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Robert Klotz, Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector – EU and National Competition Law Enforcement in:

Christian Koenig, Ludger Kühnhardt (Ed.)

Governance and Regulation in the European Union, page 253 - 270

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1. Edition 2017, ISBN print: 978-3-8487-4462-6, ISBN online: 978-3-8452-8672-3, https://doi.org/10.5771/9783845286723-253

Series: Schriften des Zentrum für Europäische Integrationsforschung (ZEI), vol. 77

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E. Sector-Specific Regulation 255 I. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector – EU and National Competition Law Enforcement By Robert Klotz1 1. Introduction When the telecommunications markets were fully liberalized in the European Union in 1998 and competition started to emerge, incumbent operators had find strategies to minimize market share losses. As a consequence, competition disputes arose between them and the new entrants who quickly started to complain about anti-competitive behaviour by the incumbents. In the first years after full liberalization, although EU and national competition rules existed alongside sector-specific regulation, the competition authorities however did not enforce them with many formal decisions. The focus of the enforcement practice rather was on the national telecoms regulators with their specific competences and tools to intervene ex ante. In some national jurisdictions, the competition rules were explicitly or implicitly side-lined, based on the view that ex ante and ex post control would exclude each other. In that context, US case law was sometimes referred to – notably the Trinko case2 - to back up this claim. Under EU law, the same trend could be observed, albeit in a less formalized manner than in some of the Member States. While the European Commission did not formally exclude the application of the competition rules in the regulated telecoms sector, its tools were not used very forcefully for a number of years, while the markets evolved quickly and some new entrants got lost on their way into the new world of competition. When the European Commission realized that the sector-specific rules were not fully suited to promote effective competition in all areas of the telecom sector, and had to be overhauled substantially in 2002, very few competition cases had been taken to ____________________ 1 |Partner| | Sheppard Mullin Richter & Hampton LLP, Brussels. 2 Verizon Communications v. Law Offices of Curtis V. Trinko, LLP, Supreme Court of the United States, 540 U.S. 398 (2004). Robert Klotz 256 a formal decision, both by the European Commission and the national competition authorities. A turning point occurred in when the more decentralized approach for the competition law enforcement under Council Regulation (EC) No. 1/20033 started to apply. Since then, the number of competition investigations and formal decisions against telecommunication companies has increased considerably, notably at national level. The commitment decision procedure was introduced into EU competition law at the same time, with Article 9 of Regulation 1/2003. Since 2004, the European Commission therefore has the possibility to conclude competition law cases by way of a formal settlement and to accept commitments to meet its competition concerns without coming to the finding on an infringement and imposing a fine. Many Member states have introduced similar procedures since then. At present, the telecommunications sector provides a good example of the increasing degree of harmonization between EU and national competition law enforcement. It is particularly interesting to observe that in certain areas the European Commission, with its formal decisions, has paved the way for comparable national decisions, while in other areas, national authorities have taken the lead, which in return appears to have inspired the European Commission to enter new grounds. For instance, national competition authorities have been more active, and earlier, than the European Commission in pursuing cases of restrictive agreements or concerted practices between telecoms operators, falling under Article 101 TFEU or the equivalent provisions under national law. On the contrary, cases of abusive unilateral conduct by dominant companies falling under Article 102 TFEU have first been pursued and concluded by the European Commission, and later on by the national authorities. This paper will focus exclusively on the EU and national enforcement practice under Article 101 TFEU. In the early days of liberalization, restrictive cartel agreements segmenting supply territories and customer groups of fixing quantities and prices did not come up to a large extent in the telecommunication sector. This might be due, at least in the fixed telephony markets, to the diverging interests of the operators concerned. After the market opening, incumbents first need to adapt to the new setting while keeping a strong market