The application of Article 102 TFEU
after the Court of Justice ruling in
TeliaSonera
European Commission,
DG Competition, Directorate C, Unit 1
1
DISCLAIMER
“The views expressed are purely those of the
speaker and may not in any circumstances be
regarded as stating an official position of the
European Commission“.
European Commission,
DG Competition, Directorate C, Unit 1
2
Outline
• Telia Sonera in the context of recent case-law
in the telecommunications sector.
• Main elements of the judgment.
• Bundling and converging markets implications for margin squeeze .
• Outlook.
European Commission,
DG Competition, Directorate C, Unit 1
3
Recent case-law in the
telecommunications sector (1)
• Case C-202/07 - France Télécom (judgment of 2 April 2009)
– Predatory pricing.
– Wanadoo – now merged with FT- was found by the Commission to
have abused its dominant position on the French market for highspeed internet access by charging predatory prices to its residential
customers.
– Decision entirely upheld by General Court (judgment of 30 January
2007) and ECJ.
European Commission,
DG Competition, Directorate C, Unit 1
4
Recent case-law in the
telecommunications sector (2)
• Case C-280/08 P - Deutsche Telekom (judgment of 14 October
2010)
• Margin Squeeze: DT was found by the Commission to have abused
its dominant position in the markets for direct access to its fixed
telephony network by charging competitors prices for local loop
access services that were higher than the retail prices which DT
charged to end-users.
• Margin squeeze is an independent abuse, subjected to “as efficient
competitor” test.
• No demonstration required that wholesale or retail prices are in
themselves abusive.
• Effects need to be proven.
European Commission,
DG Competition, Directorate C, Unit 1
5
Case C-52/09 TeliaSonera
Judgment of 17 February 2011
European Commission,
DG Competition, Directorate C, Unit 1
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Proceedings
• Reference for preliminary ruling under Article 267 TFEU from
the Stockholm District Court .
• In the course of proceedings between the Swedish Telecom
operator TeliaSonera and the National Competition Authority.
• A series of questions on the interpretation of Article 102 TFEU
concerning an alleged abuse of a dominant position in the
form of a margin squeeze .
European Commission,
DG Competition, Directorate C, Unit 1
7
Dispute in the main proceedings
• TeliaSonera, the Swedish fixed telephone network operator, exclusive
rights in the past, owns the local loop.
• Offers to rivals:
• unbundled access under regulatory obligation to supply;
• an ADSL product for wholesale users without regulatory obligation.
• Allegation: TeliaSonera abuses its dominant position on the wholesale
market by applying an insufficient margin between the wholesale price
for input ADSL products and the retail price for ADSL services.
European Commission,
DG Competition, Directorate C, Unit 1
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Questions posed by the National Court (1)
• what are the conditions under which the prices
charged by a vertically integrated dominant firm for
its wholesale and retail products would be abusive?
• is the finding of an anticompetitive effect necessary?
• is it necessary to prove that the wholesale input is
indispensable?
European Commission,
DG Competition, Directorate C, Unit 1
9
Questions posed by the National Court (2)
• Should the undertaking be dominant on the downstream
market?; is the degree of market strength relevant?
• Should there be an expectation that the dominant firm would
recoup its losses?
• Is it relevant whether the customers are new or already
existing?
• Is it relevant whether the markets concerned are mature or
feature new technology?
European Commission,
DG Competition, Directorate C, Unit 1
10
The ECJ’s ruling (1)
• Margin squeeze : stand-alone abuse (paras 31, 32):
– Margin squeeze is in itself capable of constituting an abuse
within the meaning of Art. 102 TFEU .
– The is margin squeeze « if the spread between the
wholesale prices for ADSL input services and the retail
prices… were either negative or insufficient to cover the
specific costs of the ADSL input services which TeliaSonera
has to incur in order to supply its own retail services to end
users, so that the spread does not allow a competitor
which is as efficient as that undertaking to compete for the
supply of those services to end users ».
European Commission,
DG Competition, Directorate C, Unit 1
11
The ECJ’s ruling (2)
• As efficient competitor test
– wholesale/retail price spread does not allow an equally efficient rival
to compete for the retail service (para 32)
– wholesale and retail price do not need to be in themselves abusive
(excessive or predatory) (para 34)
– the cost and prices of the dominant undertaking are the relevant
benchmark (only exceptionally those of competitors) (para 46)
– Need to demonstrate anti-competitive effect which may potentially
exclude competitors who are at least as efficient as the dominant
company (para 64)
Similar approach already in Deutsche Telekom
European Commission,
DG Competition, Directorate C, Unit 1
12
The ECJ’s ruling (3)
• Judgment clarifies application of Bronner (paras 54-58).
• TeliaSonera argued that undertakings remain free to fix their
terms of trade except if there is a refusal to supply in the
sense of Bronner (ex novo obligation to supply).
• ECJ agreed with Commission that such an interpretation
would unduly reduce the effectiveness of Art 102. The
Bronner criteria do not need to be met where the dominant
firm applies conditions which are disadvantageous or on
which there might be no purchaser.
European Commission,
DG Competition, Directorate C, Unit 1
13
The ECJ’s ruling (4)
• Indispensability
– « May be relevant » when assessing the affects of the
margin squeeze (para 69).
– Where access to the wholesale product is indispensable
potential anti-competitive effects are probable (paras 70,
71).
– But margin squeeze may exist even if the input is not
indispensable; at least potentially anticompetitive effects
need to be established (para 72).
European Commission,
DG Competition, Directorate C, Unit 1
14
The ECJ’s ruling (5)
• Art. 102 requires market strength amounting to dominance
only, but super dominance may be relevant for the
assessment of the effects of the conduct (paras 81-82).
• No need to establish dominance on the retail market (similar
to case law on refusal to deal) (paras 87-89).
• In general irrelevant whether the practice drives out of
market new or existing client of the dominant undertaking,
provided it is as efficient as the dominant firm (para 94- 95).
European Commission,
DG Competition, Directorate C, Unit 1
15
The ECJ’s ruling (6)
• The fact that the dominant undertaking is unable to
recoup its losses is irrelevant (already in France
Télécom).
• The extent of the maturity of the markets is in
general irrelevant; the cost of investment (including
costs to penetrate a neighbouring market) is part of
the analysis of the undertaking’s costs in establishing
whether a margin squeeze exists (para 110-111).
European Commission,
DG Competition, Directorate C, Unit 1
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Conclusion
• Confirms
– Margin squeeze an independent abuse, subjected to “as efficient
competitor” test
• Supports
– the Commission’s effects-based approach and general framework of
analysis of exclusionary conduct
• Clarifies
– The condition for indispensability does not need to be satisfied,
margin squeeze ≠ refusal to deal
European Commission,
DG Competition, Directorate C, Unit 1
17
Bundling and converging markets implications for margin squeeze
• Bundling: TeliaSonera confirms that dominance in
the downstream market is not needed. Therefore,
increased offering of bundled products for which the
incumbent may not be dominant (3-play, 4-play)
does not seem to have an immediate impact on the
margin squeeze analysis.
• Converging markets: different/ broader market
definition?; Implications for the dominance analysis.
European Commission,
DG Competition, Directorate C, Unit 1
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Outlook
European Commission,
DG Competition, Directorate C, Unit 1
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