**Case C-280/08 P**

**Deutsche Telekom AG**

**v**

**European Commission**

(Appeal – Competition – Article 82 EC – Markets for telecommunications services – Access to the fixed network of the incumbent operator – Wholesale charges for local loop access services to competitors – Retail charges for access services to end-users – Pricing practices of a dominant undertaking – Margin squeeze – Charges approved by the national regulatory authority – Leeway of the dominant undertaking – Attributability of the infringement – Meaning of ‘abuse’ – As-efficient-competitor test – Calculation of the margin squeeze – Effects of the abuse – Amount of the fine)

Summary of the Judgment

1.        *Appeals – Pleas in law – Mere repetition of the pleas and arguments put forward before the Court of First Instance – Inadmissibility
– Challenge to the interpretation or application of Community law made by the Court of First Instance – Admissibility*

*(Art. 225 EC; Statute of the Court of Justice, Art. 58, first para.; Rules of Procedure of the Court of Justice, Art. 112(1)(c))*

2.        *Appeals – Pleas in law – Plea submitted for the first time in the context of the appeal – Inadmissibility*

*(Rules of Procedure of the Court of Justice, Art. 113(2))*

3.        *Actions for failure to fulfil obligations – Right of the Commission to bring judicial proceedings – To be exercised at its
discretion*

*(Arts 81 EC, 82 EC and 226 EC)*

4.        *Competition – Dominant position – Abuse – Margin squeeze – Telecommunications network access services provided by the owner-operator
of the only available infrastructure – Commission decision finding the existence of the abuse in spite of the approval of
the charges by the national regulatory authority – Attributability of the infringement*

*(Arts 81 EC and 82 EC)*

5.        *Appeals – Pleas in law – Inadequate statement of reasons – Admissibility*

*(Statute of the Court of Justice, Art. 58, first para.)*

6.        *Competition – Community rules – Infringements – Committed intentionally or negligently – Meaning – Margin squeeze generated
by the charges of an undertaking with a monopoly on the wholesale services market and a virtual monopoly on the retail services
market*

*(Council Regulation No 17, Art. 15(2), first subpara.)*

7.        *Acts of the institutions – Obligation to state reasons – Subject-matter – Scope*

*(Art. 253 EC)*

8.        *Competition – Dominant position – Abuse – Margin squeeze – Telecommunications network access services provided by the owner-operator
of the only available infrastructure – Negative or insufficient spread between charges for competitors and retail charges*

*(Art. 82 EC)*

9.        *Competition – Dominant position – Abuse – Margin squeeze – Concept*

*(Art. 82 EC)*

10.      *Competition – Dominant position – Abuse – Margin squeeze – Telecommunications network access services provided by the owner-operator
of the only available infrastructure – Calculation of the margin squeeze of competitors*

*(Art. 82 EC)*

11.      *Competition – Dominant position – Abuse – Margin squeeze – Equality of opportunity – None – Taking into account revenues from
other telecommunications services – Not included*

*(Art. 82 EC)*

12.      *Competition – Dominant position – Abuse – Meaning – Conduct having a restrictive effect on competition*

*(Art. 82 EC)*

13.      *Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Serious infringement – Margin squeeze
generated by the charges of an undertaking with a monopoly – Attenuating circumstances*

*(Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03, Section 1A, second para.)*

14.      *Competition – Fines – Amount – Determination – Powers of the Commission – Change from previous practice – Breach of the principle
of non-discrimination – None*

*(Council Regulation No 17)*

1.        It is apparent from Article 225 EC, the first paragraph of Article 58 of the Statute of the Court of Justice and Article 112(1)(c)
of the Rules of Procedure of the Court of Justice that an appeal must indicate precisely the contested elements of the judgment
which the appellant seeks to have set aside and also the legal arguments specifically advanced in support of the appeal. That
requirement is not satisfied by an appeal which, without even including an argument specifically identifying the error of
law allegedly vitiating the contested judgment, merely reproduces the pleas in law and arguments previously submitted to the
Court of First Instance (now ‘the General Court’). Such an appeal amounts in reality to no more than a request for re-examination
of the application submitted to the General Court, which the Court of Justice does not have jurisdiction to undertake.

However, provided that the appellant challenges the interpretation or application of European Union law by the General Court,
the points of law examined at first instance may be discussed again in the course of an appeal. Indeed, if an appellant could
not thus base his appeal on pleas in law and arguments already relied on before the General Court, an appeal would be deprived
of part of its purpose.

(see paras 24-25)

2.        The subject-matter of the proceedings before the General Court may not be changed in the appeal. The jurisdiction of the
Court of Justice in an appeal is confined to a review of the findings of law on the pleas argued before the General Court.
A party may not, therefore, put forward for the first time before the Court of Justice a plea in law which it has not raised
before the General Court, since to do so would be to allow it to bring before the Court of Justice, whose jurisdiction in
appeals is limited, a case of wider ambit than that which came before the General Court.

