Competition Authority suspends myZONcard promotional campaign

I. Object of the investigation

On 16 December 2008, the Competition Authority was presented with a complaint against ZON Multimédia – Serviços de Telecomunicações e Multimédia SGPS SA (Zon Multimédia). Its object was the “myZONcard” promotional campaign, which consists of the allotment of a loyalty card to present and future ZON/TV Cabo customers. With this card, from 2 January 2009, they can benefit from free cinema tickets (on the conditions associated with the campaign) in the cinema auditoriums owned or managed by ZON Lusomundo Cinemas SA (ZON Lusomundo). For the purposes of the application of Law No. 18/2003 of 11 June, ZON Multimédia and ZON Lusomundo are a single undertaking (ZON).

The Competition Authority considers that ZON holds a dominant position in the national market for the exhibition of films and in the local markets in the districts of Aveiro, Braga, Coimbra, Lisbon, Porto, Setúbal, Viseu and Vila Real. The Competition Authority did not identify, as a preliminary in this phase of the investigation, fundamental changes regarding Decision Ccent No. 8/2006 (Sonaecom SGPS SA/Portugal Telecom SGPS SA)See Press Release No. 28/2006 on 'Documentos Relacionados' (non-confidential version of Decision Ccent No. 8/2006) that prejudice this conclusion.

Following its preliminary investigations, the Competition Authority instigated administrative offence proceedings, of which the object was the above-mentioned promotional campaign, in order to determine whether Article 6 of Law No. 18/2003 of 11 June (Competition Act) has been infringed. According to that Act, “it is forbidden for one or more undertakings to engage in the abusive exploitation of a dominant position in the national market or a substantial part of it, with the object or effect of preventing, distorting or restricting competition”.

II. Imposition of Precautionary Measures

Given ZON's dominant position in the relevant market and ZON/TV Cabo's penetration of the pay-TV market in Portugal, there is a high risk of negative, anti-competitive effects that may affect ZON's present and potential competitors and, directly or indirectly, consumers themselves. This would occur not only through the direct exclusion from the market of the undertakings at present competing with ZON but also the creation of barriers to the entry and expansion of other competitors in the market, by means of a loyalty system for ZON/TV Cabo customers, in the districts of Aveiro, Braga, Coimbra, Lisbon, Porto, Setúbal, Viseu and Vila Real.

The Competition Authority has also concluded that this promotional campaign “may cause imminent, serious and irreparable damage, or damage that is difficult to repair, to the competition or the interests of third parties”. Accordingly, it has ordered suspension of the campaign until completion of the proceedings in order to safeguard the useful effect of any decision that may be taken in pursuance of Article 27 (1) of the Competition Act.

With this decision, the Authority is re-establishing the pre-existing competitive conditions in the market. ZON Multimédia and ZON Lusomundo were notified of the decision on 5 January 2009.

The urgency in the imposition of this precautionary measure to re-establish the pre-existing competitive conditions – in order to reduce the risk of anti-competitive effects from the myZONcard promotional campaign – would allow the Competition Authority to issue a provisional order for its suspension without ZON being accorded a prior hearing. Nevertheless, the Competition Authority informed ZON of its intention, allowing the undertaking to state its position prior to any decision being taken on the matter. The undertaking presented the observations that it deemed relevant.

An appeal against the Competition Authority's precautionary measures may be lodged with the Lisbon Commercial Court under Article 50 (2) of the Competition Act. This appeal merely has the effect of returning the matter for re-appraisal; the decision remains in effect until cancellation by the Competition Authority “and, in all cases, for a period not exceeding 90 days, unless extended for justifiable reasons” (Article 27 (2) of the Competition Act).

The Competition Authority stresses that, since Law No. 18/2003 of 11 June came into effect, these are the first administrative offence proceedings in which precautionary measures have been imposed to re-establish pre-existing competitive conditions. The imposition of precautionary measures to maintain pre-existing competitive conditions until completion of the investigation, with due fulfilment of the conditions stipulated by the law, aims to guarantee the useful effect of the Competition Authority's final decisions, if the practice identified is liable to put the competitive structure of the market in question.

The measure suspending the myZONcard campaign must have taken full effect in the districts indicated by 12.00 midday on 9 January 2009.

(Nº: 1/2009)