Between Damping Policy and Cartel Agreement
09 May, 2013
Between Damping Policy and Cartel Agreement
Express-pay terminals claim the damping policy practiced by Bank of Georgia (BOG), one of the leading Georgian banks, led the express-pay business to the brim of bankruptcy and ask Georgian Central Bank for help. Economic analysts believe not a bank but cartel agreement concluded by Georgian cell operators led fast-pay machines to bankruptcy.

The pay-boxes’ grievance started on April 1st, 2013 when all the three cell companies operating at Georgian market Magti, Geocell and Beeline stopped paying commissions for recharging
cell call balances through express-pay terminals or banking on-line payment system. This commission was paid by cell operators up to this past April to subsidize the developing express-pay system and raise awareness of consumers in alternative balance recharging tools, cell companies explain. And now since the said system is well-developed cell operators stop subsidizing and consumers have to pay commissions standing at 4% of the paid sum if they want instant recharging of their balances through express-pay terminals and on-line payments. Bank of Georgia (BOG) used this move as a marketing trump: it waived commissions and expanded its fast-paying machine system network including every bus-stop thus providing consumer with free-of-charge and available cell balance-recharging opportunities. As a result after a couple of weeks fast-pay machines complained they are put on the brim of bankruptcy and BOG is responsible for its marketing policy is nothing more than a damping policy aimed to oust weaker competitor off the market. Pay-box business appealed to National Bank of Georgia (NBG) for help. Economic analysts believe a cartel agreement stands behind the cell operators’ move and it is up to Georgian National Communication Commission (GNCC), the communication sector regulatory body, not to the NBG to research why all the three market players simultaneously made similar marketing move that indirectly made their service more expensive, for consumers pay more for cell calls in fact. GNCC assures the issue falls beyond its competence as it cannot interfere in the service payment conditions between companies [cell operators and express-pay business] and besides consumers can still enjoy free-of-charge recharging through cell companies’ web-pages, service centers and special balance-cards. Nevertheless economic analysts believe the free recharging opportunities are restricted for service-center networks and on-line services are underdeveloped specifically in regions. Besides, it is social responsibility of cell companies to charge consumer exactly for the service they use and not encumber them by extra commission burden.
“Did anybody prevent any other bank to do the same? Anything that does not break law and is done in favor to consumers is a good marketing move and nobody can accuse BOG for dexterously used chance,” Lia Eliava, a financial market analyst, elaborated. Nodar Chichinadze, Chairperson of Association of Young Financiers and Businessmen, wonders that neither of cell operators acted more consumer-orinted. “If there were a fair competition any of the companies might undertake say 2% of charge on themselves and not lay the 4% burden on consumer, but all made similar decision that bespeaks of cartel agreement,” he said.
NBG undertook the research to find out whether the fast-pay machines really face bankruptcy or the BOG’s marketing strategy is a dumping policy. However it also finds questionable that all three mobile operators at the same time had decided to change the policy which in reality meant the increase in the price of their services.
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