Last week, on 25 March, the CJEU handed down its judgments in Deutsche Telekom and Slovak Telekom (cases C-152/19 P and C-165/19 P). The judgments provide a useful summary of the law on refusal to supply. They clarify that where a dominant firm gives access to its infrastructure but makes that access subject to unfair conditions, the conditions for establishing abuse contained in the CJEU’s 1998 Bronner ruling do not apply.
Slovak Telekom (‘ST’) is the incumbent telecommunications operator in Slovakia. It offers broadband services on its copper and fibre-optic networks. These networks include the ‘local loop’, which connects a consumer’s premises with the broadband network. In 2014 the European Commission found that ST and its parent company Deutsche Telekom (‘DT’) had abused a dominant position on the Slovakian broadband services market by (i) setting unfair terms and conditions for access to the local loop and (ii) applying unfair tariffs that made it impossible for competitors to offer services at a profit. The Commission fined ST and DT €38.8 million for the infringement and fined DT a further €31 million for recidivism.
The Commission’s decision was largely upheld on appeal to the General Court. ST and DT then appealed to the CJEU, arguing (among other things) that although ST had not refused to grant access outright, the unfair terms and conditions imposed were equivalent to an outright refusal to supply. On this basis, the appellants argued that for an abuse under Article 102 to arise, it was necessary for the Commission to show that access to the local loop was indispensable for rival operators, as prescribed by Bronner.
The CJEU’s judgments
The CJEU followed the Opinion of Advocate General Saugmandsgaard Øe and dismissed the appeals in their entirety. It confirmed that the conditions established in Bronner apply only where a dominant firm refuses outright to provide access to its infrastructure. The Court held that where a dominant firm refuses to give access to its infrastructure, a decision obliging it to grant its competitors access cannot be justified from a competition policy perspective unless the firm has a “genuinely tight grip” on the market.
In a refusal-to-supply case, a dominant firm will be deemed to have a genuinely tight grip on the relevant market and to infringe Article 102 TFEU where the three conditions established in Bronner are satisfied:
- refusing access is likely to eliminate all competition on the part of the competing firm requesting access;
- the refusal cannot be objectively justified; and
- access to the infrastructure is indispensable to the competing business (in the sense that there is no actual or potential alternative).
The CJEU justified these stringent conditions on two grounds. First, an obligation to supply is “especially detrimental to the freedom of contract and the right to property of the dominant undertaking”, and any incursions on these rights must be carefully balanced against the competition benefits. Secondly, the long-term economic impact of imposing a supply obligation must be considered. Although a more interventionist approach might result in more competition in the short term, in the long run it may reduce the “incentive for competitors to develop competing facilities” and make dominant firms “less inclined to invest in efficient facilities”.
The CJEU observed that ST had not actually refused to give access to its local loop. While the granting of access on unfair terms can constitute an abuse where it “give[s] rise to at least potentially anticompetitive effects, or exclusionary effects”, such a practice should not, in the Court’s view, be equated to a refusal to provide access. Where access has already been granted, a competent competition authority or court would not have to force the dominant firm to deal with a third party and the policy arguments against imposing such an obligation do not, in the Court’s view, apply.
The Commission was therefore not required to show that access to ST’s local loop was indispensable for competitors to enter the market, in order to be able to decide that the terms and conditions set by ST were an abuse of dominance.
By adopting a firm distinction between the approach to be taken to an outright refusal to supply and that which is appropriate when the terms of an agreement for supply are at issue, the CJEU’s judgments cast doubt on the concept of implicit or ‘constructive’ refusal to supply. Advocate General Saugmandsgaard Øe addressed this expressly in his Opinion of September last year. The AG went so far as to propose that the concept of implicit refusal to supply should be rejected entirely. He suggested that it is in no way supported by the Bronner ruling and “has a scope the elasticity of which is potentially unlimited”. The CJEU did not specifically endorse this aspect of the AG’s Opinion, but nor did it do anything to distance itself from it.
The judgments also have important policy implications. The CJEU appears to have confirmed that as soon as a dominant firm agrees to provide access to its infrastructure on specific terms, a lower threshold for infringement of Article 102 will apply. It might be argued that that gives dominant firms too strong an incentive simply to refuse access to their ‘essential facilities’. In situations where a dominant firm provides access and subsequently stops supplying, the pre-existing case law on terminating commercial relationships will continue to be relevant. Early cases such as Commercial Solvents and Boosey & Hawkes suggest that the test for abuse may be different for termination of existing commercial dealings.