The settlement agreement entered into between the Competition Commission (Commission) and Telkom addresses various complaints lodged against Telkom from 2005 to 2007 by the Internet Service Providers Association and others.

The content of the complaints were that Telkom had abused its dominance and engaged in 'margin squeeze' conduct.  Specifically, it was found that Telkom was guilty of charging excessive prices for certain bandwidth transmission lines and undersea cable lines and that Telkom set prices for certain wholesale services at levels which were not competitive with Telkom's own retail internet access services.  It was also found that Telkom bundled certain internet access services to other unrelated access services in contravention of the Competition Act.  This bundled package was priced far lower than similar services which end customers would purchase.

In the settlement agreement, Telkom has agreed that the pricing of its wholesale services resulted in a 'margin squeeze' and that the bundling of certain access services with unrelated access services resulted in anti-competitive conduct.  Consequently, Telkom has agreed to pay a penalty of R200 million over a three year period.

Furthermore, Telkom is to introduce a separation between its retail and wholesale operations as well as a transfer pricing programme to regulate transactions in its provision of network services between its wholesale and retail divisions.  Measures also include a code of conduct that would guard against discrimination against other internet service providers as well as keeping confidential service information in the wholesale division from the competing retail division.  Telkom is also to reduce the price of wholesale services between 2014 and 2016.

It is clear form this finding, that a higher standard of conduct is expected of dominant firms who must be cautious in their business activities and not engage in conduct that permits these firms to abuse their dominant positions or engage in exclusionary conduct that falls foul of the Competition Act.

Written by Pia Harvey, Director, Competition, Cliffe Dekker Hofmeyr