(see paras 34, 42, 49)

3.        It is for each Member State to take all appropriate measures, whether general or particular, to ensure the fulfilment by the
national regulatory authorities of the obligations which are binding under European Union law. Articles 81 EC and 82 EC, in
conjunction with Article 10 EC, require the Member States not to introduce or maintain in force measures, even of a legislative
or regulatory nature, which may render ineffective the competition rules applicable to undertakings.

However, as regards the possibility of the Commission bringing an action for failure to fulfil obligations against a Member
State, since the judgment under appeal relates solely to the lawfulness of a decision adopted against an appellant company
by the Commission pursuant to Article 82 EC, the Court of Justice must, in the context of the appeal, confine itself to ascertaining
whether the complaints put forward in support of that appeal show that the General Court’s examination of the lawfulness of
such a decision is vitiated by errors of law, irrespective of whether the Commission could, simultaneously or alternatively,
have adopted a decision finding that the Member State in question had infringed European Union law.

Consequently, even if it is not inconceivable that the national regulatory authorities infringed European Union law, and the
Commission could have chosen to bring an action for failure to fulfil obligations against the Member State under Article 226 EC,
such possibilities are irrelevant at the stage of the appeal. Under the system laid down by Article 226 EC, the Commission
has a discretion to bring an action for failure to fulfil obligations, and it is not for the Courts of the European Union
to assess whether it was appropriate to do so.

(see paras 45-47)

4.        It is only if anti-competitive conduct is required of undertakings by national legislation, or if the latter creates a legal
framework which itself eliminates any possibility of competitive activity on their part, that Articles 81 EC and 82 EC do
not apply. In such a situation, the restriction of competition is not attributable, as those provisions implicitly require,
to the autonomous conduct of the undertakings.

Articles 81 EC and 82 EC may apply, however, if it is found that the national legislation leaves open the possibility of competition
which may be prevented, restricted or distorted by the autonomous conduct of undertakings. The possibility of excluding anti-competitive
conduct from the scope of Articles 81 EC and 82 EC on the ground that it has been required of the undertakings in question
by existing national legislation or that the legislation has precluded all scope for any competitive conduct on their part
has been accepted only to a limited extent by the Court of Justice. If a national law merely encourages or makes it easier
for undertakings to engage in autonomous anti-competitive conduct, those undertakings remain subject to Articles 81 EC and
82 EC. Dominant undertakings have a special responsibility not to allow their conduct to impair genuine undistorted competition
on the common market.

In that regard, the mere fact that a dominant undertaking in the telecommunications sector was encouraged by the intervention
of a national regulatory authority such as the regulatory authority for telecommunications and post to maintain the pricing
practices which led to the margin squeeze of competitors who are at least as efficient as that undertaking cannot, as such,
in any way absolve that undertaking from responsibility under Article 82 EC.

Since, notwithstanding such interventions, the undertaking had scope to adjust its retail prices for end-user access services,
the margin squeeze was attributable to that undertaking. The existence or otherwise of any fault in conduct involving a failure
to use that scope cannot alter the finding that the undertaking had scope to adopt that conduct, and can be taken into account
only in determining whether that conduct was an infringement and at the stage of setting the level of the fines.

(see paras 80-85, 88-89)

5.        The question whether the grounds of a judgment of the General Court are adequate is a question of law which is amenable, as
such, to judicial review on appeal.

(see para. 123)

6.        As regards the question whether the infringements of the competition rules were committed intentionally or negligently and
are, therefore, liable to be punished by a fine in accordance with the first subparagraph of Article 15(2) of Regulation No 17,
that condition is satisfied where the undertaking cannot be unaware of the anti-competitive nature of its conduct, whether
or not it is aware that it is infringing the competition rules of the Treaty.

This is so in the case of an undertaking in the telecommunications sector which could not have been unaware that, notwithstanding
the authorisation decisions of the regulatory authority for telecommunications and post, it had genuine scope to set its retail
prices for end-user access services and, moreover, the margin squeeze entailed serious restrictions on competition, particularly
in view of its monopoly on the wholesale market in local loop access services and its virtual monopoly on the retail market
in end-user access services.

(see paras 124-125)

7.        The obligation to provide a statement of reasons laid down in Article 253 EC is an essential procedural requirement which
must be distinguished from the question whether the reasoning is well founded, which is concerned with the substantive legality
of the measure at issue. To that end, the statement of reasons required by Article 253 EC must be appropriate to the measure
at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that
measure in such a way as to enable the persons concerned to ascertain the reasons for it and to enable the competent European
Union judicature to exercise its power of review.

The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content
of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other
parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning
to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements
of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules
governing the matter in question.

(see paras 130-131)

8.        Subparagraph (a) of the second paragraph of Article 82 EC expressly prohibits an undertaking in a dominant position from directly
or indirectly imposing unfair prices and, inter alia, from adopting pricing practices which have an exclusionary effect on
its equally efficient actual or potential competitors, that is to say practices which are capable both of making market entry
very difficult or impossible for such competitors, and of making it more difficult or impossible for its co-contractors to
choose between various sources of supply or commercial partners, thereby strengthening its dominant position by using methods
other than those which come within the scope of competition on the merits. From that point of view, therefore, not all competition
by means of price can be regarded as legitimate.

