In the wake of recent developments at the competition authorities, which have so far caused more disappointment than relief for small businesses, an intriguing possibility emerges that an age-old and basic practice by Telkom may well be anti-competitive.
Telkom charges business clients R132 a month for the rental of an ordinary business line. For exactly the same line, technologically speaking, it charges R99 for residential customers. The difference of R33 a month won’t be enough to make any business owner take the case to the Competition Commission, but if Telkom services, say, 500 000 business lines, is it possible that it may be skimming off as much as R16,5-million a month from the South African business community in contravention of the Competition Act?
Telkom’s business centre, where orders for new lines are placed, confirmed that a business registered as a Close Corporation will not be able to order a residential line. The operator was willing, however, to register a residential line as long as the business owner put it under his own name, as opposed to that of his business.
Two years ago, the Cape Chamber complained to the Competition Commission on behalf of business owner Marius Marais that Telkom was forcing business owners to buy their faster and more expensive business internet broadband package. Businesses were prohibited from renting the slower but cheaper residential ADSL offering.
While the investigation dragged on at the commission, Telkom scrapped the difference between their residential and business ADSL packages. At the time, it denied that it was in response to the investigation. It said it was done to simplify the company’s ADSL range.
Keith Weeks, senior economic analyst at the commission, believes that the pressure of the investigation had at least something to do with changes in Telkom’s product offering.
Commenting on the possibility that a similar case could be made that Telkom’s differentiation between residential and business telephone lines is anti-competitive, Weeks said he “wouldn’t say no”, but that a careful investigation would have to be made of the difference between the two offerings.
He was aware of the fact that Telkom argued that business customers enjoy priority when it comes to fixing faulty lines and that this was supposed to be the basis of the price difference. During the ADSL investigation they had asked Telkom to provide evidence of the priority, but it was never received.
Most lawyers approached for comment said that a successful case of price discrimination, where a dominant company charges different customers different prices for the same service, is very hard to make, because the law requires proof that the practice leads to a “substantial lessening of competition”.
A few years ago, owner-manager Jim Foot lost a lengthy legal process against chemical giant Sasol. Foot had proved, by obtaining official Sasol price lists, that he was paying substantially more for the creosote — the chemical used in treating tar poles — than his larger competitors. He eventually lost the case because he could not prove that the price discrimination practised by Sasol substantially lessened competition in his industry.
But one commentator said that in the recent Mittal Steel case, the Competition Tribunal found that Mittal’s ability to “stratify the market, segment the market and charge different segments of the market different prices”, signalled to the tribunal that excessive pricing was being practised. A similar argument could be made for Telkom’s segmentation of residential and business line rentals.
But competition lawyer Nkonzo Hlatshwayo of Webber Wentzel Bowens said not everyone is sure “whether the tribunal got it right”, and that the Competition Appeal Court may overturn the ruling.
Telkom spokesperson Khulani Qomaka said Telkom would not divulge the number of its business line customers, as this is commercially confidential information. Nor could it comment on any possible changes to its products and services, as the company was trading in a “closed period” just before the release of its financial results. It would respond in writing about accusations that it was profiteering, he said. At the time of filing, no response had been received.