Anti-competition clause dropped

Vodafone Malta has dropped a clause in a draft franchising agreement that it submitted for approval to the Malta Communications Authority and the Office of Fair Competition.

The clause, 3.7 of a 20-page agreement, was interpreted as a way to exclude any competition to its Vodafone Live! service, particularly MMS services from Go Mobile, the other mobile operator.

Vodafone Malta yesterday confirmed to The Sunday Times: "The clause was dropped in the agreement submitted to the Office of Fair Competition for its approval since it was circulated in draft form in a meeting for retailers late last month." The Sunday Times has acquired a copy of this draft contract. The clause reads:

"The Franchisee is prohibited from negotiating and commercialising similar products and services, ones which are comparable, or which can in any way pose competition to the Products and Services; the Franchisee is also prohibited from negotiating and commercialising products and services of operators in direct or indirect competition with the Franchiser, except without the express written consent of the Franchiser for the commercialisation of specific products and services by the Franchisee."

On Friday Vodafone took full page colour advertisements in local newspapers announcing it had appointed 25 retailers in 12 localities in Malta as "exclusive and authorised Vodafone Live! dealers".

Asked to comment on the Vodafone franchise agreement, the MCA told The Sunday Times:

"According to adverts appearing in newspapers and other reports we have had, Vodafone Malta Ltd (VML) has secured franchise agreements with a number of independent retailers with the objective of promoting and commercialising the Vodafone Live! brand and ancillary products and services.

"The MCA has noted that these agreements include a number of clause(s) (particularly clause 3.7) which prohibit the independent retailer/franchisee from negotiating and/or commercialising similar or competing products and services (i.e., such as Go Live) without Vodafone's prior written consent.

"The MCA is of the view that the exclusivity nature of these agreements (particularly Clause 3.7) prima facie is anti-competitive and in breach of Reg. 9 (on competition rules) of Legal Notice 151 of 2000.

"In line with the MCA's obligation to ensure that the principles of competition law are fully applicable in the telecommunications market, the MCA is investigating the matter and in conjunction with the Office of Fair Competition is taking appropriate action to ensure compliance with the law."

Marcel Pizzuto, head of the Office of Fair Competition, on Friday confirmed that Vodafone Malta had applied for "negative clearance" for its franchise agreement on Wednesday afternoon.

This implies that the franchise agreement does not infringe competition rules. Given the time of the year and the nature of the agreement, Mr Pizzuto said the application was "under review" and being dealt with "urgently".

He however said that he was undertaking a full investigation, which would take the time needed and the Office of Fair Competition should not be looked on as a mere "rubber stamp" for such matters. He would be examining European caselaw and all the legal implications of the agreement.

Vodafone Malta confirmed to The Sunday Times that it was in the process of securing agreements with a number of outlets for the joint promotion and sale of Vodafone Live! services and handsets. "This agreement does not preclude the outlet from selling non-Vodafone MMS phones, starter packs and top-up vouchers. Customers are therefore able to access other MMS services."

To the question: "Would customers be able to buy Go Mobile MMS services from these outlets?" Vodafone Malta replied a categorical "yes". The exclusivity element related to where Vodafone Live! was being sold from. "You cannot get Vodafone Live! from anywhere else but these retailers and Vodafone branches in Malta and Gozo," the company said.

Asked to comment, Peter Gauci, senior executive, Sales and Marketing of Go Mobile, said: "We are a company that brings choice. We want to ensure customers are offered a complete choice from unbiased retailers.

"Our agreements are non-exclusive in the spirit of open competition and we want retailers to be free to sell what clients require without fear or hindrance."

Vodafone Malta affirmed that its agreements had to comply with the Vodafone Group's standards internationally and international regulations.