Telecom Eireann engaged in a policy of predatory pricing last year aimed at "squeezing" Esat Telecom, it was claimed in the High Court yesterday.
According to Esat, with an address at the Malt House, Grand Canal Quay, Dublin, that predatory pricing policy made it impossible for Esat to compete at below-cost prices without suffering a negative margin.
Telecom Eireann denies the claims and says it merely introduced discount schemes which were scrutinised and had the approval of the Director of Telecommunications Regulation, Ms Etain Doyle.
In judicial review proceedings taken by Esat against the Director, which opened yesterday before the President of the High Court, Mr Justice Morris, Esat is seeking an order quashing the Director's decision of October 24th, 1997, that insufficient evidence existed to show that reductions proposed by Telecom Eireann constituted predatory pricing.
Esat also wants an order instructing the Director to take a decision on the reductions and discounts, introduced by Telecom on November 30th, 1997, in accordance with her obligations under Irish and EU law.
The Director acknowledges that it is part of her supervisory function to ensure approval is not given to manifestly anti-competitive bulk discount schemes. But she denies this supervisory function extends to the investigation of matters more appropriately within the jurisdiction of either domestic or EU competition authorities.
She also denies that she acted ultra vires in failing to notify Esat of her decision to request Telecom Eireann to modify its discount charges.
In an affidavit, Ms Doyle said she exercised her discretion correctly, taking into account all relevant factors, and that accordingly her conclusion that there was insufficient evidence of predatory pricing or a breach of competition law was reasonable.
While she had power to supervise discount changes, she was advised that exercising that power only required her not to sanction such changes if they were manifestly anti-competitive.
Mr Bill Shipsey SC, for Esat, said the Director was charged with a number of statutory responsibilities in regard to the regulation of the telecommunications industry. His client was a public company and was in direct competition with Telecom Eireann in the provision of international call services and long-distance calls nationally. An associate company, Esat Digifone, held the licence for the second mobile phone franchise in Ireland.
Telecommunication charges were subject to the supervision of the national regulatory authority in each country, according to a 1995 EU directive, and in Ireland this authority was the Director of Telecommunications Regulation.
In June 1997 Esat wrote to the Director informing her of Telecom Eireann's intent to alter the discount scheme it was operating for business and pointing out she had the jurisdiction and the duty to supervise these discount schemes.
Subsequently, the Director acknowledged that prima facie there was a case to be answered.
Between then and October 24th, when the Director announced her determination, it appeared she had engaged in a course of action which was contrary to natural and constitutional justice and involved the use of unfair procedures, counsel said.
In that period a process of negotiation had taken place between Telecom and the Director which resulted in Telecom modifying its original proposals. Subsequently, new base rates and discounts were introduced by Telecom on November 30th, 1997. Mr Shipsey said the Director had gone "totally off the rails" in the manner in which she reached her decision.
Telecom Eireann, which is a notice party to the action, says Esat's action is misconceived and misinterprets the powers of the Director of Telecommunications. It rejects any claim by Esat that it has acted in breach of law and, in particular, in breach of competition law.
The hearing resumes today.