The European Commission has reopened an investigation into a disputed contract which enabled US firm Meridian to purchase airtime on the Eircell network.
The contract was used by a Meridian subsidiary, Cellular 3, to introduce the Imagine mobile phone service last year. But it was terminated in April after the High Court ruled that Eircell was not dominant in the market and was entitled to end the agreement.
Meridian made a complaint about Eircell to the competition directorate of the European Commission in June 1999. A month later, the Commission commenced an investigation into an alleged abuse of dominant position by Eircell, although that process was halted in August 1999 when Meridian took a High Court action against Eircell.
Following the High Court ruling, it is now understood the competition directorate wrote to Eircell on June 20th last, informing the company that it had decided to restart its inquiry.
According to an informed person, the commission told Eircell it understood Meridian had agreed to withdraw its complaint to Europe as part of the termination of the volume discount agreement. Despite this, the Commission said it would continue the process on an ex officio (by virtue of official position) basis.
It sought correspondence between the two companies and a copy of the agreement from Eircell, in addition to associated documentation and market information. Eircell was sold by Eircom to Vodafone last December. The Commission is not empowered to oblige Eircell to re-enter the contract, but it can impose a fine if it finds against the company.
Cellular 3 used 40 per cent discounts on bulk airtime to introduce the Imagine service, which offered cheaper call rates than Eircell or its leading competitor, Esat Digifone.
The service, introduced by businessman Mr Sean Bolger, secured about 20,000 customers.
These reverted to Eircell when the contract was terminated because Meridian could not secure another volume discount agreement and was unwilling to absorb the extra cost of supplying its customers.
As part of the termination deal, Eircell agreed not to pursue the £6.7 million (€8.51 million) it claimed Meridian owed it. Cellular 3 subsequently made its 60 staff redundant.
In the High Court, Mr Justice O'Higgins found against claims by Meridian that Eircell was in a dominant position. As a result, he did not rule on claims that Eircell had abused a dominant position. He did, however, find Eircell guilty of a number of breaches of contract, describing Eircell's behaviour in one respect as "obstructive, obdurate and arrogant". Eircell said it considered those issues as minor in the context of the whole case.
Though common in other markets where companies such as Orange piggyback on mobile networks, such systems have not gained a place in the Republic.
