THE COMPETITION CONSILIUL COUNCIL CONCURENŢEI PLENUM OF THE COMPETION COUNCIL DECISION No APD – 8 mun. Chişinău As of 26 September 2013 The Plenum of the Competition Council as constituted: Viorica CĂRARE – Chairperson Emil GUŢU – Vice Chairperson Mihail CIBOTARU – Vice Chairperson Ion MAXIM – Member Victoria BUZULEAC – Secretary, Acting on the grounds of art. 41 para. (1) let. h) and art. 93 ale The Law on Competition no.183 as of 11 July 2012, Parliament Decision no. 179 as of 12.07.2013 on appointing members of Plenum of the Competition Council, Having analyzed the investigation report on the case initiated by the Disposition Administrative Council of National Agency for Protection of Competition1 no.42 as of 19 July 2011 and the attached materials, HAS FOUND: On 12 July 2011 the National Agency for Protection of Competition (hereinafter NAPC) received the application form the economic agent JV „Moldcell” JSC claiming the actions of JV „Orange Moldova” JSC on launching the promotional campaign - „SMS and MMS for 10 bani to any number on every weekend in July”, which is deemed by JV „Moldcell” JSC to be abuse of dominant position by setting low monopolist prices. The Administrative Council of NAPC by the Disposition no. 42 as of 19 July 2011 ordered the initiation of the action to the object of infringement of art. 6 of the Law no. 1103-XIV as of 30.06.2000 on the protection of competition by JV „Orange Moldova” JSC. 1Successor of rights is Competition Council from the Republic of Moldova 1 The parties concerned: JV „Orange Moldova” JSC, subsidiary of France Telecom Group, operating on the grounds of License Series A MMII. no. 024155 as of 06.03.1998 for providing cellular mobile telephony services, GSM standard, and the License Series AA no. 065139 as of 08.08.2008 for the use of radio frequencies and channels in the provision of networks and cellular mobile communications services of third-generation– 3G. JV „Moldcell” JSC part of a big family of GSM operators from Fintur Holdings BV, operating on the grounds of License no. 04 as of 29.09.2008 for providing telephony services delivered by means of land public mobile networks. According to official data of National Regulatory Agency for Electronic Communications and Information Technology (NRAECIT) in 2011, JV „Orange Moldova” JSC had a coverage on the territory of the republic with radio signal from own networks of 2nd generation (2G) of 99%, JV „Moldcell” JSC – of 97,35%. Relevant market: the relevant product and geographic market I. Relevant product market The relevant product market contains products deemed by consumers as being interchangeable or substituible due to use thereof, due to phisical characteristics, fuctionaly and price. The identification of relevant product market started with the claimed action and services provided for by the party concerned by the investigation (SMS and MMS services). SMS service (i.e. Short Message Service) implies that the technology allows for reception and sending of short messages by mobile telephone. MMS (i.e. Multimedia Messaging Service) is a system of transmitting multimedia messages (photo, audio, and video) in the mobile telephony networks. It allows for sending messages not only the mobile telephone, but also to electronic mail. MMS consists of two parts. The first is the information which enters in the MMS and is kept on a special server of the operator (WAP-server). The second is the SMS which is sent to the recipient. Therefore, MMS is an additional setup that combines services of SMS and WAP. In the Republic of Moldova the services of SMS and MMS are used only together with voice telephony service and are not granted separately. In order to benefit from SMS and MMS services, one should be user of mobile telephony (having subscription or prepaid cards) of one of the existent providers (JSC „Moldtelecom”, JV „Moldcell” JSC or JV „Orange” JSC). Substitutability at the level of demand is the essence of defining relevant market 2 and shall identify products which are considered substitutable by the consumers, products which shall be sufficiently similar; insofar the consumers or beneficiaries should consider them while making purchasing decision. Two products must not be identical from the point of view of physical and functional characteristics, of quality or price, in order to be deemed as substitutable or interchangeable from the point of view of buyers. It is important that the products have sufficient degree of substitutability in order to satisfy the needs and the wishes of buyers, insofar each of the products constitute a real economic alternative for other products, the consumer having the possibility to choose while taking the purchasing decision. The Competition Council deems there are no arguments for sustaining substitutability of the demand between the services of message (SMS, MMS), on