CADE condemns Telemar for abuse of dominant position

The Administrative Council for Economic Defense – CADE condemned, on the judgment session of 11 March 2015, Telemar Norte Leste S/A for abuse of dominant position in the telecommunication market. The anticompetitive conduct occurred in the beginning of the 2000s, when Telemar controlled more than 90% of the fixed telephony market in the denominated Region I of General Concession Plan (“Região I do Plano Geral de Outorgas”) – which corresponds to the states of RJ, MG, ES, BA, SE, AL, PE, PB, RN, CE, PI, MA, PA, AP, AM e RR. (Administrative Proceeding no. 08012.003918/2005-04).

According to CADE’s investigation, Telemar conducted the monitoring of its customers’ calls to the call center of its competitor Vésper –a recent incoming in the market at the time, after the development of the new regulatory framework of the telecommunications industry and the restructure of Telebrás system. By this monitoring, Telemar offered specific service plans to avoid its customers’ migration to the competitor. 

To the Reporting Commissioner, Márcio de Oliveira Júnior, Telemar’s customer segmentation and promotional offers did not constitute competitive offences. However, he stressed that Telemar’s client segmentation and promotional offers was based on a regulation illicit (illegal data access), for which it was punished by the sector regulator, the National Telecommunications Agency (ANATEL, for its acronym in Portuguese), being imposed a fine of BRL 11.5 million. Thus, the Reporting Commissioner voted to close the case due to lack of evidence of violations to the economic order. 

Commissioner Ana Frazão, however, diverged from the Reporting Commissioner and pointed on her oral vote that Telemar unduly took advantage of sensitive customer information, of which it had access due to legal obligations of interconnection of telecommunications networks, to avoid competition. According to Ana Frazão, Telemar’s monitoring did not aim at providing special offers and conditions to customers, but at impeding, by unlawful means, the entrance of new players in the market. 

“After it was proved the harmful potential of the conduct, I understand that the defendant committed an antitrust infringement, by abusing its dominant position, and creating undue and unjustified difficulties to the development of Vésper in fixed telephony market”, said Commissioner Frazão. 

The understanding of the Commissioner that Telemar’s conduct resulted in anticompetitive effects was followed by CADE’s President, Vinicius Marques de Carvalho, resulting in the company’s condemnation and the imposition of a fine of BRL 26.5 million.