11 April 2003

Anne Laure Helene des Ylouses

Since transposition of European Directive 98/10/EC concerning liberalisation of the telecommunications services market through the introduction of carrier pre-selection, the marketing activities of former incumbent operators have become a source of contention in many Member States.

In its eighth report on implementation of the regulatory package, the European Commission has stressed that “the introduction of carrier pre-selection has turned out to be a very sensitive issue in the European Union. In practically every Member State new entrants are complaining about win back campaigns conducted by incumbent operators. Promotional offers appear to be specifically directed at subscribers who have recently converted to carrier pre-selection. The new entrants have also been complaining that the retail divisions of the former incumbent operators often appear to be using privileged information about consumers which is passed on by the network business.’ Despite this conclusion the European Commission has not expressed any intention of opening an inquiry into win-back campaigns. This means new entrants have to fall back on the national authorities if they wish to challenge a win back campaign.

In France new entrants have launched proceedings against France Telecom before different tribunals with varying results. Cegetel and Tele2 obtained a judgement from the French Competition Council on 19 December 2001 which required France Telecom to terminate some of the campaigning and advertising practices which the former incumbent had adopted just before the market for local communications services was liberalised.

The French telecommunications regulatory authority (the ART) which was approached by Tele2, for its part required France Telecom not to exploit for commercial purposes its interconnection information and more generally, to cease all practices allowing its retail division to use privileged information. According to the ART, the French incumbent complied with the order but the DGCCRF (General Directorate for Fair Trading, Consumer Affairs and Fraud control), the French competition watchdog, has launched an investigation on win back campaigns conducted by France Telecom.

Cegetel and 9 Telecom commenced successive actions for damages claming that France Telecom’s campaigns were unfair. In response to Cegetel’s complaint the Paris Commercial Court has prohibited France Telecom from including the name of the pre-selected operator in advertising which it sends its former customers. The Court has however refused to require the former incumbent to pay damages because of a lack of evidence. The claim introduced by 9Telecom is still pending but the judgement is expected in June.

In other Member States, challenges to the legality of win back campaigns have generally been made to the national regulatory authority with responsibility for the telecommunications sector. In practice the legal questions raised by win back campaigns such as the network division of the historical operator passing confidential information to the retail division, possible abuse of a dominant position, or violation of data protection rules, require the expertise of specialist authorities. In the majority of Member States concerned it is the regulatory authority for the telecommunications sector which has stepped in to rule on the win back campaigns of the historical operator.

In Spain, the Commission for the Telecommunications Market (the NRA) has prohibited Telefonica from taking any steps which are designed to win back a customer which has pre-selected an alternative operator, until the expiration of a four month period. In a decision dated March 6, 2003, the Spanish regulator fined Telefonica Euro 3,5 million for one win back campaign sent to 418,017 customers in March 2002. Prior to this particularly innovative decision, the Irish Regulatory Authority adopted on 17 August 2000, an injunction which prohibited those employees of Eircom who were involved in win back campaigns from having access to information concerning the identity of the pre-selected operator.

Outside Europe the Canadian Regulatory Authority issued a decision at the start of 2002 prohibiting each local incumbent operator from trying to win back clients who had chosen pre-selection, within a 3 month period. Some national regulatory authorities have elected to condemn win back practices by requiring the incumbent operator to pay a fine, generally following a decision prohibiting the incumbent from using privileged information. Thus the Italian Regulatory Authority (AGCOM) decided on 9th January 2003 to impose on Telecom Italia a fine for having used information from its network division in its win back campaign in violation of a previous decision prohibiting this. The Swiss Regulatory Authority did something similar, imposing a fine on Swisscom, the former incumbent, for using confidential information in its win back campaign.

Other regulatory authorities have merely applied pressure to the historical operator as happened in Norway for example where the NPT made a decision in March 2001 threatening TeleNor with penalties. In the UK, OFTEL quickly intervened to warn BT against any attempt at anti-competitive win back campaigns in markets in which BT was active.

In summary, three types of penalty have been imposed on operators for win back campaigns which have been judged inconsistent with the competitive market by a national regulatory authority:

  • a warning
  • a straight forward prohibition; and
  • a fine.

Experience suggests that a total prohibition, but only for a pre-determined period, is the best way to prevent win back campaigns from undermining the competitive market and in particular, the launch of new services.