Ofcom has announced that BT Wholesale, despite having operated a margin squeeze on telecoms products, will not be fined as in Ofcom’s view there was insufficient evidence of anti-competitive effects.
Gamma and Thus made a formal complaint back in 2008 that BT Wholesale was abusing its dominant position in the market by conducting a margin squeeze, i.e. by pricing its wholesale calls to its customers below cost such that an equally efficient operator could not properly compete with BT.
OFCOM has taken over 5 years to pursue this and has finally released its decision.
Bob Falconer, the CEO of Gamma says “We really are very disappointed with OFCOM over both the timescales and the appeasing nature of the final decision. BT Wholesale has been found to have operated a margin squeeze; the basis of our complaint has been upheld; and yet no action is being taken. The reason given by Ofcom is that there was insufficient evidence that the margin squeeze caused anti-competitive effects.
We believe that this is a flawed decision, and fails to recognise the pressure exerted on BT Wholesale’s competitors at the time. Gamma survived only by rapidly diversifying into new products, and Thus was acquired by C&W in the second half of 2008.
Our view is that this demonstrates a failure to regulate the market in an effective and timely way. It appears to give a green light to market abuse so long as a dominant player’s competitors are crippled rather than completely destroyed. Unfortunately we feel we can no longer rely on Ofcom to create a level playing field. In an industry that still desperately needs a greater level of genuine competition, this is really poor.”
Gamma will be considering the decision and will respond appropriately over the coming weeks.