JT face £40k fine for competition breach

Wednesday 24 June 2020

JT is facing a £40,000 fine from the competition watchdog for cornering its competitors into upping their prices by ‘squeezing’ profit margins.

The Jersey Competition Regulatory Authority (JCRA) found that JT engaged in this ‘margin squeeze’ – a practice where a provider who sells services wholesale at a higher rate so that its competitors are forced to put their retail prices up – for a period of thirteen months ending in February this year.

During this period, JCRA concluded that “JT priced its wholesale services to other telecoms providers at such a level that these companies were restricted in their ability to compete”.

This practice violates local competition law as it makes it harder for other providers to compete with JT’s retail prices and therefore results in “limiting consumer choice and value.”

Pictured: The telecoms provider faces a fine for the margin squeeze.

In reaching its decision JCRA say that it considered “the degree of harm, actual or potential, caused by the contravention and that JT did not deal with the issue in a timely and effective way even after the JCRA made JT aware of it.”

Issuing notice of its intention to fine the telecoms provider, the authority noted that “this is the second time [it] has found JT to have acted in contravention of” this particular condition of its licence.

JT was found to be in breach of the same condition in 2016, but no financial penalty was proposed. 

Tim Ringsdore, Interim CEO of the JCRA said: "This was a breach of JT's Licence conditions and it is not the first time JT has been warned of engaging in margin squeeze. We consider the level of penalty to be appropriate. It is essential, for the maintenance of a healthy and competitive economy and to protect consumer choice and value, that activity of this nature is penalised. 

"JT has accepted it breached its licence condition and has subsequently cooperated with the Authority in our investigation, and we have taken that into account in arriving at our conclusions." 

Pictured: Tim Ringsdore, Interim CEO of the JCRA.

Noting the actions JT took in rectifying the squeeze, the official notice states: “JT has taken steps to undo the contravention by raising retail prices to a level which removes the margin squeeze. Whilst it took some time to take this action, JT did co-operate with the investigation in a reasonable manner.” 

Taking this into account, the Authority decided to reduce the level of penalty down to £40,000. The Authority say that this level of fine was imposed based on the revenue JT earned from its broadband services during the period in question. 

Competitor Sure's Chief Executive, Graham Hughes, welcomed the decision, saying JT's actions had "made it impossible for us to compete fairly for broadband customers for more than a year, having an impact on consumers who were faced with a limited choice as a result."

Responding to the JCRA's finding, a JT spokesperson said: “Clearly this decision comes as a disappointment to JT, but we fully accept JCRA’s conclusion.

"Our discussion with JCRA over the financial model used to regulate this market goes back over a number of years, and we hope it can be developed further in the future."

They continued: “Notwithstanding that, this particular issue comes from a genuine error on our part, and we have written to the group of customers involved to explain the situation to them.

"We will now be working with JCRA to ensure our processes are reviewed, to prevent any repeat.”