In so far as an undertaking in a dominant position in the telecommunications sector has scope to reduce or end a margin squeeze
of its equally efficient competitors by adjusting its retail prices for end-user access services, that margin squeeze is capable,
in itself, of constituting an abuse within the meaning of Article 82 EC in view of the exclusionary effect that it can create
for those competitors.

Article 82 EC aims, in particular, to protect consumers by means of undistorted competition. It is irrelevant in that regard
that the dominant undertaking has to increase its prices in order to end the abuse.

By further reducing the degree of competition existing on a market – the end-user access services market – already weakened
precisely because of the presence of that undertaking, thereby strengthening its dominant position on that market, such a
margin squeeze also has the effect that consumers suffer detriment as a result of the limitation of the choices available
to them and, therefore, of the prospect of a longer-term reduction of retail prices as a result of competition exerted by
competitors who are at least as efficient in that market.

The General Court is not obliged to establish that the wholesale prices for local loop access services or retail prices for
end-user access services are in themselves abusive on account of their excessive or predatory nature, as the case may be.

(see paras 172, 177, 180-183)

9.        In order to assess whether the pricing practices of a dominant undertaking are likely to eliminate a competitor contrary to
Article 82 EC, it is necessary to adopt a test based on the costs and the strategy of the dominant undertaking. A dominant
undertaking cannot drive from the market undertakings which are perhaps as efficient as the dominant undertaking but which,
because of their smaller financial resources, are incapable of withstanding the competition waged against them.

Where the abusive nature of the pricing practices of a dominant undertaking stems from their exclusionary effect on its competitors,
it is appropriate to analyse that abusive nature solely on the basis of the charges and costs of the dominant undertaking.
Such a test can establish whether a dominant undertaking in the telecommunications sector would itself have been able to offer
its retail services to end-users otherwise than at a loss if it had first been obliged to pay its own wholesale prices for
local loop access services. That test is therefore suitable for determining whether the pricing practices of a dominant undertaking
have an exclusionary effect on competitors by squeezing their margins.

Such an approach is particularly justified because it is also consistent with the general principle of legal certainty in
so far as the account taken of the costs of the dominant undertaking allows that undertaking, in the light of its special
responsibility under Article 82 EC, to assess the lawfulness of its own conduct. While a dominant undertaking knows what its
own costs and charges are, it does not, as a general rule, know what its competitors’ costs and charges are.

Those findings are not affected by the less onerous legal and material conditions to which the dominant undertaking’s competitors
are subject in the provision of their telecommunications services to end-users. Even if that assertion were proved, it would
not alter either the fact that a dominant undertaking cannot adopt pricing practices which are capable of driving equally
efficient competitors from the relevant market, or the fact that such an undertaking must, in view of its special responsibility
under Article 82 EC, be in a position itself to determine whether its pricing practices are compatible with that provision.

(see paras 198-203)

10.      Even if, from the point of view of the end-user, access services and call services can indeed constitute a whole, the Commission
is entitled to consider the existence of a margin squeeze in relation to access services alone, without call services being
included, in the light of the principles of tariff rebalancing and equality of opportunity.

The General Court does not commit any error of law in taking into account the principle of tariff rebalancing which arises
from the legislation relating to the telecommunications sector in order to consider the merits of the Commission’s application
of Article 82 EC to the abusive pricing practices of a dominant undertaking. Since the legislation relating to the telecommunications
sector defines the legal framework applicable to it and, in so doing, contributes to the determination of the competitive
conditions under which a dominant undertaking carries on its business in the relevant markets, it is a relevant factor in
the application of Article 82 EC to the conduct of that undertaking, whether for the purposes of defining the relevant markets,
assessing the abusive nature of such conduct or setting the amount of the fines.

That finding is not affected by the fact that the tariff rebalancing principle applies only to the dominant undertaking and
not to its competitors, since the General Court is fully entitled to rely, in accordance with the as-efficient-competitor
test, on the situation and the costs of the dominant undertaking for the purpose of determining whether that undertaking’s
pricing practices constitute an abuse in the light of Article 82 EC.

Consequently, since the General Court held that the tariff rebalancing referred to in European Union legislation in relation
to the telecommunications sector had to take the form, in particular, of a reduction in the charges for regional and international
calls and an increase in the monthly rental and local call rates, it could lawfully infer from this that the principle of
tariff rebalancing does require that retail prices for access services and retail prices for call services be considered separately
for the purpose of determining whether the relevant pricing practices of the dominant undertaking are abusive.

(see paras 221, 223-226)

11.      A system of undistorted competition can be guaranteed only if equality of opportunity is secured as between the various economic
operators.

This means that a dominant undertaking in the telecommunications sector and its equally efficient competitors are placed on
an equal footing in the retail market in end-user access services. That condition is not fulfilled where wholesale prices
paid to the dominant undertaking for local loop access services cannot be reflected in their retail prices for end-user access
services other than by providing those services at a loss.

