2.2 If following an investigation, Oftel concludes that a licensee is contravening or had contravened and is likely again to contravene one or more of its licence conditions, the Director General will take enforcement action, by issuing a final order. Where the Director General considers that a licensee is contravening, or had contravened and is likely again to contravene any of its licence conditions, and it is requisite that a provisional order be made, he shall (instead of taking steps towards the making of a final order) take enforcement action by issuing a provisional order, requiring the licensee to do such things as specified or described in order to secure compliance. In deciding whether or not to make a provisional order, the Director shall have regard to the extent to which any person is likely to sustain loss or damage as a consequence of any contravention of a licence condition, before a final order may be made. A provisional order will lapse after two months.

2.3 If a licensee fails to comply with an order and any person suffers damage as a result, that person is entitled to bring an action for damages or other appropriate relief against the licensee. The Director General can also obtain an injunction or other appropriate relief from the courts to ensure compliance with his order.

Chapter 3

The Competition Act

3.1 The Competition Act is based on Articles 81 and 82 of the EC Treaty. It contains two prohibitions:

• of anti-competitive agreements

• of abuses of dominance

3.2 In order for a complaint to be upheld it will be necessary to demonstrate that the agreement or conduct complained of falls within the scope of the Competition Act: ie

• For the Chapter I prohibition: that there is an agreement or concerted practice between two or more undertakings which has as its object or effect the prevention, restriction or distortion of competition; that this agreement has an appreciable effect on competition within the United Kingdom and that it was intended to be implemented within the United Kingdom: and/or

• For the Chapter II prohibition: that an undertaking is in a dominant position, that it is abusing its dominant position and that this abuse affects trade within the United Kingdom. In order to prove an undertaking is in a dominant position, the relevant product and geographic markets will need to be defined.

3.3 Oftel has published guidance on The Application of the Competition Act in the Telecommunications Sector. The OFT has also published a substantial amount of guidance on the various key concepts of the Competition Act. Details of these publications can be found at paragraph 4.23 below.

3.4 The Director General of Telecommunications is able to exercise, concurrently with the Director General of Fair Trading (DGFT), almost all of the functions of the DGFT under the Competition Act in so far as those functions relate to commercial activities connected to telecommunications. Therefore, complaints relating to matters falling under either of the prohibitions of the Competition Act may be made either to the Office of Fair Trading (OFT) or to Oftel. The information requirements will be effectively the same and arrangements are in place between the two offices to decide who should deal with a given complaint. Usually, complaints about commercial activities connected with telecommunications will be dealt with by Oftel even if made originally to OFT.

3.5 Under the Telecommunications Act, Oftel has a duty to investigate any non-trivial complaint from any source. Under the Competition Act, it is for Oftel to decide whether or not to investigate a complaint.

3.6 The more information you can provide at an early stage, the better. The following paragraphs indicate the points you should consider and the kind of information that you should try to include in your submission to Oftel.

Chapter 4

Who can make a complaint?

4.1 Complaints may come from:

• Individual firms
• Their legal representatives
• Trade associations
• Industry groups (both formal and ad hoc)

4.2 Complainants are welcome to discuss a case informally with Oftel before making a formal submission. To do so, telephone the Competition Hotline on 020 7634 8833.

Set out the complaint clearly

4.3 Please make your complaint in writing, addressed to:

The Quality Assurance Manager
Compliance Directorate
Oftel
50 Ludgate Hill
London
EC4M 7JJ

Fax No: 020 6734 8949

4.4 If you prefer to use e-mail, we have set up the following dedicated e-mail address for complaints by industry members:

e-mail: competition.complaints@oftel.gov.uk

4.5 Please provide your business name, address, telephone/fax number, and/or e-mail address and, if relevant, the contact details of a person who can discuss the detail of a complaint.

4.6 Please give a brief explanation of the nature of your business (eg Network Operator, ISP etc) and its scale (local, national, international - approximate turnover is helpful).

4.7 Please provide details of the target(s) of the complaint

4.8 Summarise the complaint, including details of any relevant contact with the target of the complaint. A short chronology of events may be helpful.

