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Robert Klotz, Nov 26, 2007
The Spanish Government recently decided to lodge an appeal before the European Court of First Instance (CFI) against the European Commission’s decision of July 4, 2007 imposing on Telefonica a high fine for abusing its dominant position in the Spanish broadband access market. At almost 152 million Euros, this was the largest antitrust fine ever imposed by the Commission on a telecommunications company. Telefonica has also appealed the decision arguing, inter alia, that the fine is unjustified and disproportionate. The Spanish Ministry of Industry, Tourism and Commerce declared that the purpose of its separate appeal is to defend the authority of the Spanish telecoms regulator (Comision del Mercado de las Telecomunicaciones, CMT), rather than to defend Telefonica. In the Ministry’s views, the Commission decision interferes with the powers of the CMT, which had adopted several measures concerning price regulation in the Spanish broadband access market in recent years. The Commission stated in its decision that Telefonica committed an abuse of its dominant position between September 2001 and December 2006 by charging unfair prices in the form of a margin squeeze for access to its broadband network. A margin squeeze can be found if the difference between a vertically integrated operator’s prices for retail and wholesale access to comparable services is not sufficient, either for a reasonably efficient competitor to enter the market, or for the incumbent operator itself to cover its own cost for the provision of the retail services. The latter methodology was followed by the Commission for assessing the margin squeeze in the Telefonica case. In its appeal, the Spanish Government is not contesting this method as such, but rather focusing on the fact that the tariffs in question were subject to sector-specific regulation at the national level.
