The Competition Commission is going after Vodacom after the mobile telecoms giant won a tender from the National Treasury positioning it as the sole provider of mobile telecommunication services to all government. In a statement issued today the Commission seems to argue that this contracts amounts to unfair behaviour.
The Commission’s “it has initiated an investigation against Vodacom abuse of dominance after the company secured an exclusive contract with National Treasury to be the sole provider of mobile telecommunication services to the government.”
It noted that before Vodacom entered into the exclusive four-year agreement with National Treasury, all government departments could purchase mobile telecommunication services from any mobile network operator.
The concerned contract was concluded in March 2016. This is after the National Treasury issued a tender for the supply and delivery of mobile communication services to National and Provincial Government Departments for the period 15 September 2016 to 31 August 2020. Vodacom was the preferred supplier after the other bidders were eliminated at different phases of the bidding process.
The Commission said it has information that there are 20 government departments which will be subjected to the new Vodacom contract. “Other departments, including state owned entities and municipalities, will be incentivised to adopt the new contract.”
The Commission said it has reasonable grounds to suspect that the exclusive contract may constitute an exclusionary abuse of dominance by Vodacom in contravention of the Competition Act.
It said the Act prohibits a dominant firm from abusing its dominance by
- requiring or inducing a supplier or customer to not deal with a competitor and
- engaging in an exclusionary act that impedes or prevents a firm’s entry or expansion within a market, unless the firm concerned can show technological, efficiency or other pro-competitive gains which outweigh the anti-competitive effect of its act.
The Commission added that it is of the view that the contract will:
- Further entrench Vodacom’s dominant position in the relevant market;
- Raise barriers to entry and expansion in the relevant market;
- Distort competition in the market; and
- Result in a loss of market share for other network operators.