4.9 If possible, explain which part of the Competition Act ie Chapter I - anti-competitive agreements and/or Chapter II - abuse of a dominant position or which licence conditions you believe the target of the complaint has breached

4.10 Please confirm whether Oftel may disclose your name to the target of the complaint. Oftel recognises that there are some circumstances in which complainants prefer to remain anonymous but that may hinder full explanation of the problem to the target of the complaint, thus limiting the effectiveness of the investigation. Oftel will accept anonymous complaints but cannot guarantee to follow them up. Please confirm too whether Oftel may disclose your name when publishing the basic details of the complaint in its quarterly Competition Bulletin.

4.11 Explain what remedy, if any, you are seeking.

4.12 If relevant, provide names of other industry members who can support your complaint.

Provide supporting evidence

4.13 As well as a short summary of the specific concerns, it would be helpful if you were able to provide supporting information as soon as possible, making clear which parts, if any, are confidential. You should put any confidential information into a separate annex. If you do so, please also supply a `non-confidential' version of your complaint. Supporting evidence will normally include:

• A description of the products or services you offer and whether and to what extent you manufacture them yourself or buy them in. State to whom they are supplied (eg to end users or resellers/ retailers),
• An explanation of how the behaviour complained about has affected or is likely to affect your business. If possible, provide facts and figures about contracts lost or not obtained. Copies of relevant correspondence or e-mails as well as notes of meetings and of telephone conversations etc would also be useful,
• Your assessment of the urgency of the complaint, with reasons.

If possible, provide some analysis of the relevant market

4.14 In order to investigate an alleged breach of licence conditions or of the Competition Act, Oftel will need to obtain certain information from both you and the target of the complaint to enable us analyse the relevant market(s). If you can provide some basic information at the time of making the complaint, it will help to speed up the investigation process.

4.15 Information about the markets involved is fundamental to any investigation of alleged anti-competitive behaviour. For example, in order to take action against an abuse of dominant position, it is necessary to establish the market(s) - if any - in which the dominant position exists, identify the firm(s) that hold that position and then assess the effect of the alleged abuse on competition. Annex B sets out the type of questions which will have to be answered in an economic analysis of the market(s). Not all the questions will necessarily be relevant in every case. (eg in a new market, there may not be a great deal of information available). Oftel recognises that smaller firms may not have the resources available to enable them to provide a full analysis of the market but, the more information you can provide at the start, the sooner Oftel will be able to make a decision on your complaint.

Keep Oftel informed of relevant developments

4.16 Sometimes, having made a complaint to Oftel about another firm, complainants continue to negotiate about the problem with that firm. This may well lead to resolution of the complaint, to the benefit of both parties. If such negotiations take place, it is important to keep Oftel informed of any developments.

What will Oftel do?

4.17 Oftel will open a preliminary investigation into your complaint. The aim of this investigation is to establish the facts of the case and, if necessary, to undertake initial economic, legal and technical analysis in order to decide whether prima facie evidence of anti-competitive behaviour exists. Oftel may also wish to seek information from the target of the complaint. You will receive an acknowledgement letter which will seek your consent to disclosure of your details during the course of the investigation. The letter will be signed by the case officer dealing with your complaint and will also include the name of an alternative Oftel contact (usually a casework manager). Oftel aims to complete the preliminary investigation within six weeks of receipt of a complaint.

4.18 If it appears that the behaviour complained about may be a breach of licence conditions or of the Chapter I and/or the Chapter II prohibition, Oftel will proceed to a full investigation. At that stage, we will write to you again explaining how we propose to take forward the investigation. Relevant information will be gathered from all available sources and the complaint will be analysed fully by the casework team. We will aim to send you an update on progress at least every six weeks. When Oftel reaches a decision on the complaint, you will be given an explanation of the reasons for that decision. Currently, Oftel aims to complete 80% of investigations within 6 months and all investigations within 12 months.

4.19 Occasionally, when resolving a complaint, Oftel will have to take decisions which have major policy implications for consumers or for a sector of the industry. In such situations, it may be appropriate for Oftel to consult with interested parties before taking action. The form of consultation will vary according to the circumstances, and Oftel will try to minimise the delays which consultation can cause. In general, public bodies such as Oftel are expected to allow at least 12 weeks for responses to written public consultations, but there is scope for timescales to be reduced, particularly where all interested parties are able and willing to engage in swifter, less formal, types of consultation. Oftel will make use of this flexibility where appropriate.

4.20 Oftel may also be required, by law or by the terms of a licence condition, to consult publicly in a specific form before taking action. However, in many such cases the Director General has discretion to determine what might be a ‘reasonable period’ for consultation, subject only to the legitimate expectations which past behaviour may have established. Oftel will continue working with industry and consumers to ensure that it achieves the optimum balance between swift action and appropriate consultation. Any changes to established practice will be publicised.

