Last week the CJEU delivered its judgment in case C-165/19 P dismissing the appeal brought by Slovak Telekom (“ST”) against the judgment of the General Court of 13 December 2018 (T‑851/14). Damien was representing ST alongside Robert O’Donoghue from Brick Court Chambers. The case concerns a 2014 infringement decision of the Commission, whereby the latter found that ST had committed an infringement of Article 102 TFEU concerning broadband internet access services in Slovakia between 12 August 2005 and 31 December 2010.
ST enjoyed a legal monopoly on the Slovak telecoms market until 2000. Following a market analysis, in 2005 the national regulatory authority of Slovakia designated ST as an operator with significant market power on the wholesale market for unbundled access to the local loop (“ULL”). It also imposed on ST the requirement to grant all reasonable and justified requests for unbundling its local loop.
According to the Commission decision, ST engaged in two forms of abuse: (1) a (constructive) refusal to supply access to its ULL; and (2) margin squeeze (applying unfair tariffs which did not allow an as efficient competitor relying on wholesale access to the ULL of ST to replicate the retail broadband services offered by ST without incurring a loss). The refusal to supply was not outright, but rather lay in the fact that ST applied unfair terms that made unbundled access to its local loop unacceptable.
The key legal issue – Bronner and constructive refusal to supply
Hereafter I focus on what I consider as probably the most important issue, namely whether the Commission was required to establish that the Bronner criteria were satisfied with respect to ST’s constructive refusal to supply, and in particular, whether the Commission was required to establish that access to ST’s ULL was indispensable for alternative operators to compete on the downstream market. In its decision, the Commission had considered it was under no obligation to do so, essentially relying on the (rather controversial) dictum from TeliaSonera, where the CJEU held that it cannot be inferred from the Bronner judgment that the indispensability condition must necessarily also apply when assessing the abusive nature of conduct which consists in supplying services or selling goods on conditions which are disadvantageous or on which there might be no purchaser. ST had argued, among others, that the CJEU’s dictum in TeliaSonera was limited to cases of margin squeeze (which was the type of abuse in that case).
In Slovak Telekom the CJEU essentially sided with the Commission, holding that Bronner applies only in cases of “outright” refusal to supply, to the effect that the Commission was not required to establish that access to ST’s ULL was indispensable. In other words, the CJEU limited Bronner to cases of “outright” refusal to supply, which it distinguished from cases where the dominant undertaking provides access but on unfair terms. It reasoned as follows:
The rationale behind Bronner
After citing well-rehearsed case law (special responsibility of dominant undertakings; notion of abuse; relevance of all the circumstances), the CJEU recalled the conditions laid down in paragraph 41 of Bronner (namely (i) indispensability of upstream input; (ii) refusal likely to eliminate all effective competition on behalf of the person seeking access; (iii) and no objective justification).
The CJEU then explained that the reason for imposing these conditions is that the remedy in refusal to supply cases interferes with the dominant company’s commercial freedom: finding that an undertaking had abused its dominant position by refusing to conclude a contract has the consequence of forcing the undertaking to conclude a contract with a competitor; such an obligation is “especially detrimental to the freedom of contract and the right to property of the dominant undertaking” (par. 46, citing Volvo). In addition, there is the well-known issue of the impact on the incentives of dominant undertakings (par. 47).
Distinguishing non-outright refusal to supply
On the other hand, the conditions laid down in Bronner do not apply where a dominant undertaking gives access to its infrastructure but makes that access “subject to unfair conditions”. These practices cannot be equated to a “simple refusal to allow a competitor access to the infrastructure.” The reason is that in this case the competent authority will not have to force the dominant undertaking to give access to its infrastructure as that access has already been granted; the measures would be thus less detrimental to the company’s freedom of contract and right to its property (par. 51).
As for TeliaSonera, the CJEU clarified that paragraph 58 of that judgment was not limited to margin squeeze cases (par 53).
The legal test in cases where the dominant undertaking provides access but on unfair terms (i.e. there is no outright refusal to supply)
The CJEU did not say much here. It suggested that in this case, the Commission will need to show at least potential anticompetitive effects (which is arguably not a very high threshold). As the CJEU put it, “…such practices [granting access on unfair terms] can constitute a form of abuse where they are able to give rise to at least potentially anticompetitive effects, or exclusionary effects, on the markets concerned” (par. 51).
What the CJEU’s judgment means for tech / digital platform cases
To me, the key message of last week’s judgment is that the (demanding) Bronner test is limited to cases where a dominant undertaking engages in an outright refusal to deal – or, to put it another way, when the remedy would be to force it to conclude a contract with a competitor / grant access to infrastructure which it has reserved for the needs of its own business (after all, remedy and theory of harm are logically two sides of the same coin). If, on the other hand, the dominant undertaking has already granted such access but on unfair terms, Bronner does not apply.
This is of particular relevance for tech cases involving vertically integrated digital platforms – or as is often said, platforms exercising a dual role e.g., Apple with respect to the App Store, Amazon with respect to Amazon marketplace, Google with respect to Google Search – said to engage in “self-preferencing” (leveraging their dominant position as operators of the platform to distort competition in an adjacent market – think of Google Shopping). Per Slovak Telekom, in such cases the competent authority is under no obligation to show that the Bronner criteria are met, contrary to the arguments raised by some in the past with respect to Google Shopping (see e.g., here and here). If a digital platform has granted competitors access to its platform but on unfair terms that favour its own downstream activities, then there is no need to show indispensability per Bronner (or that the practice in question is likely to eliminate all effective competition). The competent authority will of course not be relieved of the requirement to show at least potential anticompetitive effects (and, while the CJEU did not say so, we know from its 2009 Guidance that the Commission will pursue a case if the practice in question also leads to consumer harm).
Photo by Mustafa Yasser on Unsplash