Since, on the one hand, the retail market for end-user access services constitutes a separate market and, on the other, wholesale
local loop access services are indispensable to enabling competitors who are at least as efficient to enter into effective
competition on that market with an undertaking which has a dominant position largely as a result of the legal monopoly it
enjoyed before the liberalisation of the telecommunications sector, the establishment of a system of undistorted competition
requires that the dominant undertaking should not be able – by means of its pricing practices on that retail market – to impose
on all its equally efficient competitors a competitive disadvantage such as to prevent or restrict their access to that market
or the growth of their activities on it.

That is particularly the case given that, since any provision by those competitors of other telecommunications services to
end-users across the dominant undertaking’s fixed network also requires them to acquire wholesale local loop access services
from the dominant undertaking, that competitive disadvantage on the retail market for end-user access services is necessarily
reflected in the markets for those other telecommunications services. That last point does not, however, mean that revenues
from those other telecommunications services have to be taken into account in order to ascertain whether competitors who are
at least as efficient as the dominant undertaking are subject to inequality in competitive conditions on the retail market
for end-user access services. Those other telecommunications services fall within markets that are distinct from the latter
market.

Therefore, it must be held that the dominant undertaking’s pricing practices on the retail market for end-user access services
place all of its equally efficient competitors on an unequal footing on that market by comparison with the dominant undertaking
itself, resulting in a margin squeeze of those competitors in relation to access services.

(see paras 230, 233-236, 240)

12.      By prohibiting the abuse of a dominant position in so far as trade between Member States is capable of being affected, Article
82 EC refers to the conduct of a dominant undertaking which, through recourse to methods different from those governing normal
competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering
the maintenance of the degree of competition still existing in the market or the growth of that competition. It follows from
this that the existence of a pricing practice resulting in a margin squeeze of its equally efficient competitors constitutes
an abuse within the meaning of Article 82 EC only if proof of an anti-competitive effect is produced.

As regards the pricing practices of a dominant undertaking in the telecommunications sector resulting in a margin squeeze
of its equally efficient competitors, the anti-competitive effect which the Commission is required to demonstrate relates
to the possible barriers which those pricing practices could have created for the growth of products on the retail market
in end-user access services and, therefore, on the degree of competition in that market. Such a pricing practice is an abuse
within the meaning of Article 82 EC if it has an exclusionary effect on competitors who are at least as efficient as the dominant
undertaking itself and is capable of making market entry more difficult or impossible for those competitors, and thus of strengthening
the position of the dominant undertaking on that market to the detriment of consumers’ interests.

Where a dominant undertaking actually implements a pricing practice resulting in a margin squeeze of its equally efficient
competitors, with the purpose of driving them from the relevant market, the fact that the desired result is not ultimately
achieved does not alter its categorisation as abuse within the meaning of Article 82 EC. However, in the absence of any effect
on the competitive situation of competitors, such a pricing practice cannot be classified as exclusionary if it does not make
their market penetration any more difficult.

(see paras 251-254)

13.      The Commission enjoys a broad discretion as regards the method for calculating fines. That method, set out in the Guidelines
on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty,
displays flexibility in a number of ways, enabling the Commission to exercise its discretion in accordance with those provisions.
It is for the Court of Justice to verify whether the General Court has correctly assessed the Commission’s exercise of that
discretion.

The gravity of the infringements of EU competition law must be assessed in the light of numerous factors, such as, inter alia,
the particular circumstances of the case, its context and the dissuasive effect of fines, although no binding or exhaustive
list of the criteria to be applied has been drawn up. The factors capable of affecting the assessment of the gravity of infringements
include the conduct of the undertaking concerned, the role it played in the establishment of the practice in question, the
profit which it was able to derive from that practice, its size, the value of the goods concerned and the threat that infringements
of that type pose to the objectives of the European Union.

(see paras 271-274)

14.      The fact that the Commission, in the past, imposed fines of a certain level for particular types of infringement does not
mean that it is stopped from raising that level within the limits indicated in Regulation No 17, if that is necessary to ensure
the implementation of European Union competition policy. The proper application of the European Union’s competition rules
requires that the Commission be able at any time to adjust the level of fines to the needs of that policy.

(see para. 294)

JUDGMENT OF THE COURT (Second Chamber)

14 October 2010 (*)

Table of contents

I –  Background to the dispute

II –  The proceedings before the General Court and the judgment under appeal

III –  Forms of order sought

IV –  Appeal

A –  Admissibility

B –  Substance

1.  Preliminary observations

2.  The first ground of appeal, alleging errors of law concerning the manner in which the regulation of the appellant’s activities
by RegTP as the competent national regulatory authority was dealt with

a)  The first part of the first ground of appeal, concerning the attributability of the infringement

i)  Judgment under appeal

ii)  Arguments of the parties

iii)  Findings of the Court

b)  The second part of the first ground of appeal, concerning the principle of the protection of legitimate expectations

i)  Judgment under appeal

ii)  Arguments of the parties

iii)  Findings of the Court

c)  The third part of the first ground of appeal, concerning the intentional or negligent nature of the infringement of Article
82 EC

i)  Judgment under appeal

ii)  Arguments of the parties

iii)  Findings of the Court

d)  Conclusion as to the first ground of appeal

3.  The second ground of appeal, alleging errors of law in the application of Article 82 EC

a)  Judgment under appeal

b)  The first part of the second ground of appeal, concerning the relevance of the margin squeeze test for the purpose of
establishing an abuse within the meaning of Article 82 EC

i)  Arguments of the parties

ii)  Findings of the Court

c)  The second part of the second ground of appeal, concerning the adequacy of the method of calculating the margin squeeze

i)  The complaint concerning the misapplication of the as-efficient-competitor test

