Johannesburg — TELKOM could have to pay R3,7bn in penalties for anti-competitive behaviour after the Supreme Court of Appeal overturned a high court order and ruled that the Competition Tribunal had the power to decide on a long-running complaint.

A penalty of this size could have negative implications for Telkom's balance sheet and reputation.

The appeal court ruled in favour of the Competition Commission after a complaint was lodged with it seven years ago against Telkom by the South African Value Added Network Service (Vans), the Internet Service Providers Association (Ispa) and 18 Vans providers.

The service providers complained that Telkom did not provide telecommunication facilities to them unless they entered into a restrictive standard agreement with the company, prohibiting Vans from providing private networks to their customers; from reselling spare capacity; from carrying voice on behalf of customers; from using Telkom facilities for conveying data between different premises of any single customer; and from bypassing Telkom's public switched telecommunications network.

Telkom also competed against Vans by offering lower prices to its subsidiary, Telvans.

The commission at the time recommended that the Competition Tribunal impose a fine of 10% of Telkom's annual revenue, amounting to R3,7bn.

But Telkom took the commission to the Pretoria High Court to determine if it had jurisdiction in the matter.

Telkom contended that the complaint referred to the commission fell within the exclusive jurisdiction of the Independent Communications Authority of SA (Icasa) and was beyond that of the competition authorities. It argued that the legislature could not have intended the competition authorities to have the power or competence to adjudicate on conduct that was authorised by the Telecommunications Act, by the regulations made under it, or by Telkom's licence, or that might have been authorised by Icasa under its empowering provisions.

The high court ruled in favour of Telkom, but only because procedural errors had been made by the commission.

The Competition Commission subsequently took the matter on appeal. Last week the appeal court ruled that the commission does in fact have jurisdiction over Telkom. The appeal court also held that the commission has the jurisdiction to refer the complaint to the Competition Tribunal, and that the tribunal has the competence to adjudicate on it.

The appeal court's judgment comes one month after the Competition Commission referred a separate matter to the tribunal in which Telkom stands accused of abusing its dominance in the internet market. That case could result in Telkom being fined as much as R3,5bn.

Ispa welcomed the appeal court's decision, saying yesterday it paved the way for the Competition Tribunal to "finally examine Telkom's conduct in the internet services market during the early part of this decade".

It also sets an important precedent regarding the jurisdiction of the Competition Commission over the communications sector.

"It is well known that Telkom had been hoping for a victory in the appeal court case as this would have meant the competition authorities would not have had the jurisdiction to penalise the company. The operator has long argued that the commission has no jurisdiction over the telecoms industry and that it is solely regulated by Icasa," Ispa said.