Commissie verwelkomt het vonnis van het Hof inzake boete voor Deutsche Telekom voor misbruik van zijn dominante positie in Duitse telecommarkt (en)
The European Commission welcomes today's judgement of the European Court of First Instance (CFI), upholding in its entirety a 2003 Commission decision imposing a €12.6 million fine on Deutsche Telekom AG (DT) for abusing its dominant position on the German telecommunications market. For more than 5 years DT charged unfair prices for the provision of local access to its fixed telecommunications network (local loops). This meant that alternative operators could not compete effectively with Deutsche Telekom and German consumers were deprived of the benefits of choice and price competition for more than five years. The CFI ruling is important, not only for German consumers, but also because it confirms that dominant operators who have a regulatory obligation to supply access to their networks cannot evade this obligation through a margin-squeeze price policy.
The judgment of the Court of First Instance
In its judgment, the Court of First Instance rejects all pleas advanced by DT. The Court confirms that the Commission correctly found that, from the beginning of 1998 to the end of 2001, and from 2002 to the adoption of the decision, DT had sufficient scope to end or reduce the margin squeeze, while complying with the price ceiling imposed by the German Regulatory Authority (RegTP).
The Court of First Instance also clarifies that the fact that DT’s charges had to be approved by RegTP does not absolve it from responsibility under competition law. As an undertaking in a dominant position, DT was obliged to and had the possibility to submit applications for adjustment of its charges as soon as those charges had the effect of impairing genuine undistorted competition on the common market.
Furthermore, the Court of First Instance upheld the method used by the Commission to establish a margin squeeze. It notes that the abusive pricing policy of Deutsche Telekom was due to the reduced spread between its prices for wholesale access and its retail prices. The Commission was not therefore required to demonstrate that the retail prices were, as such, predatory and abusive.
The Commission was also correct to base its calculation of the margin squeeze on a comparison of wholesale access with a weighted average of retail prices for all Deutsche Telekom’s access services (analogue, ISDN and ADSL).
The judgment recalls that at the time of the adoption of the Commission decision in 2003, there was no infrastructure in Germany other than DT's fixed network that would have enabled its competitors to make a viable entry onto the market in retail access services. A potential competitor who was just as efficient as DT could thus not enter the retail access services market without suffering losses. This effect is proven by the small market shares acquired by DT’s competitors which show that the abusive behaviour also had an impact on the market.
As regards the argument of DT that the Commission had impinged on the competences of the German Regulatory Authority, RegTP, the judgment observes that decisions of national authorities do not in any way affect the Commission’s power to find infringements of competition law. The Court of First Instance underlines that the Commission cannot therefore be accused of introducing double regulation of DT's pricing practices by punishing DT for having failed to use its discretion in order to end the margin squeeze.
The Commission decision of 21 May 2003 (see also IP/03/717)
In its decision of 21 May 2003 the Commission found that DT charged new entrants higher fees for wholesale access to the local loop than what DT’s subscribers paid for fixed line subscriptions. This discouraged new companies from entering the market and reduced the choice of suppliers of telecoms services as well as price competition for consumers. The Commission’s action stemmed from complaints by numerous new entrants in the German telecommunications market.
Since 1998 DT was legally obliged to provide competitors access to its local loops. In spite of this clear obligation, there was still very little effective unbundling of the local loops and DT, with a market share of 95% in 2003, remained the dominant provider of broadband and narrowband retail access. Many new entrants tried to compete with the incumbent operator. None of them was able to reach significant market share, not least because DT charged its competitors higher fees for local loop access than its end users had to pay for broadband or narrowband access. This was clearly harmful to consumers, because competition between operators is the best means to bring overall prices down.
Background: Access to the local loop in Germany
The « local loop » is the physical circuit between the customer's premises and the telecommunications operator's local switch. Traditionally it takes the form of pairs of copper wires. New entrants on the telecommunications markets need access on fair and non-discriminatory terms to the local loops (“local loop unbundling”) to be able to offer retail services to end-customers, as it would be impossible to replicate such a network built over a century.
Effective local loop unbundling is key for the spread of electronic communications services. It was imposed on the incumbent operators by way of legislation at EU level and, in some Member States, such as Germany, also at national level. The regulatory framework was not the only tool available to tackle the show take-up of local loop unbundling. The conditions of local loop unbundling, such as pricing, were also subject to scrutiny under the EU competition rules.
In Germany, DT has offered local loop access at two different levels for many years. Besides the retail subscriptions to end customers, DT also offers unbundled access to the local loop to competitors, which allows them direct access to end-users. DT was and is thus active on the upstream market for wholesale local loop access to competitors and on the downstream market for retail access services to end-customers. Both markets are closely linked to each other.
DT’s local access network is not the only technical infrastructure allowing for the provision of wholesale access services to competitors and of retail access services to end-users. But the other alternatives, which include fibre-optic networks, wireless local loops, satellites, power lines, and upgraded cable TV networks, were at least during the infringement period not yet sufficiently developed and could not be considered as equivalent to DT’s local loop network.