–  Arguments of the parties

–  Findings of the Court

ii)  The complaint concerning an error of law in that call services and other telecommunications services were not taken into
account in calculating the margin squeeze

–  Arguments of the parties

–  Findings of the Court

d)  The third part of the second ground of appeal, concerning the effects of the margin squeeze

i)  Arguments of the parties

ii)  Findings of the Court

e)  Conclusion as to the second ground of appeal

4.  The third ground of appeal, alleging errors of law in the calculation of the fines owing to the failure to take the regulation
of charges into account

a)  Judgment under appeal

b)  Arguments of the parties

i)  The first part of the third ground of appeal, concerning the serious nature of the infringement

–  Arguments of the parties

–  Findings of the Court

ii)  The second part of the third ground of appeal, concerning the failure to take the regulation of charges into appropriate
consideration as a mitigating circumstance

–  Arguments of the parties

–  Findings of the Court

iii)  The third part of the third ground of appeal, concerning the imposition of a symbolic fine

–  Arguments of the parties

–  Findings of the Court

c)  Conclusion as to the third ground of appeal

Costs

(Appeal – Competition – Article 82 EC – Markets for telecommunications services – Access to the fixed network of the incumbent operator – Wholesale charges for local loop access services to competitors – Retail charges for access services to end-users – Pricing practices of a dominant undertaking – Margin squeeze – Charges approved by the national regulatory authority – Leeway of the dominant undertaking – Attributability of the infringement – Meaning of ‘abuse’ – As-efficient-competitor test – Calculation of the margin squeeze – Effects of the abuse – Amount of the fine)

In Case C‐280/08 P,

APPEAL under Article 56 of the Statute of the Court of Justice, brought on 23 June 2008,

**Deutsche Telekom AG,** established in Bonn (Germany), represented by U. Quack, S. Ohlhoff and M. Hutschneider, Rechtsanwälte,

appellant,

the other parties to the proceedings being:

**European Commission,** represented by K. Mojzesowicz, W. Mölls and O. Weber, acting as Agents, with an address for service in Luxembourg,

defendant at first instance,

**Vodafone D2 GmbH,** formerly Vodafone AG & Co. KG, formerly Arcor AG & Co. KG, established in Eschborn (Germany), represented by M. Klusmann,
Rechtsanwalt,

**Versatel NRW GmbH,** formerly Tropolys NRW GmbH, formerly CityKom Münster GmbH Telekommunikationsservice and TeleBeL Gesellschaft für Telekommunikation
Bergisches Land mbH, established in Essen (Germany),

**EWE TEL GmbH,** established in Oldenburg (Germany),

**HanseNet Telekommunikation GmbH,** established in Hamburg (Germany),

**Versatel Nord GmbH,** formerly Versatel Nord-Deutschland GmbH, formerly KomTel Gesellschaft für Kommunikations- und Informationsdienste mbH, established
in Flensburg (Germany),

**NetCologne Gesellschaft für Telekommunikation mbH,** established in Cologne (Germany),

**Versatel Süd GmbH,**formerly Versatel Süd-Deutschland GmbH, formerly tesion Telekommunikation GmbH, established in Stuttgart (Germany),

**Versatel West GmbH,**formerly Versatel West-Deutschland GmbH, formerly Versatel Deutschland GmbH & Co. KG, established in Dortmund (Germany),

represented by N. Nolte, Rechtsanwalt,

interveners at first instance,

THE COURT (Second Chamber),

composed of J.N. Cunha Rodrigues, President of the Chamber, A. Arabadjiev, U. Lõhmus, A. Ó Caoimh (Rapporteur) and P. Lindh,
Judges,

Advocate General: J. Mazák,

Registrar: B. Fülöp, Administrator,

having regard to the written procedure and further to the hearing on 25 November 2009,

after hearing the Opinion of the Advocate General at the sitting on 22 April 2010,

gives the following

**Judgment**

1        By its appeal, Deutsche Telekom AG seeks to have set aside the judgment of the Court of First Instance of the European Communities
(now ‘the General Court’) of 10 April 2008 in Case T‐271/03 *Deutsche Telekom* v *Commission* [2008] ECR II‐477 (‘the judgment under appeal’) dismissing its action for annulment of Commission Decision 2003/707/EC of
21 May 2003 relating to a proceeding under Article 82 of the EC Treaty (Case COMP/C-1/37.451, 37.578, 37.579 – Deutsche Telekom
AG) (OJ 2003 L 263, p. 9; ‘the decision at issue’).

