Franchise agreement for Vodafone Live! anti-competitive

Vodafone Malta Limited has been refused permission by the Office of Fair Competition to enter into a franchise agreement with 25 top specialist mobile phone retailers in 12 localities.

Marcel Pizzuto, director, Office of Fair Competition (OFC), yesterday confirmed to The Sunday Times: "Vodafone has been refused negative clearance on the agreement submitted to us."

This implies that the franchise agreement infringes competition rules, specifically Article 10 (9) of the Competition Act. This article reads: "Where negative clearance has been refused or has been revoked, it shall not be lawful to proceed with the agreement, decision, practice or conduct for which clearance has not been granted or has been revoked."

Reacting to the decision, Vodafone Malta yesterday expressed surprise at the ruling, adding: "Vodafone has asked for further details and clarifications as to the reason behind this ruling."

Mr Pizzuto confirmed that Vodafone has requested a meeting to clarify details of the ruling. He explained that Vodafone will now have to resubmit a new draft franchise agreement, which "will be considered on its own merits".

Reacting to the OFC ruling, the Malta Communications Authority, which has been following developments closely, even at a legal level, yesterday expressed satisfaction at the decision.

Joseph Cuschieri, the MCA's chief of operations, pointed out that it shared the view that "the exclusive nature of the agreement is prima facie anti-competitive and in breach" of the Competition Act. It would also act as a hindrance to the other mobile operator, Go Mobile.

Vodafone Malta entered into an agreement with the 25 retail outlets to be "exclusive and authorised Vodafone Live! dealers" late last month, taking out full page advertisements listing the outlets on December 12. It submitted the agreement to the OFC for the negative clearance on December 10.

However, an anti-competition clause (3.7) was changed in the 20-page agreement it submitted to the OFC. The OFC's decision was made know on Wednesday, a fortnight after it was submitted, following a full investigation, including visits to retail outlets to see how the agreement was being applied in practice, meetings with all the parties concerned, including both mobile operators and the MCA, and examination of European caselaw.

Many of the retail outlets, which signed the franchise agreement, were not aware that it had been altered and they complained to The Sunday Times that they did not entirely favour the arrangement. They preferred to sell the products and services of both mobile telephony operators.

Vodafone have maintained that the franchise agreement did not preclude the outlets from selling non-Vodafone MMS phones, starter packs and top-up vouchers. It simply precluded other outlets from selling Vodafone Live!

The altered clause apparently prevented the retail outlets from displaying Go Live! posters, leaflets, dealer kits or Go Mobile magazines explaining its MMS products and services.

Vodafone last week expressed satisfaction "that a number of independent retailers supported Vodafone Live! and that our customers opted for Vodafone Live!, making it a very successful launch in December".

Go Mobile, however, consider the franchise agreement an "all-out war" since, according to Peter Gauci, senior executive, Sales and Marketing, this "smacks of monopolistic practices".

While expressing satisfaction at the OFC's decision, he told The Sunday Times yesterday: "This step further ensures that the Maltese consumer retains the ability to choose the service he wants. This also gives us the impetus to develop the Go Live! brand further, for the benefit of all consumers."

Go Mobile insists on offering retail outlets a non-exclusive clause in its contracts.