position. New entrants on the other hand pursue their own ____________________ 3 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 257 business strategies, trying to gain customers and market shares from the incumbents. These diverging interests hardly offer any incentives for cartels or other restrictive agreements among such competing operators. In addition, the essential elements for their business relationship, such as network access and related conditions, are subject to sector-specific regulation. On the mobile telephony markets, these considerations however applied only to a lesser extent, because these markets emerged in most Member states under competitive conditions, less influenced by the former State monopolies, and with a lower degree of sector-specific oversight by national telecoms regulators. It is therefore not surprising that the first formal decisions under Article 101 TFEU were adopted against mobile telephony operators, while the first such cases against fixed telephony operators appeared only much later, as will be described in further detail below. 2. Formal decisions taken at national level 2.1 Dutch mobile operators 2.1.1 Information exchange The Dutch competition authority (NMa) adopted a first formal decision on 30 December 2002 against five national mobile operators, T-Mobile Netherlands, Orange Nederland, KPN Mobile, Telfort and Vodafone Libertel4, for an exchange of confidential business information and coordinated behaviour, resulting from a joint meeting after which all of them simultaneously lowered the standard payments to retail traders for entering into or selling mobile telephone subscriptions. This was considered as a horizontal agreement among competitors preventing clients from switching operators and led to a fine of 88 million Euros, later reduced to 52 million Euros by the internal appeal body of the authority. After the Rotterdam Court had partially annulled the decision and ordered the NMa to re-examine the matter, it was brought before the Dutch Trade and Industries Appeal Tribunal, which decided to stay proceedings and refer the case for preliminary ruling to the European Court of Justice ____________________ 4 Nederlandse Mededingingsautoriteit, Case No. 2658-344, Decision of 30 December 2002. Robert Klotz 258 (ECJ). On 4 June 2009, the ECJ ruled5 that a single meeting can indeed be sufficient to cause an infringement of Article 101 TFEU, so that the competition authority was right in its initial assessment. Based on this ruling, the Appeal Tribunal on 12 August 2010 ordered the Dutch competition authority to reassess the evidence produced by the mobile operators to rebut the presumption of a causal link, to re-examine the actual effects of the infringement on the market and to reset the level of the fine. On 27 October 2011, the authority held that the mobile operators were not allowed to exchange information about the dealer remuneration levels, not even once, and thus confirmed their liability for the concerted practice dating back to 2001. On this basis, the authority ultimately imposed fines of 7.9 million Euros on KPN, 4.6 million Euros on T-Mobile and 3.7 million Euros on Vodafone. 2.1.2 Price fixing The same three operators again came under the scrutiny of the Dutch competition authority. In 2013, the Authority for Consumers and Markets (ACM) concluded an investigation into suspected price-fixing agreements.6 Although there was no evidence for actual price-fixing, the ACM did establish that public statements about future market behaviour could have anticompetitive effects. The authority found that statements made in public by the mobile providers about planned price variations for consumers could lead to indirect collusive behaviour, because other mobile operators could align their behaviour which could be harmful to consumers. The three companies in question then offered commitments to the ACM, consisting of a promise to refrain from making such statements in public to avoid any risk of anticompetitive behaviour in the future. These commitments were also to be included in their internal compliance programs to ensure that they became a matter of general company policy. The commitments were accepted by the ACM in January 2014, which led to the closure of the probe against the three mobile operators.7 This case provides a good ____________________ 5 Case C-8/08, T-Mobile Netherlands and Others, 4 June 2009, ECLI:EU:C:2009:343, Press Release No 47/09. 6 Autoriteit Consument & Markt, Case No 13.0612.53, Press Release of 21 November 2013. 7 Autoriteit Consument & Markt, Case No. 13.0612.53, Decision of 7 January 2014. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 259 indication of how far companies can exchange views about their future endeavours before there is a risk of collusion or other anticompetitive behaviour. There is however something almost paradoxical about this case. Although the companies stated that they merely intended to be transparent, the Dutch regulator found that such transparency did not come without a threat to competition. According to the ACM, the risk was due to the uncertainty that the companies would implement the statements they had made regarding future actions, although no internal decision had been made to this effect. It followed that the ACM’s decision consisted in a prohibition against verbal or written statements in the public domain about future prices and other commercial conditions before these had been made. On 22 December 2016 the ACM lifted the binding commitments imposed on KPN, T-Mobile and Vodafone. In letters addressed to each of them, the authority notified them that the commitments have been lifted, but that it still expects them not to make such statements in the future.8 2.2 French mobile operators 2.2.1 Horizontal agreements The French competition authority (Conseil de la Concurrence) adopted a formal decision on 30 November 2005 against three French mobile telephony operators, Orange France, SFR and Bouygues Télécom, for engaging in an anticompetitive horizontal agreement.9 The fine imposed reached a total of 534 million Euros. The investigations revealed that every month between 1997 and 2003, the operators had exchanged detailed confidential information on the number of new and lost customers, to which they could not have gained access otherwise. This was used as an important source of information for their commercial strategies. This information sharing agreement allowed the operators to monitor the progress of the "market pacification" policy they had adopted, to the detriment of consumers. In addition, the operators also entered into an agreement aimed at stabilizing the development of their respective market shares. ____________________ 8 Autoriteit Consument & Markt Case No. 13.0612.53, Decision of 22 December 2016, Press Release of 28 December 2016. 9 Conseil de la concurrence (now: Autorité de la concurrence), Décision relative à des pratiques constatées dans le secteur de la téléphonie mobile, Decision No 05- D-65 of 30 November 2005. Robert Klotz 260 The authority considered this as a very serious infringement, in view of the damage to the economy, the three-year duration, the size of the market and the high barriers to entry, given that mobile operators are required to obtain a license and no service providers, such as mobile virtual network providers, were granted access to the operators' networks during the period in question. The competent appeal Court (Cour d’Appel de Paris) confirmed the decision in 2006, stating that the oligopolistic structure of the market, combined with the regular exchange of precise and non-public information on a systematic and closed basis, altered the remaining competition between the operators, especially since such behaviour had the effect of revealing, on a daily basis and to all competitors, the market positions and strategies of each one of them.10 The French Supreme Court (Cour de Cassation) partly over-ruled this judgment in 2007, in so far as the Cour d’Appel had not considered whether the authority had demonstrated that the information exchange had a concrete anticompetitive object or effect.11 According to the Cour de Cassation, an exchange of information is not prohibited per se. The anticompetitive object or effect cannot be induced from the sole consideration that information was exchanged. For the prohibition to apply, the information exchange must enable each operator to adapt its strategy to that of the predictable behaviour of their competitors. Hence, the potential or actual anticompetitive object or effect of an alleged anticompetitive conduct must be supported by a detailed assessment, which the Cour d’Appel had failed to deliver. The Cour de Cassation however upheld the previous ruling concerning the market share freezing practices which justified the major part of the 534 million Euros fine. On 11 March 2009, the Cour d’Appel confirmed the authority’s finding of infringement with respect to the exchange of information and confirmed the 92 million Euros fine imposed. On 7 April 2010, the Cour de Cassation upheld this ruling on substance but quashed it regarding the fine of 41 million Euros imposed on Orange, due to a lack of arguments on the harm done to the French economy. On 30 June 2011 the Cour d’Appel once again confirmed the decision.12 ____________________ 10 Cour d’Appel de Paris, Decision of 12 December 2006, RG n°2006/00048. 11 Cour de Cassation, Decision of 29 June 2007. 12 Cour d’Appel de Paris, Decision of 11 March 2009, RG n° 2007/19110, Cour de Cassation, Decision of 7 April 2010, Cour d’Appel de Paris, Decision of 30 June 2011, RG n° 2010/12049. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 261 2.2.2 Vertical agreements In December 2009, the French competition authority concluded another case in the telecoms sector, this time concerning a vertical restriction of competition, and imposed a fine of 63 million Euros on Orange Caribbean and France Télécom for engaging in anti-competitive practices in the French West Indies, which led to foreclosure of the market through exclusivity contracts with independent distributors.13 According to the decision, this agreement had raised the rivals’ cost of entry and prevented access by competitors, which had the effect of deterring consumers from switching operators at the only moment when it could be contemplated. The practices also limited the use of customer loyalty points to the purchase of new handsets and conditioned this to a new subscription. As a consequence, France Télécom and Orange Caribbean were found jointly liable for this infringement and were fined 52.5 million Euros, in addition to 10.5 million Euros imposed on France Telecom for a margin squeeze. The Cour d’Appel de Paris, on 23 September 2010, upheld the fine of 52.5 million Euros for the restrictive agreement between the two undertakings, and reduced the fine for the margin squeeze to 7.5 million Euros.14 2.3 Polish mobile operators On 23 November 2011, the Polish office of Competition and Consumer Protection (UoKiK) stated in a formal decision that the four biggest national mobile operators, Polkomtel, PTK Centertel, PTC and P4, had engaged in anticompetitive practices.15 The operators had agreed on the common conduct towards Info-TV-FM, a wholesale operator of mobile television, which delayed the development of mobile TV services on the Polish market. The authority ordered to discontinue the practice while imposing a total amount of fines exceeding 28 million Euros. The operators had established a consortium, Mobile TV, for participating in the tender to obtain a license for allocating frequency bands necessary to provide mobile television services in the digital video broadcast technology. ____________________ 13 Autorité de la concurrence, Décision relative à des pratiques mises en œuvre par Orange Caraïbe et France Télécom sur différents marchés de services de communications électroniques dans les départements de la Martinique, de la Guadeloupe et de la Guyane, Decision No 09-D-36 of 9 December 2009. 14 Cour d’Appel de Paris, Decision of 23 September 2010, RG n° 2010/00163. 15 KoKiK, Decision No. DOK-8/2011 of 23 November 2011. Robert Klotz 262 Having lost the tender, the four companies would have had to buy the service from the winner of the tender, Info-TV-FM. The operators however remained reluctant and refrained from the negotiations with the winner of the tender. The authority determined that the operators were participating in several meetings where they assessed the financial and business aspects of the ITF’s offer, discussed how to jointly undermine the offer and agreed on their common behaviour. Although during the meeting they agreed on the economic disadvantages of the offer, they remained in individual negotiations with ITF and thus delayed access to the mobile services market in Poland. Taking into account the long lasting negotiations and the meetings among the four mobile operators, the authority concluded that their conduct constituted an anticompetitive agreement by object and effect, as it restricted competition on the retail market for mobile telephony and on the wholesale market for mobile television. The joint venture which had first been established for the participation in the tender so as to obtain the license for mobile television services, was then transformed into a restrictive practice between its members, going beyond the scope of lawful arrangements being permitted between the members of a joint venture. The authority considered the anticompetitive conduct as being adopted with the intention to minimize the risk that one of the four operators would offer mobile television services to customers, and thus would gain a competitive advantage over the others. The decision clarified the need for members of a joint venture to be cautious in their common business actions as they may fall under Article 101 TFEU. 2.4 Czech fixed telephony providers On 25 March 2005 the Czech Office for the Protection of Competition (UOHS) adopted its final decision on a price fixing agreement between Český Telecom and two suppliers of ADSL modems, Joyce and Lucent. Under this agreement the contractors were bound not to supply these products to other purchasers in the Czech Republic for a better price than provided to Český Telecom. In addition, the agreement contained a system of volume discounts granted to Český Telecom. The Office imposed a fine amounting to 10 million CZK (approx. 393,000 Euros).16 In its decision, the authority described the negative effect on competition of the commitment by both suppliers not to supply modems at a better price to any competitor of Český Telecom. This agreement was seen to have an adverse effect on competition due to the fact that Český Telecom limited its competitors’ possibilities to reach better prices in the case of contractual ____________________ 16 UOMS, Decision No. R 4/2004 of 25 March 2005. