Insights CJEU decision in the Slovak Telecom case and what it means for digital platforms

The Slovak Telekom saga ended after almost 12 years on 25 March 2021 with the CJEU Judgment.[1] I was involved in the Slovak Telekom case at the phase of the Commission investigation between 2009 and 2013 on the side of Slovak Telekom’s defence but for the purposes of the present summary, which focuses on the key arguments covered by the judgment, I only rely on publicly available information.

The judgment in this case has clarified very important principles regarding the conditions under which competition law can be used to mandate access to assets, infrastructure or services of a dominant company or find an abuse of market power in breach of EU competition law in case access is not provided at all or provided on unfair terms.

This judgment will obviously guide the present debate on digital platform regulation despite the fact that it originated it the telecoms sector, as it provides a clear direction for use of competition law tools – and its limits – versus the use of (ex-ante) regulation. We should not be surprised if the future regulation of digital platforms borrows from the well-established telecoms regulation toolkit to which the judgments directly refers. Moreover, this judgment may provide yet another impulse for ex ante regulation of these platforms by tying back the application of competition law.

Whilst it seems that big tech companies see this as a landmark judgement providing them with powerful defence against the Commission and other competition authorities’ possible intervention, I can see other aspects of this decision which may not seem obvious at a first sight and which may not work in their favour.

The judgment indeed confirms that for any obligation to deal, which could be imposed on a dominant undertaking on competition grounds, there is a very high threshold to be met by the competition authorities (or third-party access seekers). This threshold is referred to as the Bronner criteria (based on the earlier CJEU judgement in Bronner case (link), which can be described as ‘essentiality’ or ‘indispensability’ of the input from the dominant player for products or service of its competitors (see below).[2] Where the input is not indispensable, the dominant undertaking cannot be found abusing its market power and forced to provide access. In other words, for an ‘outright’ refusal to deal, the threshold set by Bronner is very high and competition authorities are not very likely to succeed in their intervention. This indeed provides a theoretical ‘safe harbour’ to the big tech companies or digital platforms in a situation where they do not want (and are not obliged) to provide access to its competitors (or where such access is sought using competition law principles).

However, the implications of the court decision become much more dangerous in a situation where such platform either:

  1. voluntarily provides access or supplies services to its competitors, or
  2. is forced to provide it under some form of a regulation.

This is because – as per the Slovak Telekom case – in such a scenario the competent authority is under no obligation to show that the Bronner criteria are met (as discussed below). In other words, these other circumstances could give rise only to a ‘constructive’ refusal to deal, which has much lower threshold as there is no need to show indispensability/ elimination of all competition as per Bronner. The competent authority will of course not be relieved of the requirement to show at least potential anticompetitive effects, but we all know how vague or speculative this can be in practice.

The first set of circumstances can be easily found where a digital platform, which is ‘vertically integrated’ has granted third parties access to its platform or provides platform services to them (e.g. an app store, market-place or other demand aggregation platform or a search engine).

The second set of circumstances could soon be found once the various UK, EU or other national initiatives regarding digital platforms’ regulation are implemented and access remedies imposes (see, for example, the Commission proposal for regulation of digital markets (link).

In this second scenario, the digital platforms will be in the same boat as the telecommunications incumbents, which are almost always under some pre-existing regulatory obligations. This a very dangerous proposition, which essentially means that once there is any other legal or regulatory framework under which (in compliance with EU law/ constitutional order) an obligation to provide access has been imposed, then the indispensability/ essentiality criterion no longer plays any material role. In such circumstances, it can be easily ‘game over’ as soon as the competition authority can show that the terms of supply can reasonably be considered unfair because the threshold of ‘potential anticompetitive effects’ is very low.

Slovak Telecom case

This case started in 2009 and involved Slovak Telecom, a fixed line incumbent being Deutsche Telecom subsidiary in Slovakia. It involved price and non-price related terms and conditions of supply of physical access to metallic fixed network infrastructure (local loops) in Slovakia. The Commission accused Slovak Telecom of a constructive refusal to deal and margin squeeze for wholesale physical access between 2005-2010.

What was interesting about this case was the fact that at the time of the infringement (which started when the Slovak Republic entered the EU in 2005), the incumbent’s fixed network in the country, similarly to other countries in the region, was nothing like BT ubiquitous metallic network in the UK. It had more limited coverage and there were already significant infrastructure competitors present on the fixed market (i.e. fibre roll-out in certain areas, cable networks using high-speed technologies as well as strong local and regional players using FWA or WiFi). There was also another important factor typical for the wider region: fixed broadband came quite late and mobile broadband rolled out by the mobile operators represented a real alternative. All these arguments were put forward before the Commission during the market definition and market analysis exercise but they were all dismissed (note that these arguments are not too dissimilar to the ‘multi-homing’ type of arguments in the context of digital platforms). However, Slovak Telecom still believed in the argument that its network was not essential for competitors to compete on the retail broadband market and that any terms of supply of local loops set by it could not eliminate all competition on that market.

