Dutch regulator ACM has reached an agreement with KPN on improving the incumbent operator's compliance and oversight. The ACM found that KPN has made progress in improving its internal compliance and meeting its regulatory obligations, allowing the regulator to end its heightened surveillance of the operator from 01 July.
The two signed a new Compliance Covenant, and as part of that KPN has agreed to drop its appeals against a number of sanctions imposed earlier by the ACM. This includes withdrawing its appeal against the EUR 29.7 million fine for the OT2010 government contract, making the fine definite.
KPN said it welcomed the ACM's decision, which recognises its efforts to adhere to the law and regulations. KPN has been under increased surveillance by the regulator since December 2011. The incumbent was in a number of disputes with the regulator (then known as Opta) at the time, many of which were kept private as KPN obtained injunctions against the publication of decisions pending its court appeals. Opta signalled the problems in public by saying it would keep a closer eye on KPN.
Covenant agreements
The latest covenant, signed by KPN CEO Eelco Blok and ACM director Henk Don, covers the markets where KPN is considered a dominant player. KPN is expected to organise its activities in order to minimise the chance of violating the Telecommunications Act, detect any such violations itself, report these to the ACM and bring the violations to an end. This requires an open dialogue and mutual confidence with the regulator.
KPN is expected to incorporate the law in a timely fashion in its own corporate policies and code of practice for managers. The organisational culture should ensure that violations are quickly signaled and those responsible face consequences. Any conflicts should be discussed with the ACM, and each quarter KPN will provide a compliance report to the regulator.
The ACM also committed to organisational changes, such as ensuring Chinese walls between its market analysis branch and enforcement unit. It also agreed to consider all context in cases and provide a clear, prompt response to any questions from KPN, in strict confidence.
The commitments will be re-evaluated each year.
Investigations
When the regulator first tightened its oversight of KPN, the incumbent was involved in regulatory disputes over two major government contracts (OT2006, OT2010) as well as controversial discounts provided to business customers. Opta found that KPN was keeping too much information from the regulator, despite their existing covenant from 2008. In 2008 and 2009 Opta started a number of investigations at the operator.
Opta started talks with KPN on agreeing a new compliance framework, but in March 2012 the two said they could not reach a deal. While the previous agreement remained in place, it did not always ensure results.
KPN fined
Opta's investigations eventually led to a number of sanctions as well as court cases. In January 2013, a fine of EUR 8.5 million for the business contracts was made definite. The dispute over the OT2010 contract also started to gain more publicity.
KPN not only lost the OT2010 contract to Tele2, but was imposed a fine of EUR 33 million for its behaviour in the tender. This was later reduced to EUR 29.7 million in court, but much of the violations were upheld. KPN has now withdrawn its appeal of the fine. More recently, it was revealed that KPN was fined EUR 900,000 over the OT2006 contract.
The fines are based on the regulator's previous sanctions policy, from 2005 and 2008, and this has since been updated to allow more severe fines.
KPN's efforts
Since the regulator tightened its surveillance, KPN has taken various measures to improve its internal compliance with laws and regulations, according to the ACM. In 2013 KPMG conducted an investigation in order to make an independent assessment of the effectiveness of KPN's compliance organisation. The results of this study confirm the ACM's impression that KPN's efforts have led to a clear improvement in measures required to ensure compliance with ACM's domain.
KPN has pledged further improvements, said it aims to learn from its past and is prepared to work on a daily basis on a trustful relationship with the regulator. KPN agreed to withdraw a number of appeals and said it will no longer employ the standard practice of seeking injunctions to prevent the publication of sanctions decisions.
All of the above is included in the new Compliance Covenant.