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 263 relations with these two suppliers. The authority did not evaluate the competitors’ possibility to purchase the modems from other producers whose products were perfect substitutes. Moreover, the competitors were indeed entitled to conclude an agreement with the suppliers under the same price conditions as Český Telecom. Hence, the problematic issue in this case was not the mere fact that the competitors were limited by the incumbent, but rather the combination of this limitation with the volume discounts provided to Český Telecom. 2.5 Italian mobile telephony operators Following a complaint by the Italian network operator Bip Mobile in 2012, the Italian competition authority (Autorità Garante della Concorrenza e del Mercato, AGCM) opened an investigation against the network operators Telecom Italia and Wind Telecomunicazioni. Bip Mobile alleged that the network operators had prevented it from entering the Italian mobile telephony market with this horizontal agreement. In an attempt to prevent a negative decision, Telecom Italia and Wind Telecomunicazioni offered to change the wording of their contracts with alternative providers as commitments, so that the agreements no longer tied certain benefits to conditions such as activating a minimum number of SIM cards. Previous agreements had allowed Telecom Italia and Wind Telecomunicazioni to either terminate agreements or withdraw incentives such as discounts if dealers entered into contracts with their competitors. In December 2014, these commitments were accepted by AGCM which closed its investigation regarding Telecom Italia and Wind Telecomunicazioni.17 Accordingly, Wind Telecomunicazioni is obliged for five years to not withdraw from agreements if dealers enter into contracts with mobile phone operators that were not previously their customers so long as those operators hold a smaller market share than Wind Telecomunicazioni. Telecom Italia is obliged not to include clauses in its contracts with distributors that foresee additional incentives being cancelled if those distributors sign commercial agreements to sell services of operators competing with Telecom Italia for three years. ____________________ 17 AGCM, Decision No. 25229 of 11 December 2014, ostacoli all'accesso al mercato di un nuovo operatore di telefonia mobile. Robert Klotz 264 2.6 Danish mobile telephony operators The Danish Competition Council on 29 February 2012 adopted a commitment decision against two mobile operators, Telia Denmark and Telenor A/S, after they had offered five commitments which the authority then made binding upon them.18 The decision concerns a horizontal network sharing agreement via a joint venture, set up by the mobile operators in order to jointly operate a radio access network. The cooperation put in place by this agreement covers the entire Danish territory and the parties will remain separate mobile operators on both the wholesale and retail markets. The authority concluded that such a network sharing agreement is capable of having an anticompetitive impact on the Danish telecom market. However, the issues which gave rise to such a conclusion have been solved by five commitments offered by the parties. Interestingly, in addition to imposing these commitments, the authority also applied Article 101(3) TFEU, pursuant to which the anticompetitive agreement between the undertakings could be exempted from the application of Article 101(1) TFEU. Consequently, the authority decided that there was no sufficient ground for further action. 2.7 Spanish mobile telephony operators On 2 July 2009 the Spanish competition authority (Comisión Nacional de los Mercados y la Competencia, CNMC) stated that parallel rate increases implemented by the three Spanish mobile operators Telefónica, Vodafone and France Telecom were not the consequence of a restrictive agreement or concerted practice between them, and ceased its proceedings.19 Under the Spanish Law on Consumer Protection, a three months period (starting on 30 December 2006) was granted to the mobile operators for adapting their pricing policies. Additionally, under the general consumer protection legislation, any modification of the terms and conditions of consumer services must be notified to consumers at least one month in advance. Consequently, Telefónica notified its new mobile phone rates to its customers on 20 January 2007 and disclosed them to the public on 23 January 2007. ____________________ 18 Konkurrence-og Forbrugerstyrelsen, Decision of 29 February 2012, Radio Access Network sharing agreement between Telia Denmark A/S and Telenor A/S. 19 CNMC, Decision No. AEM 2009/465 of 2 July 2009, Propuesta de Resolución sobre la tasa de coste del capital a aplicar en la contabilidad de France Telecom España, S.A. en el ejercicio 2009. