Telecom's loyalty offers under investigation

Photo / Martin Sykes

The Commerce Commission has opened an investigation into loyalty offers made by Telecom's wholesale business unit.

The decision followed findings by the Independent Oversight Group (IOG) that the loyalty offers were a breach of Telecom's separation undertakings, the commission said today.

It had also received complaints about the same matter.

The commission said its investigation would assess whether there was a breach of the undertakings. It would seek the views of Telecom Wholesale and complainants before reaching a decision.

The commission expected to issue a decision by October 9 on whether or not any enforcement action was needed.

In the event that a breach of the undertakings had occurred, the High Court may issue remedial orders and/or monetary penalties and damages, the commission said.

It had also received a complaint about the same loyalty offers under the Commerce Act, but the commission had not decided whether to start a separate investigation under that legislation.

If the commission found Telecom failed to comply with the separation undertakings, it may request the High Court impose penalties of up to $10 million for the breach.

Under the loyalty programme, Telecom Wholesale offered customers discounts if they gave it at least 90 per cent of their business.

On Thursday the IOG said it investigated the wholesale loyalty offers after complaints from Vodafone and Kordia.

It upheld complaints about an Auckland loyalty offer Telecom launched last December and a New Zealand loyalty offer launched in March.

Scott Bartlett, chief executive of Kordia-owned Orcon said the loyalty offers had been structured in such a way as to disadvantage Orcon, which had led the unbundling of the local loop, and its customers.

Following the IOG decision on Thursday, Telecom Wholesale chief executive Matt Crockett said the loyalty offers would be removed as soon as practicable.

The IOG's review of the offer was the first guidance on some complex operational separation rules so its decision was important, Mr Crockett said.

He said the loyalty offers had been launched to compete for business, and Telecom Wholesale felt the offers were consistent with, and in the spirit of, the undertakings and competition.

- NZPA