Would this have been legal?

June 13th, 2013 at 11:00 am by David Farrar

Tom Pullar-Strecker at Stuff reports:

Chorus made an expensive gamble in rejecting a deal that would have seen it paid just under $14 a month for wholesale copper connections, according to sources close to the failed negotiations.

Chorus’ share price has been on the slide since the proposed slashing the regulated price of wholesale copper broadband connections by about $12 a month to $8.93 in a draft decision in December.

But the company is understood to have chosen to take its chances persuading the commission to set a higher price or on government intervention.

It is understood all major telecommunications retailers agreed on the compromise price and Communications Minister Amy Adams, who would have had to regulate it over the head of the Commerce Commission, was informed.

The compromise was brokered by the Telecommunications Forum, whose chief executive, David Stone, declined to comment.

I’m not  lawyer, and welcome comment from lawyers who work with competition law. But I thought competitors couldn’t all sit down together and try to negotiate an agreed price level.

It didn’t eventuate in this case, but I think the possible precedent is somewhat alarming. The Commerce Commission is the appropriate body for pricing of monopoly utility services, not a private gathering of retailers with no input from consumers.

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7 Responses to “Would this have been legal?”

  1. b1gdaddynz (264 comments) says:

    It is illegal to have any agreement on a fixed price between competitors as this is clearly anti-competitive behavior! I’m not a lawyer but I work in retail and we have to go through annual training on this.

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  2. anonymouse (651 comments) says:

    But I thought competitors couldn’t all sit down together and try to negotiate an agreed price level.

    The Commerce act talks specifically about reducing competition within a market, and I think the the words “within a market” would be key to any action,

    Chorus would argue that the price they change is not a market prices ( they are the only [regulated] provider) and that given the price they charge is set by the Minister that there is certainly not a market.. thus the commerce act would not apply

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  3. AG (1,727 comments) says:

    It is understood all major telecommunications retailers agreed on the compromise price and Communications Minister Amy Adams, who would have had to regulate it over the head of the Commerce Commission, was informed.

    The bolded bit is the key. The price wouldn’t be what the companies have agreed between themselves to charge to the consumer (in a situation where they could charge less or more). It would be the amount that the Minister decrees (albeit based on the companies saying that it is what they want).

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  4. peterwn (2,933 comments) says:

    It is rather like airlines getting together to negotiate with an airport on landing charges. ‘Mischief’ would only occur if they together came to a ‘cosy’ arrangement, which has not happened in the airport cases. Regardless of legalities, it seems preferable that the telecom companies on one side and Chorus on the other try to see each others’ point of view and determine common ground. If UFB were not confusing the issue, then it would be in the interests of the telecom resellers to agree to a price which would encourage Chorus to expand its network to cater for extra traffic and to areas where subdivision and similar development is taking place. Probably the key thing would be that after say 12 months, retailers can individually negotiate with Chorus. In any case here, it seems the negotiations were robust and Chorus negotiators took an agreed figure to its management who rejected it. Similarly Telecom or Vodafone negotiators could have had their recommendations rejected.

    Chorus does face competition from wireless networks. It is quite feasible for a household with only a modest bandwidth requirement to use mobile broadband and telephone service, and forget about a landline. For example various bach owners who had landline phones have had them disconnected and rely on mobile only. A young professional I know does not have any landline connection (ie Chorus has a pair not earning anything), but relies on a mobile phone and shares (legitimately) a neighbour’s wi-fi.

    From my work experience, it is always better to come to an agreement with another department or division in a workplace, something which both sides are reasonably happy with. Escalating such matters to senior management risks a solution being imposed which is difficult to work with all round. Similar considerations apply here.

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  5. Viking2 (10,709 comments) says:

    Chorus are sitting pretty..

    The copper in the grund is mostly 50 plus years old, much wrapped in paper and is long past its life. Failure is not far away.
    Sooner you get fibre in the better.
    And Kinect have really good deals.

    Ask any old telco man about the cables.

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  6. insider (990 comments) says:

    I believe the commerce commission are Ok with arrangements that improve competition or reduce prices. Look at the oil industry where there is lots of coopetition through shared facilities but that benefits consumers by lowering overheads by preventing duplication of infrastructure.

    @ Viking

    the advice used to be never try to make a phone call in Auckland after heavy rain.

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  7. orewa1 (425 comments) says:

    Very, very, very dodgy. But the DomPost has a record of getting telecoms stories majorly wrong, so lets not jump to conclusions.

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