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 265 Following this announcement, Orange and Vodafone adopted their rates accordingly which resulted in very similar rates for the mobile phone services of all three mobile operators. In its decision the authority stated that direct or indirect communication unilaterally started by one company and targeted at competitors regarding future commercial strategy shall only qualify as an anticompetitive practice if the competitors actually follow the announced strategy. Moreover, the authority added that it is not relevant whether the company announcing its future strategy has absolute certainty on the degree of follow-up by its competitors at the moment of the announcement. The authority, however, considered Telefónica’s announcement followed by the modification of the commercial strategy by Orange and Vodafone as mere parallel conduct. The authority also considered that the modified tariff system, in particular persecond charging from the first second of each call, was directly imposed by the law, so that there was no other alternative for the mobile operators. The authority concluded that, in order to maintain their revenues, the mobile operators have the right to adapt their strategy to the one that they have verified or foresee that their competitors would follow. Concerning the application of higher rates for national, roaming and international calls, the authority found that it has not been affected by the announcement as it was internally adopted by Orange and Vodafone in advance. After examining all specific circumstances of the case, the authority thus concluded that the announcement by Telefónica prior to the deadline cannot be regarded as an intentional step towards reducing competition in the market. The conduct of the mobile operators was in compliance with the law governing the modification and prior announcement of the rates and thus without any anticompetitive object or effect. 3. Formal decisions taken at EU level As already described above, the European Commission has been less active than national competition authorities in pursuing restrictive agreements falling under Article 101 TFEU since the telecommunications markets were opened for competition. Despite a number of dawn-raids in 2001 and 2002, Robert Klotz 266 the attempts to prove the existence of restrictive agreements between mobile network operators in various Member States regarding the level of their international roaming tariffs failed due to the lack of conclusive evidence.20 3.1 Cross border market sharing in Spain/Portugal In the field of Article 101 TFEU, only one formal prohibition decision has been adopted to date by the European Commission against a cartel agreement or concerted practice among telecoms operators. The proceedings had been started in January 2011 against the incumbent operators Telefónica and Portugal Telecom, regarding their agreement not to compete on the Iberian telecommunications markets. The agreement had been concluded in 2010 as part of Telefónica's acquisition of sole control over the Brazilian mobile operator Vivo, previously jointly owned by both parties. The European Commission held that the object of the agreement was to partition markets, resulting in potentially higher prices and less choice for consumers. Such clauses lead to significant violations of the competition rules. The non-compete clause can lead to higher prices and to a decrease of choice for consumers. The European Commission has as one of its objects the creation of a single telecommunications’ market in the European Union, and therefore it does not tolerate this type of clauses which block the integration process of this market. On 23 January 2013 the European Commission adopted its decision21, finding that the non-compete clause infringed Article 101 TFEU because of its wording, the economic and legal context of which it formed part and the actual conduct and behaviour of the parties concerned, and that it amounted to a market sharing agreement. Even though the parties limited the scope of the clause and removed it on 4 February 2011, the European Commission did not consider that was sufficient to prevent the competitive risks for the liberalized telecommunications market. Indeed, the infringement lasted for about four months (from 27 September 2010 until 4 February 2011). ____________________ 20 In 2004 and 2005, the European Commission initiated proceedings under Article 102 TFEU against network operators in Germany and the UK. These cases were closed in 2007, following the adoption of the Roaming Regulation, which since then provides for maximum roaming prices at wholesale and retail level. 21 European Commission, Decision of 23 January 2013, Telefónica, S.A. and Portugal Telecom SGPS, S.A., Case COMP/39.839, Press Release IP/13/39. