Telecom loses appeal against $12m fine

Commerce Commission chairman Mark Berry said the record Telecom fine "sends a strong signal to businesses". Photo / Mark Mitchell

Telecom, the biggest company on the NZX 50 Index, is reviewing the Court of Appeal's decision affirming a record High Court-imposed fine of $12 million for breaches of competition law through the misuse of market power.

"We are reviewing the decision and considering next steps," the company said in an emailed statement.

"This judgment relates to conduct before sector-specific regulation, more than 10 years ago. Following structural separation (last year), the judgment relates to assets and services that now sit within Chorus."

The Court of Appeal upheld the fine imposed in the High Court in Auckland in April last year for breaches of section 36 of the Commerce Act. It has the right to appeal to the Supreme Court.

The court "found that from February 1999 to late 2004 Telecom unlawfully took advantage of its market power to charge downstream competitors disproportionately high prices for wholesale access to its network", the Commerce Commission said in announcing the decision.

"This prevented competitors from offering retail end-to-end high-speed data transmission services at a competitive price," it said.

Commission chairman Mark Berry said the fine "sends a strong signal to businesses that taking advantage of market power to prevent rivals from competing effectively is a serious breach of the Commerce Act".

In its High Court ruling last year, Justice Rodney Hansen said breach of section 36 of the Commerce Act "was the result of a deliberate strategy, apparently sanctioned at the highest levels of Telecom, to price data tails at a level that would preclude price competition between Telecom" and other service providers..

The fine is the highest imposed under the Commerce Act for anti-competitive conduct.

Shares of Telecom fell 1.1 per cent to $2.67 and have gained 28 per cent this year.