In its ruling in Deutsche Telekom v Commission (C-152/19 P), the European Court of Justice ("ECJ") provided guidance on the application of the Bronner case law to refusal to supply cases, as well as on the relevant facts, and on the circumstances in which an infringement of competition law can be imputed to a parent company.
What you need to know – key takeaways
- The Bronner conditions remain the appropriate test to determine whether a refusal to provide access to infrastructure constitutes an abuse of Article 102 TFEU.
- However, where a dominant undertaking provides access to its infrastructure, but makes that access subject to unfair conditions, competition authorities are not required to establish that such access is indispensable to find an abuse.
- The ECJ also held that, for the purposes of imputing liability for an infringement, competition authorities can rely, in part, on facts demonstrating that a parent company was able to exercise decisive influence in order to establish that such influence was exercised.
Background
In its decision in 2014, the European Commission found that Slovak Telekom ("ST"), along with its parent company Deutsche Telekom ("DT"), had abused its dominant position on the Slovak market for broadband internet services.
In 2005, ST was found to be an operator with significant market power on the wholesale market for unbundled access to the local loop. Consequently, ST was obliged to grant access to this infrastructure to other operators. In its 2014 decision, the European Commission found that ST had set unfair terms and conditions in its reference offer for unbundled access to its local loop, withheld information necessary for the unbundling of the local loop and imposed tariffs on competitor undertakings which were deemed to be unfair.
The European Commission's decision was partially annulled on appeal to the General Court, reducing the level of the fine imposed on ST and DT. On appeal to the ECJ, DT challenged, among others, the General Court's application of Article 102 TFEU, as well as its assessment of the facts on which the decision to impute an infringement to parent company can be based.
Application of the indispensability condition in Bronner
On appeal, the ECJ drew a distinction between an outright refusal to supply and an implied or constructive refusal to supply.
At first instance, the remedy required to eliminate the effects of the abuse is to force the dominant undertaking to give access to its infrastructure, which is particularly detrimental to both its freedom of contract and its right to property. Interventions of this kind can also disincentivise infrastructure investment in the first place.
In light of these considerations, the ECJ reasoned such a remedy can only be justified where the dominant undertaking has a "genuinely tight grip on the market". Therefore, the ECJ confirmed that a competition authority should be required to establish that there is no actual or potential substitute for the infrastructure in relation to which access was sought, as per the ruling in Bronner, in order to establish that an outright refusal to supply is an abuse under Article 102 TFEU.
Conversely, where the dominant undertaking has granted access to its infrastructure to competitor undertakings, even where such access is subject to unfair conditions, the remedial action required is much less detrimental to the undertaking's rights and freedoms as it does not require a competition authority to impose access to the undertaking's infrastructure. Accordingly, there is no requirement to satisfy the indispensability condition laid down in Bronner, in order to establish a constructive or implied refusal to supply.
As ST was subject to a regulatory obligation to provide access to its infrastructure, and the European Commission's allegations related to the terms on which that access was provided, the European Commission was not required to show that the Bronner conditions were met.
Imputation of liability to a parent company
In order to impute liability for an infringement to a parent company, a competition authority is required to establish that the parent had the ability to exert decisive influence over its subsidiary and that it actually exercised that influence.
Siding with the General Court, the ECJ considered that the European Commission was entitled to take into consideration facts demonstrating that the appellant was in a position to exercise decisive influence as indications contributing to a finding of an actual exercise of influence.
The ECJ therefore agreed that considerations such as the presence of DT senior management on ST's board of directors, the provision of DT staff to ST and regular reporting to DT could serve as indications of the actual exercise of influence.
Conclusion
The ECJ's ruling has confirmed the continued validity of the conditions laid down in Bronner and provides a useful framework to determine the circumstances in which these will be relevant to establish a breach of Article 102 TFEU.
The ECJ's ruling has also lightened the evidential burden on competition authorities to establish the actual exercise of decisive influence. Its findings are likely to reduce the scope for arguing that the conduct of a subsidiary should not be imputed to the parent.
With thanks to Susanna Breslin of Ashurst for her contribution.