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 267 The European Commission also noted that, contrary to what the parties argued, there was no need to take into account the effects of the agreement since it was a violation by object. So, the negative effects of this agreement, that was signed with the object to exclude or limit the competition on the Spanish and Portuguese markets did not need to be demonstrated with specific evidence, due to the serious nature of this restriction. The European Commission estimated that the non-compete clause could not be exempted under Article 101(3) TFEU, due to the lack of any efficiency resulting from that specific clause. Telefónica and Portugal Telecom were fined 66 million Euros and 12 million Euros, respectively, for this infringement. The decision was challenged by both parties before the General Court. In its judgments of 28 June 2016, the General Court dismissed almost in their entirety the actions brought by the two operators.22 The parties claimed that the European Commission failed to prove a restriction by object resulting from this clause. According to them, it was necessary to demonstrate that they were potential competitors, which the European Commission did not do in the decision. On the contrary, the Court stated that there was no obligation for the European Commission to analyse this in-depth to reach the conclusion that a restriction by object had occurred. Moreover, the Court stated that, to calculate the fines, it was necessary to exclude the company’s sales outside the competition relationship and therefore, outside the scope of the non-compete clause. Notwithstanding, the European Commission will have to determine once again the sales linked directly and indirectly to the infringement in order to calculate the amount of the fines, taking into account the findings of the General Court as set out in its ruling. 3.2 Network sharing in the Czech Republic An ongoing EU investigation under Article 101 TFEU concerns the terms and conditions of a network sharing agreement between two Czech mobile operators. The Czech Competition authority referred a case to the European Commission in March 2015 concerning an agreement between O2 and T- Mobile, having 75% of the Czech mobile market, to share their networks. The two operators had first agreed to share parts of their 4G LTE mobile ____________________ 22 Case T-208/13, Portugal Telecom v European Commission, Judgement of 28 June 2016, ECLI:EU:T:2016:368. Robert Klotz 268 networks, and then also their 2G and 3G networks, as it had been signalled to the authority in a complaint by Vodafone, a competitor on the Czech mobile network market. In October 2016 the European Commission announced that it has initiated formal proceedings against O2 Czech Republic and T-Mobile Czech Republic.23 The European Commission will investigate the network sharing cooperation and ancillary agreements in order to establish whether they restrict competition in the Czech Republic or generate efficiencies, such as reduced deployment costs and may allow for network expansion to previously unserved areas. The agreements have been ongoing since 2011 and cover almost 85% of the country. Furthermore, the Czech mobile networks market is highly concentrated with only three major players, O2, T-Mobile and Vodafone. The European Commission will now assess whether the cooperation agreement between O2 and T-Mobile risks hindering competition by slowing quality improvements in existing infrastructure and preventing the development of new technologies and services. Should it find that the agreement has a negative impact on these factors, the agreement might be contrary to the rules that prohibit anticompetitive agreements. 3.3 Network sharing in Germany and the UK Already before Regulation 1/2003 entered into force in 2004, the European Commission had dealt with several cases of notified network sharing agreements between mobile telephony operators, for the purposes of negative clearance or individual exemption pursuant to Article 101(3) TFEU.24 For instance, on 16 July and 30 April 2003, the European Commission approved two agreements regarding third generation (UMTS) mobile network sharing in Germany and the UK.25 With these agreements, T-Mobile ____________________ 23 European Commission Decision of 25 October 2016, Case No 40305, Network sharing between O2 CZ / CETIN and T-Mobile CZ in the Czech Republic, Press Release IP/16/3539. 24 This possibility existed under Article 19(3) Regulation 17/62, the predecessor of Regulation 1/2003. 25 European Commission, Decision of 16 July 2003, Network sharing Germany (T- Mobile Deutschland GmbH+Viag Interkom GmbH & Co), Case No 38369, OJ 2004 L 75/32–58, Press Release IP/03/1026; Decision of 30 April 2003, O2, UK Limited/T-Mobile UK Limited (UK Network Sharing Agreement), Case No. 38370, OJ 2003 L 200/59, Press Release IP/03/589. Cartels and Restrictive Agreements in the Liberalized Telecommunication Sector 269 and O2, had decided to share site infrastructure and to roam on their UMTS networks in the UK and Germany. After examining the agreements, the European Commission concluded that the site sharing between the companies did not restrict competition because the agreements were limited to sharing basic network infrastructure such as masts, power supply, racking and cooling. However, the European Commission found a restriction of competition regarding the reciprocal provision of national roaming services, stating that such services between network providers limited network-based competition with respect to coverage, retail prices, quality and transmission