Record €66 million fine for Proximus

Summary

Telecoms giant Belgacom last week suffered its second major blow in a week, with the announcement that the Competition Council is to carry out an "informal" investigation of a demand sent by the company to its suppliers calling for price cuts of at least 20%. Earlier in the week, daughter company Proximus, the mobile phone operator, had received the biggest fine ever handed out in a competition case. The company will appeal the €66.3 million fine, given by the Council as a result of abuse of a dominant market position.

Proximus (c) Reuters
 
Proximus (c) Reuters

Parent company Belgacom faces new investigation

Telecoms giant Belgacom last week suffered its second major blow in a week, with the announcement that the Competition Council is to carry out an "informal" investigation of a demand sent by the company to its suppliers calling for price cuts of at least 20%. Earlier in the week, daughter company Proximus, the mobile phone operator, had received the biggest fine ever handed out in a competition case. The company will appeal the €66.3 million fine, given by the Council as a result of abuse of a dominant market position.

The fine relates to the period 2004-2005, when Proximus was dominant on the market of mobile telephony for business clients. The complaint was initially brought by BASE, which claimed it could not gain market share no matter how low its prices. Proximus would always match a price cut by BASE with one of its own, the complaint said.

The Council, on investigation, found that Proximus, which as a subsidiary of Belgacom controls the physical telephone network in Belgium, was charging less for calls between two of its own customers than it did for calls involving one of the other providers (Mobistar later attached itself to the BASE complaint). This meant that competitors would find it impossible ever to undercut Proximus tariffs. The Council supported the allegation of abuse of a dominant position. The fine itself is 15% of the €340 million in sales made by Proximus in that market sector in 2005, with an additional 30% because the offending behaviour was carried on over two years. Proximus is to appeal the fine, which could have been double, at 30% of sales, had the Council considered the offence grave enough. In special circumstances, the Competition Council has the authority to set a fine at 10% of the company's entire turnover - or €200 million for the period in question.

Nevertheless, the bill could still increase for Proximus, because the ruling from the Council is exactly the evidence needed by BASE and Mobistar for an action against the company claiming damages.

Later in the week, government minister Vincent Van Quickenborne announced he was sending the Competition Council in again, this time to Belgacom itself, to carry out an informal investigation into another possible competition offence. Belgacom, it emerged, sent a letter recently to suppliers, asking them to review their prices to help the company save 20% on its outgoings. In addition, the letter contained an announcement that Belgacom was planning a round of "sourcing optimisation" - in other words, cutting the number of suppliers to those most amenable to the company's requirements. Belgacom immediately defended its policy as no more than other companies do, especially in times of crisis. But Belgacom's size and market dominance, together with the implied threat in the letter, are factors which could lead to further difficulties with the Competition Council.

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Record €66 million fine for Proximus

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