the one hand, and the services of calls to mobile points, on the other. Firstly, among main elements differentiating between these message categories (SMS or MMS) from voice calls to mobile points, there is the relevant time horizon for sending content, and the time necessary for sending the message itself. In this respect, a SMS, MMS needs a longer time to be compound, in case of SMS-es, being limited to a certain number of characters, consequently 160. Another distinctive element among the two categories of services is the lack of promptness of replies in case of sent messages. Therefore, while making a call, the promptness of reply is immediate, the communication being carried in real time, assuring the caller that the called party has received the information transmitted, and may act accordingly. As to SMS and MMS, the recipient may or may not notice the reception thereof in proper time, occurring a gap between the moment of interaction between the two parties. In conclusion, SMS or MMS does not represent a viable alternative for voice calls. Moreover, from the point of view of the way of use or functionality, the services of message and voice calls are perceived as being complementary by the end users. Although the services of SMS or MMS do not participate in the civil independent circuit, SMS and MMS are separate services. Therefore, within the investigation, the following relevant product markets were distinguished: The market for providing SMS service, and The market for providing MMS service. II. Relevant geographic market The relevant geographic market shall be defined as the entire territory of the Republic of Moldova. Found acts and facts In the submitted application, JV „Moldcell” JSC notified that on 29.06.2011 JV „Orange-Moldova” JSC, by launching the campaign „SMS and MMS for 10 bani to any number on every weekend in July”, promoted the commercial policy which may not be 3 repeated on other players on the telecommunications market without having/bearing major losses. The offer was designed to the users of mobile telephony of the company JV „Orange Moldova” JSC who have the possibility to send messages to own network of mobile telephony and other national operation in the weekends with only 10 bani. JV „Moldcell” JSC supposes that this offer used by an operator with the market share of 71,77% depending on the turnover and 62,1% by number of subscribers (in accordance with the official data presented by NRAECIT) may distort the competition on the market of telecommunications namely on the market of mobile telephony in the Republic of Moldova by setting low monopolistic prices. In this way, in the opinion of JV „Moldcell” JSC, JV „Orange-Moldova” JSC infringed the interdictions set by art. 6 let. (g) of the Law no.1103-XIV as of 30 June 2000 on the protection of competition by setting low monopolistic prices. In letters no. APD-12/289-1081 as of 26.07.2011 and no. APD-12/382-1508 as of 20.10.2011 requested the legal and economic argumentation of the promotion campaign SMS and MMS for 10 bani to any number in the country on every weekend in July 2011 from JV „Orange-Moldova” JSC. In this respect, JV „Orange-Moldova” JSC notified that the mentioned offer aimed at to stimulating consumption and retaining customers but not at the acquisition of new customers. The peculiarity of such offer lies in the fact that it is addressed to the existent customers and is not related to connecting to the service. The mentioned offer had as its object complementary services (SMS and MMS), but not basic ones (voice calls). JV „Orange-Moldova” JSC notified that the calculation i.e. economic argumentation was grounded on the methodology of average total costs. Based on the cost price calculation of the mentioned offer grounded on the average costs (the result of dividing total costs to the number of produced unities), presented by JV „Orange-Moldova” JSC, showed that the promotional action carried out in July 2011 had a profit of [… %]2. Analyzing the method of carrying out the mentioned campaign, it was found that SMS-es and MMS-es were offered for 10 bani only in weekend in July 2011. Proceeding from this, during the working days the consumers used SMS and MMS services for standard tariffs displayed officially on the web –site of JV „Orange Moldova” JSC, in accordance with the chosen package. In accordance with the information published on the web site of JV „Orange Moldova” JSC as to the conditions of the mentioned campaign, it was valid both for subscription and for PrePay. In this vein, taking account the period (month) and the conditions for promotional campaign (10 days out of 31), as well the fact that in order to benefit from the promotion campaign one should have been Orange subscriber, it was set that the promotion campaign launched on 29 June 2011 was not aimed at attracting new clients.