The case that just will not die is set to go another round.On October 30 last year, the Commerce Commission won the right to challenge a Court of Appeal verdict that Telecom did not abuse its dominant market position with a controversial dial-up internet
The case that just will not die is set to go another round.
On October 30 last year, the Commerce Commission won the right to challenge a Court of Appeal verdict that Telecom did not abuse its dominant market position with a controversial dial-up internet surcharge during the 1990s.
The commission has won the right to appeal whether the Court of Appeal erred in applying the "counter-factual test" to the 0867 affair. That is, whether a company not in Telecom's dominant market position would have taken the same action.
The two sides will return to the fray today, with the case scheduled to be heard at the High Court in Wellington Monday through Thursday this week.
Telecom has previously said it is disappointed with the commission's determination to push on with the case given the “millions of taxpayers’ and shareholders’ dollars already spent on pursuing an historical case based on old legislation”.
Let us take you back, back ...
The so-called 0867 dispute saw Telecom instigate special fees for customers to head off Zfree (owned by Clear), i4free (owned by Annette Presley and Malcolm Dick) and other ISPs that offered free dial-up internet, making their money through voice-only era interconnection agreements that saw Telecom pay them every time one of their customers logged on.
On August 4 last year, the Court of Appeal ruled that the so-called “counterfactual” definition of monopoly power under Section 36 of the Commerce Act (1986) – that is, whether a hypothetical company without market dominance would have taken the same action as the company accused of abusing its monopoly power – did not apply in the 0867 case.
Picking the wrong fight
“The commission has been itching for some time to take a test case to the Supreme Court on the ‘counterfactual’ issue, dating back to the 2004 Privy Council decision, which the Commission saw as setting the bar too high for it to ever successfully prove a Section 36 market power case,” said Gary Hughes, a competition and regulatory lawyer at Wilson Harle.
Mr Hughes told NBR that the commission’s desire for a test case was understandable, but with the 0867 spat, it had picked the wrong fight.
“The need to always refer to a counter-factual and to no other test, as the touchstone for whether someone has abused market power has been criticised. So there is an important issue there to be ventilated before our highest court,” said Mr Hughes.
But witn the counter-factual argument has got tied up in knots.
“Deciding on a plausible ‘hypothetical other world’ rival in network markets is particularly hard, and some of the possible counterfactuals that were argued in the 0867 case became eye-wateringly complex,” said Mr Hughes.
Key dates
June 18, 1999 - Commission opens 0867 investigation into Telecom
July 31, 2000 - Proceedings filed
August 20, 2007 - High Court trial
April 18, 2008 - High Court decision
May 23, 2008 - Appeal to Court of Appeal lodged by commission
March 23, 2009 - Court of Appeal hearing
August 04, 2009 - Court of Appeal decision
September 01, 2009 - Commission seeks leave for Supreme Court appeal
October 30, 2009 - Supreme Court grants commission right to appeal
June 21, 2010 - Supreme Court hearing begins