4.21 Oftel publishes basic details of all complaints quarterly in the Competition Bulletin. Companies who are not party to a particular complaint but who feel they have something useful to contribute to its investigation are free to provide comments to Oftel.

Interim Measures

4.22 Under the provisions of the Competition Act 1998, Oftel has power to take interim measures before completion of an investigation. In order to exercise this power, Oftel must have a reasonable suspicion that the Chapter 1 or the Chapter 11 prohibition has been infringed and must believe that it is necessary to act urgently either to prevent serious irreparable damage to a particular person or category of persons or to protect the public interest. Therefore, if requesting interim measures, you should be prepared to explain exactly how your business has been affected.

Availability of further guidance

4.23 For further information, you may wish to consult the guideline on The Application of the Competition Act in the Telecommunications Sector which can be found on the Oftel website at http://www.oftel.gov.uk/competition/cact0100.htm

4.24 The OFT has also published a series of guidelines, giving more detailed information about the Competition Act. You may find the following useful in helping to structure your complaint:

• OFT 400 The Major Provisions
• OFT 401 The Chapter 1 Prohibition
• OFT 402 The Chapter 11 Prohibition
• OFT 403 Market Definition
• OFT 415 Assessment of Market Power
• OFT 414 Assessment of Individual Agreements and Conduct
• OFT booklet - `Making a complaint - A guide to making a complaint under the Competition Act 1998'

4.25 To obtain copies of the OFT publications listed above, you should telephone 0870 60 60 321 or e-mail: oft@echristian.co.uk. You may also download copies of the guidelines from the OFT website at http://www.oft.gov.uk.

Oftel contacts

4.26 If you wish to discuss any aspect of this guidance note, please contact Maeve Gallagher on 020 7634 8777 (e-mail: maeve.gallagher@oftel.gov.uk) or Tim Cross on 020 7634 8798 (e-mail: tim.cross@oftel.gov.uk).

Annex A

Complainant Check List

A.1 Name, address, e-mail address, telephone and fax numbers of complainant or nominated contact.

A.2 Name and relevant details of target of complaint

A.3 State which part of the Competition Act and/or which licence condition(s) breached

A.4 Summary of complaint with copies of any relevant evidence - letters, e-mails etc.

A.5 Analysis, if possible, of the relevant market

• Definition of the market
• Level of competition in the market
• Effect on competition of the alleged behaviour

A.6 Remedies sought

A.7 Permission to disclose complainant's name

Annex B

Market definition and analysis of levels of competition

B.1 The main areas to consider are set out below. It is not an exhaustive list and, in the case of more complex complaints, Oftel may need to ask for supplementary, more detailed information. When considering these issues, you may find it helpful to refer to the various technical guidelines on competition issues listed at paragraph 12 of this document.

B.2 Market Definition

• What is your understanding of the relevant market(s)?
• Who are the target customers? What features of the product or service are important to them?
• Are there any close substitutes for the product or service? How would customers react if the price went up? Could they buy an alternative product more cheaply?
• How easily could you switch to supplying (or buying) an alternative product? (eg is production equipment dedicated or are costly special connections, maintenance, staff training etc required to use a substitute?)
• Does your product share a common technology or common network facilities with any other?
• Could any other firms switch existing capacity to supply the product?
• What is the extent of the geographical market for the product or service (ie regional, or national)?

B.3 Level of competition in the relevant market

• Who are the key players and what are their approximate market shares (by value and by volume)?
• How have market shares moved in the last 2-5 years?
• What is the approximate total size of the market - in value and volume terms - and has it changed in recent years?
• How do firms in the market compete (eg mainly on price or on quality/service)?
• How is competition organised - eg are there formal tendering processes? Are there long-term contracts?
• How do prices differ between firms? What is the price history of the market (eg upward or downward trend)?
• Are economies of scale or of scope important in the market?
• Are there any significant first mover advantages to be had?
• What barriers to entry or exit exist?
• Have any new firms entered in the last 3 years? Have any exited?

B.4 Nature of breach and possible remedies

• Which licence conditions (Telecommunications Act) or which provision(s) of the Competition Act do you consider may be relevant?
• What remedy would be appropriate, in your view?
• Are you aware of any previous complaints of this type against the target of the complaint?