Dear competition inspectors,
I would like to inquire the council regarding the recent set of events surrounding a controversial arrangement between the telecommunications company Romtelecom and the insurance company Astra Asigurari.
Specifically, in April 2010 the Romanian media unveiled that Romtelecom was forcefully enrolling their existing phone service customers into property insurance plans provided by Astra, while charging for the insurance premium directly through the telephone bills. It is further well known that Romtelecom engaged in this practice without the customer's permission or request for such services, and in fact, a number of complaints to the Autoritatea Nationala pentru Protectia Consumatorilor (ANPC) reveal that customers inquiring and requesting termination of the insurance policy faced a great deal of resistance and even outright refusal from the Romtelecom staff.
A number of Romanian authorities swiftly responded in defense of Romtelecom customers, their identity and their consumer rights. Fines and/or interdictions in this case have been levied against both Romtelecom and Astra by the ANPC, Autoritatea Nationala de Supraveghere a Prelucrarii Datelor cu Caracter Personal (ANSPDCP) and Comisia de Supraveghere a Asigurarilor (CSA).
Somewhat surprisingly, there is one authority that is entirely missing from the media's spectrum of coverage regarding this controversy: Consiliul Concurentei. Indeed, of the number of real and potential irregularities elicited by the Romtelecom/Astra arrangement, the possible violation of Romania's (and European Union's) competition laws has not been addressed by Romania's press. The reasons for the potential violation are straightforward, and may be briefly described as follows:
In a vast number of regions of Romania (particularly rural), Romtelecom is the only provider of telecommunications services. This dominant position as a monopolist over an essential service was acquired by Romtelecom through privatization of a state company, and is solidified in many geographical locations by control over existing telecommunications infrastructure. In other words, Romtelecom's monopoly is generally well protected in many geographical markets through insurmountable barriers to entry faced by potential competitors.
In such regions, Romtelecom has both an ethical and legal obligation to exercise utmost responsibility as an exclusive (e.g. monopolistic) service provider. Entirely on the contrary, however, Romtelecom appears to be determined to abuse this dominant position in every conceivable manner. In the case of Astra, they have set out to do so by tying an entirely unrelated product (property insurance) to the service (telephone) over which they exercise monopolistic control and face no potential threat of future competition.
It is important to note that Romtelecom, by its own contention, engages in this practice willingly and intentionally. Moreover, the fact the initiative coincides with a recently passed law obliging mandatory homeowner insurance is not a coincidence. Since Romtelecom's dominant positions are strongest in more remote areas, it is not difficult to imagine that those very same regions represent the most potential for the suddenly emerging homeowner insurance market instigated by the new law.
Consequently, by forcing homeowner insurance upon individuals who have no choice but to acquire telephone services from Romtelecom, this is essentially a clear attempt of using a dominant position in an existing market (e.g. telecommunication services) to obtain a dominant position in an unrelated market (e.g. property insurance). The fact that the insurance policy is undersigned by Astra Asigurari is of little importance -- by billing their clients directly, Romtelecom establishes itself as a direct beneficiary of the insurance sales, and therefore, of the newly acquired dominant position in the insurance market.
As far as I know, abusing a dominant position by tying unrelated products constitutes a violation of both Article 6(1) of Romania's Competition Law (nr. 21/1996, as amended by OUG nr. 75/2010) and Article 102 of the Treaty on the Functioning of the European Union. Accordingly, all the elements of such a violation appear to be clearly present in the Romtelecom/Astra arrangement.
The general media has not followed up on the subject, and after several months, I have not been able to obtain any public information suggesting any form of involvement by Consiliul Concurentei in the matter. Therefore, I would like to inquire more directly as to whether or not Consiliul Concurentei has considered this case as a potential act of anti-competitive practice, whether any type of formal investigation is under way, or in the very least, what general opinion may the council express regarding this issue?
My underlying fear in observing the evolution of these events is that Romtelecom has no intention of easing the practice of abusing their market power. Even with respect to the present controversy, the effectiveness of the authorities' reactions is yet unclear. From eyewitness experience, I can confirm that the Romtelecom/Astra program was in full practice as of July 2010, where a number of customers in the Suceava region were still receiving telephone bills with unexpected EUR 10 charges (representing property insurance from Astra Asigurari).
Moreover, by their own views expressed in response to the reaction of the authorities (http://www.romtelecom.ro/companie/centru-de-presa/comunicate-de-presa/2010/mai/25-mai-2010/), it is clear that Romtelecom assumes no recognition of the inappropriateness of their arrangement with Astra Asigurari, and in fact, justifies the legitimacy of the present by a successful agreement of a similar nature in 2009.
It is quite clearly to me, in consequence, that Romtelecom has every intention to continue exploring such abusive practices, unless otherwise restrained by suitable regulatory action. This may likewise apply to similar organizations in possession of impervious monopolies that arose in the aftermath of Romania's transition from a communist regime and continue to dominate a number of important markets today. Yet preventing such dominant positions from impeding the successful development of healthy, competitive markets is key to Romania's short and long term economic success.
Irrevocably, Consiliul Concurentei plays a crucial role in ensuring the latter, and to date, has undertaken its duties with undeniably seriousness and responsibility. Accordingly, I am addressing the council in this matter with due confidence that I will obtain sincere and pertinent information.
Thank you in advance for your attention and I eagerly await your reply.
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