British Telecommunications plc: BTOpenworld's consumer broadband products

No. 19/12/2003

Alleged anticompetitive practices by British Telecommunications plc in relation to BTOpenworld's consumer broadband products

Following a complaint by Freeserve.com plc ('Freeserve') in March 2002 to the Director General of Telecommunications (the 'Director') regarding certain marketing activities and pricing policies by BTOpenworld ('BTOW') in relation to BTOW's consumer broadband activities, the Director opened an investigation which was subsequently closed in May 2002, concluding in relation to all allegations that BT had not acted anti-competitively.

Freeserve appealed all aspects of the decision to the then Competition Commission Appeal Tribunals, now the Competition Appeal Tribunal (the 'Tribunal'). In its judgment in April of this year the Tribunal dismissed the appeal as regards all but one aspect of Freeserve's complaint.

On the ground of lack of reasoning, the Tribunal set aside the paragraphs of the Director's May 2002 decision relating to an allegation that BTOW's consumer broadband pricing policies amounted to a breach of competition law. Freeserve had alleged that there was a "prima facie case of unlawful cross subsidy" between BTOW and the remainder of BT. Freeserve had further alleged that BTOW was engaged in predatory pricing in relation to its consumer broadband products (together the '2002 pricing allegations').

Following the Tribunal's judgment, the Director undertook to reassess Freeserve's 2002 pricing allegations. The Director considers that the potential abuse set out in Freeserve's 2002 pricing allegations is most appropriately addressed in the context of a margin squeeze investigation. However, in the specific circumstances applicable to the original and new Freeserve investigations the Director considers that his conclusions deal adequately with Freeserve's allegation of predation.

As a result, the Director has reassessed in this investigation whether BTOW's pricing policies of its consumer broadband products as announced by BTOW in February 2002 amounted to a margin squeeze at that time by BT in breach of the Chapter II prohibition of the Competition Act 1998. The Director considers that the balance of evidence in this case does not support the conclusion that BT was operating a margin squeeze. Accordingly, the Director has concluded that BT has not infringed the Chapter II prohibition.

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