speeds. The European Commission also found that these services promote market entry, which leads to better and quicker 3G service coverage. Accordingly, the European Commission granted the parties individual exemption pursuant to Article 101(3) TFEU. It is noteworthy that in this case, the decision regarding Germany was challenged before the Court of First Instance (CFI) by one of its beneficiaries, O2 Germany, who contested the qualification of certain clauses as restrictive agreements in the sense of Article 101(1) TFEU. In its ruling of 2 May 2006, the Court stated, in favour of the applicant, that the European Commission had failed to take into consideration the fact that the competitive situation would not have been the same if the agreement had not been concluded. In the absence of the agreement, the company would not have been able to ensure better coverage, quality and transmission rates for UMTS services, and thus to be an effective competitor.26 The CFI concluded that much of the economic analysis currently conducted under Article 101(3) TFEU should instead have been conducted under Article 101(1) TFEU by the European Commission. The Court thus annulled the decision in this respect. 4. Conclusions After almost twenty years of full liberalization of the telecommunication sector in the EU, the markets keep evolving and require ongoing supervision with all the legal instruments available. Although the focus of this article is clearly on competition law enforcement and not on sector-specific regulation, both of them must still be considered as complementary tools, rather than excluding each other. Both are being implemented at EU and ____________________ 26 CFI, Case T-328/03, O2 (Germany) v Commission, Judgement of 2 May 2006, ECLI:EU:T:2006:116. Robert Klotz 270 national level and the decisions adopted so far can be seen as a joint achievement by all competent authorities with considerable deterrent effect on all players in the market. In hindsight, it is striking to observe that the cases of cartels and restrictive agreements did not appear immediately after full liberalization of the telecommunication markets in the EU in 1998. This might be due to the fact that such practices, in order to be commercially or strategically meaningful for the market players, pre-suppose rather mature markets, which cannot be assumed in the early days of liberalization. This may also, to a certain extent, explain why fixed telephony services have been less concerned by such investigations than mobile telephony services, which were offered under more competitive conditions from earlier on, and where the regulatory oversight was less stringent than in fixed telephony. Looking ahead, it is particularly interesting to follow the competition law enforcement practice in times of ongoing convergence between the telecoms operators and media as well as Internet companies, all engaged in a fierce battle with more and more attractive multiple service offerings to the consumers. Although even here, Article 102 TFEU has so far played a more prominent role than Article 101 TFEU, this may change, with more incentives for companies to engage in restrictive agreements, due to the co-existence of regulated and unregulated players and market activities. This article is a revised and amended version of a publication in „Concurrences 1-2013”.

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Abstract

The reader entitled “Governance and Regulation in the EU” frames research and teaching at the Centre for European Integration Studies (ZEI). The dynamic interplay between governance and regulation shapes the EU, its impact on citizens’ lives and its role globally. This book offers interdisciplinary perspectives on the important relationship between governance and regulation, and on the increasingly complex process of European integration. Its authors include distinguished academics and professional experts who form the Faculty of ZEI’s postgraduate programme “Master of European Studies – Governance and Regulation”, through which they come together to share their perspectives and knowledge. This reader provides samples of the profile with which they enrich the ZEI’s postgraduate education programme.

Zusammenfassung

Der Reader "Governance and Regulation in the EU" spiegelt den Schwerpunkt des Zentrums für Europäische Integrationsforschung (ZEI) in Forschung und Lehre. „Regieren und Regulieren in der EU“ vereint die beiden Aspekte, deren Zusammenspiel die EU in ihren Auswirkungen auf das Leben der Bürger und auf ihre Rolle weltweit maßgeblich prägt. Regieren legitimiert Regulieren und Regulieren ist notwendig, um das Funktionieren des EU-Binnenmarktes sicherzustellen. Das Werk eröffnet interdisziplinäre Perspektiven auf die Union und bietet tiefere Einblicke in den zunehmend komplexen Prozess der europäischen Integration. Zu den Autoren gehören renommierte Wissenschaftler und Sachgebietsexperten, die im „Master of European Studies – Governance and Regulation“, dem Postgraduierten-Studiengang des ZEI, lehren.