The key legal argument

Slovak Telecom has put forward the key legal argument that there is no reason why the indispensability and other criteria established by the Bronner case law should apply only to the outright refusal to deal and not to other types of a refusal to deal. The same threshold should be applied to all forms of refusal to deal including a constructive refusal to deal as otherwise there would be a perverse incentive for all dominant firms to never grant access. Following the same logic, Slovak Telekom argued that the Commission was required to establish that the Bronner criteria were satisfied with respect to Slovak Telekom’s constructive refusal to supply, and in particular that access to its local loops was indispensable for its competitors to compete on the downstream market.[3]

However, the Commission considered it was under no obligation to do so, essentially relying on 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 involves supplying services or selling goods on conditions which are disadvantageous or on which there might be no purchaser. In TeliaSonera the court also clarified that the indispensability criterion may play a role when assessing the effects of the margin squeeze. It further held that where access to the wholesale product is indispensable, potential anti-competitive effects are probable, but a margin squeeze may exist even if the input is not indispensable.

The Court judgment

The arguments around the application of the Bronner case law to abuse of dominance cases have been clarified in that:

1. The Bronner indispensability criterion is relevant and applies to an outright/ de novo refusal to deal only. In other words, it is relevant where there was no pre-existing obligation to deal or the dominant undertaking did not decide to supply its competitors on voluntary basis and the competition law intervention and the associated remedy would be to force the undertaking to supply its competitors/ grant access to infrastructure which it has reserved for its own business.

It follows, that it is not possible for competition authorities – on the competition law grounds – to impose an obligation to grant access/ supply unless they can establish genuine indispensability (whilst the burden of proof is on their side). The key parts of the judgment dealing with this are:

[…] where a dominant undertaking refuses to give access to an infrastructure that it has developed for the needs of its own business, the decision to oblige that undertaking to grant that access cannot be justified, at a competition policy level, unless the dominant undertaking has a genuinely tight grip on the market concerned.

The application […] of the conditions laid down by the Court of Justice in the judgment in Bronner, […], and in particular the condition relating to the indispensability of the access to the dominant undertaking’s infrastructure, allows the competent authority or national court to determine whether that undertaking has a genuinely tight grip on the market by virtue of that infrastructure. Thus, that undertaking may be forced to give a competitor access to an infrastructure that it has developed for the needs of its own business only where such access is indispensable to the business of such a competitor, namely where there is no actual or potential substitute for that infrastructure.”[4]

2. When it comes to a constructive refusal to deal or a margin squeeze, where (i) there is a pre-existing obligation to supply/ grant access or (ii) the dominant undertaking voluntarily provides access/ supplies its competitors, but set unfair or abusive terms, the competition authorities do not have to show indispensability and can directly establish an abuse. Indispensability is thus not a condition sine qua non but may establish at least potential anticompetitive effects. The court made clear that this conclusion (which was previously articulated in TeliaSonera for margin squeeze only), applies to all types of a constructive refusal to deal.[5] This also means that in regulated sectors like telecoms, energy, or possibly also digital platforms in the future, the competition law enforcement will become a powerful tool to enforce existing regulatory obligations using imposing large fines. The key parts of the judgment dealing with this are:

“By contrast, where a dominant undertaking gives access to its infrastructure but makes that access, provision of services or sale of products subject to unfair conditions, the conditions laid down by the Court of Justice in paragraph 41 of the judgment in Bronner do not apply. It is true that where access to such an infrastructure – or service or input – is indispensable in order to allow competitors of the dominant undertaking to operate profitably in a downstream market, this increases the likelihood that unfair practices on that market will have at least potentially anticompetitive effects and will constitute abuse within the meaning of Article 102 TFEU […].

While such practices 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, they cannot be equated to a simple refusal to allow a competitor access to the infrastructure, since the competent competition authority or national court will not have to force the dominant undertaking to give access to its infrastructure, as that access has already been granted. The measures that would be taken in such a context will thus be less detrimental to the freedom of contract of the dominant undertaking and to its right to property than forcing it to give access to its infrastructure where it has reserved that infrastructure for the needs of its own business.”[6]

[1] On that date the EU highest court rendered a decision in the Slovak Telecom case (i.e. Cases C-152/19 P Deutsche Telekom AG v Commission and C-165/19 P Slovak Telekom a.s. v Commission)[1] involving abuse of dominance on wholesale market related to broadband (i.e., the market for physical infrastructure access).

[2] For the sake of completeness, these are the conditions laid down in paragraph 41 of Bronner (namely (i) indispensability of upstream input; (ii) refusal is likely to eliminate all effective downstream competition by those seeking access; (iii) and absence of any objective justification. The focal point however is the indispensability criterion.

[3] Note that Slovak Telecom has raised this argument after the CJEU has established in 2011 in TeliaSonera (link), that the Bronner criteria apply only for de novo/ outright refusal to deal but not to constructive refusal and following the Commission Guidance on Article 102 Enforcement Priorities of 2009 (link), which essentially says that where there is a pre-existing regulatory obligation, the competition authority does not have to show indispensability (see paragraph 82).

[4] The judgment at paragraphs 48-49, see also CJEU press release of 25 March 2021, page 2, paragraphs 2-3, emphasis added.

[5] See, paragraph 53 of the judgement.

[6] The judgment at paragraphs 50-51, see also CJEU press release of 25 March 2021, page 2, paragraph 4, emphasis added.