I –  **Background to the dispute**

2        The facts of the case were set out by the General Court in paragraphs 1 to 24 of the judgment under appeal as follows:

‘1      The applicant, Deutsche Telekom AG, is the incumbent telecommunications operator in Germany. ...

2      The applicant operates the German fixed telephone network. Before the full liberalisation of telecommunications markets, it
enjoyed a legal monopoly in the retail provision of fixed-line telecommunications services. The German markets in the provision
of infrastructure and in the provision of telephone services have been liberalised since 1 August 1996, when the Telekommunikationsgesetz
(German Law on telecommunications; “TKG”) of 25 July 1996 (BGBl. 1996 I, p. 1120) came into force. Since then, the applicant
has faced varying degrees of competition from alternative operators on the two markets.

3      The applicant’s local networks each consist of a number of local loops for subscribers. The term “local loop” signifies the
physical circuit connecting the network termination point at a subscriber’s premises to the main distribution frame or equivalent
facility in the fixed public telephone network.

4      The applicant offers access to its local networks to other telecommunications operators and to subscribers. As regards the
applicant’s access services and charges, it is therefore necessary to distinguish between the local network access services
which the applicant offers its competitors (“wholesale [local loop] access [services]”) and the local network access services
which the applicant offers its subscribers (“[end-user access services]”).

I – Wholesale [local loop] access [services]

5      By Decision No 223a of the Federal Ministry of Post and Telecommunications ... of 28 May 1997, the applicant was required to
offer its competitors fully unbundled access to the local loop with effect from June 1997.

6      The applicant’s charges for wholesale [local loop] access [services] are made up of two components: a monthly subscription
charge, and a one-off charge. ...

7      Under Paragraph 25(1) of the TKG, the applicant’s wholesale [charges for local loop access services] must be approved in advance
by the Regulierungsbehörde für Telekommunikation und Post (German regulatory authority for telecommunications and post; “RegTP”).

8      In that context, RegTP checks whether the wholesale [charges for local loop access services] proposed by the applicant satisfy
the requirements laid down by Paragraph 24 of the TKG. Thus, under Paragraph 24(1) of the TKG, “[r]ates shall be based on
the costs of efficient service provision”. ...

...

II – [End-user access services]

10      As regards [end-user access services], the applicant offers two basic variants: the traditional analogue connection ... and
the digital narrowband connection ... Both these variants of end-user access can be provided over the applicant’s existing
copper pair network (narrowband connections). The applicant also offers end-users a broadband connection (... ADSL ...), for which
it had to upgrade the existing [narrowband] networks so as to be able to offer broadband services such as faster Internet
access.

...

12      The applicant’s retail prices [for end-user access services] are made up of two components: a basic monthly charge, which
depends on the quality of the line and services supplied, and a one-off charge for a new connection or takeover of a line,
...

A – Charges for retail analogue lines ... and digital narrowband ... lines ...

13      Retail prices for analogue and [digital narrowband] lines are regulated under a price cap system. Under point 2 of Paragraph
27(1) and Paragraph 25(1) of the TKG ..., retail prices for connection to the applicant’s network and for telephone calls are
not regulated separately for each service, according to the individual cost of that service; they are regulated for a block
of services at a time, with different services being grouped together in “baskets”.

14      ... The system was taken over by RegTP on 1 January 1998, whereupon RegTP established two baskets, one for services to residential
customers and the other for services to business customers. Each basket contained both [end-user access services] ... and the
full range of telephone products offered by the applicant, such as local, regional, long-distance and international calls.

...

17      Under the terms of the decision of the [Federal Ministry of Post and Telecommunications] of 17 December 1997, the applicant
was to reduce the aggregate price for each of the two baskets by 4.3% in the period from 1 January 1998 to 31 December 1999
(first price cap period). When that first period ended on 31 December 1999, RegTP – by decision of 23 December 1999 – essentially
maintained the composition of the baskets and lowered the prices by a further 5.6% in the period from 1 January 2000 to 31
December 2001 (second price cap period).

18      Within this framework of binding price reductions, the applicant could modify the charges for individual components of each
basket after obtaining prior authorisation from RegTP. ... The system thus enabled the charges for one or more components of
a basket to be increased, provided that the price ceiling for the basket was not exceeded. ...

19      In the first two price cap periods [from 1 January 1998 to 31 December 2001], the applicant reduced the retail prices in both
baskets substantially, going far beyond the mandatory reductions. Those price reductions essentially applied to call charges.
Retail prices for analogue lines ..., on the other hand, remained unchanged throughout both price cap periods, ... As regards
retail prices for [digital narrowband] lines, the applicant lowered basic monthly charges during the same period ...

20      A new price cap system ... has been in effect since 1 January 2002 ... In place of the two baskets for residential and business
customers, the new system uses four baskets, for end-user lines (basket A), local calls (basket B), domestic long-distance
calls (basket C), and international calls (basket D).

21      On 15 January 2002, the applicant informed RegTP that it proposed to increase its monthly charges for analogue and [digital
narrowband] lines ... That increase was authorised by RegTP ...

