Competition Commission investigates Vodacom for Treasury contract

The Competition Commission has initiated an investigation of the Vodacom Group for its alleged abuse of dominance after the company secured an exclusive contract with National Treasury to be the sole provider of mobile telecommunication services to government.

Before Vodacom entered into the exclusive four-year agreement with National Treasury, all government departments could purchase mobile telecommunication services from any mobile network operator.

The Commission has information that there are 20 government departments that will be subjected to the new Vodacom contract. Other departments, including state-owned entities and municipalities, will be incentivised to adopt the new contract.

The Commission says it has reasonable grounds to suspect that the exclusive contract may constitute an exclusionary abuse of dominance by Vodacom in contravention of the Competition Act.

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The Act prohibits a dominant firm from abusing its dominance.

This could be through requiring or inducing a supplier or customer to not deal with a competitor; and engaging in an exclusionary act that impedes or prevents a firm’s entry or expansion within a market, unless the firm concerned can show technological, efficiency or other pro-competitive gains that outweigh the anti-competitive effect of its act.

The Commission is of the view the contract will further entrench Vodacom’s dominant position in the relevant market, raise barriers to entry and expansion in the relevant market, distort competition in the market and result in a loss of market share for other network operators.

In March 2016, Treasury issued a tender for the supply and delivery of mobile communication services to national and provincial government departments for the period 15 September 2016 to 31 August 2020.

Vodacom was the preferred supplier after other bidders were eliminated at different phases of the bidding process.