Own-initiative investigation against BT about potential anti-competitive exclusionary behaviour

09 July 2004

Complainant: Ofcom own-initiative investigation
Investigation against: BT
Case opened: 31 March 2004
Case closed: 12 July 2004
Issue: Whether BT's changes to its retail residential PSTN tariffs due to be introduced on 1 April 2004 and 1 July 2004 ("BT's new retail tariffs") constitute anti-competitive behaviour.
Relevant instrument: Chapter II of the Competition Act 1998 (abuse of a dominant position) and Article 82 of the EC Treaty

Ofcom closed this case on 12 July 2004 by issuing a 'no grounds for action' decision. A non-confidential version of the decision has been prepared and is available at the link below.

http://www.ofcom.org.uk/bulletins/comp_bull_index/comp_bull_ccases/closed_all/cw007/cw_760_dec/

Case leader: Richard Thompson (e-mail: Richard.Thompson@ofcom.org.uk)
Case reference: CW/00760/03/04

Text published when the case was opened

Complainant: Ofcom own-initiative investigation
Complaint against: BT
Case opened: 31 March 2004
Issue: Whether BT's changes to its retail residential PSTN tariffs due to be introduced on 1 April 2004 and 1 July 2004 ("BT's new retail tariffs") constitute anti-competitive behaviour.
Relevant instrument: Chapter II of the Competition Act 1998 (abuse of a dominant position).

Update note - 13 May 2004

'On opening its investigation, Ofcom received a number of submissions from Carrier Pre-Selection Operators (CPSOs) and other stakeholders requesting that Ofcom seek interim measures under the Competition Act.

Ofcom has now reviewed the case for interim measures based on the evidence currently available to it and has decided not to seek interim measures at this time.

Ofcom's wider investigation remains open while it considers the issues in full in order to reach its final conclusions.

End of update note

Update note - 4 May 2004

The Competition Act 1998 has been amended as of 1 May 2004 in order to implement EC Regulation 1/2003 (the "Modernisation Regulation") into UK law. Ofcom now has the power under the Act to apply Article 81 and Article 82 of the EC Treaty in full, in addition to the Chapter I and Chapter II prohibitions.

As of 1 May 2004, Ofcom is conducting this investigation under Article 82 of the EC Treaty, in addition to under the Chapter II prohibition.

End of update note

On 24 March BT announced plans to withdraw its standard residential retail line rental and its standard PSTN call prices and migrate existing customers paying standard rates to BT Together Option 1. In addition and at the same time BT announced changes to both the fixed line rental element and the call prices of the BT Together residential payment plans. The new pricing on BT Together Option 1, and the migration of customers paying standard rates, is due to be introduced on 1 July 2004. The new pricing on BT Together Options 2 and 3 is due to be introduced on 1 April 2004.

Ofcom has received representations from 13 Carrier Pre-Selection Operators (CPSOs) and other stakeholders about the potential for BT's new retail tariff packages for line rental and PSTN calls to distort competition in the retail market(s) for PSTN calls.

Under section 25 of the Competition Act, Ofcom may conduct an investigation if there are reasonable grounds for suspecting that the Chapter II prohibition has been infringed.

In the light of Oftel's Fixed Narrowband Retail Services Market Review, Ofcom has reasonable grounds to suspect that BT is dominant in the market(s) for residential retail exchange lines and the market(s) for residential PSTN calls.

In addition, in the light of Oftel's Fixed Narrowband Wholesale Exchange Line, Call Origination, Conveyance and Transit Market Review Ofcom has reasonable grounds to suspect that BT is dominant in the market(s) for wholesale exchange lines and the market(s) for wholesale call conveyance.

CPSOs have alleged that, following the introduction of BT's new retail tariff packages for line rental and PSTN calls and given the wholesale price that they must pay BT for call conveyance, they will be unable to compete effectively with BT in the provision of PSTN calls to residential customers. That is, the concerns expressed are that the effect of BT restructuring its retail tariff packages for line rental and PSTN calls will be to exclude its competitors from the relevant retail market.

In light of the structure of BT's new retail tariff packages and the allegations made as to BT's conduct, Ofcom has reasonable grounds to suspect that BT has abused its dominant position in the markets identified above.

Case leader: Richard Thompson ( e-mail:Richard.Thompson@ofcom.org.uk)
Case reference: CW/00760/03/04