22      On 31 October 2002, the applicant made a further application to increase its retail charges. RegTP partly refused that application
...

B – Charges for ADSL lines ...

23      ADSL ... charges are not subject to advance regulation under the price cap system. Under Paragraph 30 of the TKG, those charges
may be reviewed subsequently.

24      On 2 February 2001, following a number of complaints from competitors of the applicant, RegTP initiated a retrospective investigation
of the applicant’s ADSL prices in order to determine whether there was any practice of below-cost selling, contrary to the
German rules on competition. RegTP closed the proceeding on 25 January 2002, having found that the price increase which the
applicant had announced on 15 January 2002 did not give rise to a suspicion of price dumping.’

3        Following the lodging in 1999 of complaints from competitors of the appellant, the Commission of the European Communities
adopted the decision at issue by which it found, particularly in recitals 57, 102, 103 and 107 of that decision, that the
appellant had committed an abuse in the form of a ‘margin squeeze’ generated by an inappropriate spread between wholesale
charges for local loop access services and retail charges for end-user access services.

4        In regard to that margin squeeze the General Court recalled, in paragraph 38 of the judgment under appeal, the terms of recitals
102 to 105 of the decision at issue, which are as follows:

‘102      A margin squeeze exists if the charges to be paid to [the applicant] for wholesale [local loop] access [services], taking
monthly charges and one-off charges together, are so expensive that competitors are forced to charge their end-users prices
higher than the prices [the applicant] charges its own end-users for similar services. If wholesale charges [for local loop
access services] are higher than retail charges [for end-user access services], [the applicant’s] competitors, even if they
are at least as efficient as [the applicant], can never make a profit, because on top of the wholesale charges [for local
loop access services] they pay to [the applicant] they also have other costs such as marketing, billing, debt collection ...

103      If [the applicant] charges its competitors [wholesale] prices for [local loop] access [services] that are higher than its
own prices for retail local network access, [the applicant] prevents its competitors from offering access via the local loop
in addition to call services. ...

104      [The applicant] takes the view that there cannot be abusive pricing in the form of a margin squeeze in the present case, because
wholesale charges [for local loop access services] are imposed by [RegTP]. ...

105      Contrary to [the applicant’s] view, however, the margin squeeze is a form of abuse that is relevant to this case. On related
markets on which competitors buy wholesale [local loop access] services from the established operator, and depend on the established
operator in order to compete on a [retail] product or service market, there can very well be a margin squeeze between regulated
wholesale [prices for local loop access services] and retail prices [for end-user access services]. To show that there is
a margin squeeze it is sufficient that there should be a disproportion between the two charges such that competition is restricted.
...’

5        Under Article 1 of the decision at issue, the Commission therefore found that ‘[the applicant] has since 1998 infringed Article
82(a) of the EC Treaty by charging its competitors and [its] end-users unfair monthly and one-off charges for access to the
local loop, thus significantly impeding competition on the market for access to the local network’.

6        Under Article 3 of the decision at issue, the Commission imposed a fine of EUR 12.6 million on the appellant for that infringement.

II –  **The proceedings before the General Court and the judgment under appeal**

7        By application lodged at the Registry of the General Court on 30 July 2003, the appellant brought an action, principally,
for annulment of the decision at issue and, in the alternative, for a reduction of the fine imposed by that decision.

8        In support of its application for annulment of the decision at issue, the appellant put forward, inter alia, a plea in law
alleging infringement of Article 82 EC and a plea in law alleging misuse of powers and infringement of the principles of proportionality,
legal certainty and protection of legitimate expectations.

9        The plea alleging infringement of Article 82 EC was in several parts, of which three are relevant for the purposes of the
present appeal: the first alleging the absence of an abuse as the appellant did not have sufficient scope to avoid a margin
squeeze; the second complaining that the method used by the Commission to establish the margin squeeze was unlawful; and the
fourth alleging that the margin squeeze had no effect on the market.

10      The General Court rejected all those parts of the plea, noting in particular in its review, in paragraphs 150 and 242 of the
judgment under appeal, that the appellant had not, in its application, challenged the definition of the relevant markets that
was accepted in the decision at issue, according to which it is appropriate to distinguish, on the one hand, between a wholesale
market for local loop access services and, on the other, a retail market for access to the local loop, which includes a market
for narrowband access and a market for broadband access, all of which have a national dimension.

11      As regards the first part of that plea, the General Court found, in paragraphs 140 and 151 of the judgment under appeal, that
the Commission had been entitled to find in the decision at issue that the appellant had sufficient scope during the period
in question to reduce the margin squeeze identified in that decision by adjusting retail prices for end-user access services.

12      As regards the second part of that plea, in paragraph 168 of the judgment under appeal the General Court rejected the appellant’s
complaint that the abusive nature of the margin squeeze could arise only from the abusive nature of its retail prices for
end-user access services. It went on to state, in paragraphs 193, 203 and 206 of its judgment, that the Commission had been
correct to analyse the abusive nature of the appellant’s pricing practices solely – in accordance with the as-efficient-competitor
test – on the basis of the appellant’s particular situation, namely on the basis of the appellant’s charges and costs, and
by taking into account only revenues from access services while excluding revenues from other services, such as call services,
and comparing the wholesale price for local loop access services to retail prices for all end-user access services, namely
narrowband and broadband access.

13      As regards the fourth part of the plea, the General Court noted, in particular, in paragraph 237 of the judgment under appeal
that the margin squeeze at issue will, in principle, hinder the growth of competition in the retail markets for end-user access
services.

14      The plea in law alleging misuse of powers and infringement of the principles of proportionality, legal certainty and protection
of legitimate expectations was also rejected in its entirety by the General Court. As regards the complaint that the Commission
was subjecting the appellant’s charges to double regulation, thereby infringing the principles of proportionality and legal
certainty, the General Court stated, in particular, in paragraph 265 of the judgment under appeal:

‘While it is not inconceivable that the German authorities also infringed Community law – particularly the provisions of [Commission
Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services (OJ 1990 L 192, p. 10)],
as amended by [Commission Directive 96/19/EC of 13 March 1996 (OJ 1996 L 74, p. 13)] – by opting for a gradual rebalancing
of connection and call charges, such a failure to act, if it were to be established, would not remove the scope which the
applicant had to reduce the margin squeeze.’

15      Furthermore, as regards the complaint of infringement of the principle of protection of legitimate expectations, the General
Court found, in paragraph 269 of the judgment under appeal, that RegTP’s decisions could not have created such a legitimate
expectation for the appellant.

16      Lastly, as regards the complaint as to misuse of powers, the General Court held in paragraph 271 of its judgment:

‘In the [decision at issue], the Commission refers only to the applicant’s pricing practices and not to the decisions of the
German authorities. Even if RegTP had infringed a Community rule and even if the Commission could have initiated proceedings
against the Federal Republic of Germany for failure to fulfil obligations, such possibilities cannot affect the lawfulness
of the [decision at issue]. In that decision, the Commission merely found that the applicant had committed an infringement
of Article 82 EC, a provision which concerns only economic operators, not the Member States. The Commission did not therefore
misuse its powers by making that finding on the basis of Article 82 EC.’

17      In support of its claim for a reduction of the fine imposed, the appellant put forward six pleas in law, including, in particular,
a third plea based on the lack of negligence and intentional fault, a fourth plea alleging that insufficient account was taken
of the regulation of charges in calculating the level of the fine and a sixth plea alleging a failure to take account of attenuating
circumstances. The General Court rejected those three pleas in paragraphs 290 to 321 of the judgment under appeal.

18      Consequently, the General Court dismissed the whole action and ordered the appellant to bear its own costs and to pay those
incurred by the Commission.

III –  **Forms of order sought**

19      By its appeal, the appellant claims that the Court should:

–        set aside the judgment under appeal;

–        annul the decision at issue;

–        in the alternative, in the exercise of its unlimited jurisdiction, reduce the fine imposed on it under Article 3 of the decision
at issue; and

–        order the Commission to pay the costs.

20      The Commission contends that the Court should dismiss the appeal and order the appellant to pay the costs.

21      Vodafone D2 GmbH, formerly Vodafone AG & Co. KG, formerly Arcor AG & Co. KG (‘Vodafone’), contends that the Court should dismiss
the appeal as inadmissible or, at the very least, unfounded, and order the appellant to pay the costs.

22      Versatel NRW GmbH, formerly Tropolys NRW GmbH, formerly CityKom Münster GmbH Telekommunikationsservice and TeleBeL Gesellschaft
für Telekommunikation Bergisches Land mbH, EWE TEL GmbH, HanseNet Telekommunikation GmbH, Versatel Nord GmbH, formerly Versatel
Nord-Deutschland GmbH, formerly KomTel Gesellschaft für Kommunikations- und Informationsdienste mbH, NetCologne Gesellschaft
für Telekommunikation mbH, Versatel Süd GmbH, formerly Versatel Süd-Deutschland GmbH, formerly tesion Telekommunikation GmbH,
and Versatel West GmbH, formerly Versatel West-Deutschland GmbH, formerly Versatel Deutschland GmbH & Co. KG (together ‘Versatel’)
also contended at the hearing that the Court should dismiss the appeal, endorsing the forms of order sought by the Commission
and by Vodafone.

IV –  **Appeal**

A –  *Admissibility*

23      Vodafone and Versatel plead, as a preliminary point, that the appeal is inadmissible in that it is limited – under the first
ground of appeal and the first and second parts of the second ground of appeal which, in essence, challenge the General Court’s
findings concerning the application of Article 82 EC to the relevant pricing practices of the appellant and concerning observance
of the principles of proportionality, legal certainty and protection of legitimate expectations – to reproducing the arguments
on which the appellant relied in the proceedings at first instance for the sole purpose of securing a re-examination of those
arguments by the Court of Justice.

24      In that regard, it should be borne in mind that it is apparent from Article 225 EC, the first paragraph of Article 58 of the
Statute of the Court of Justice and Article 112(1)(c) of the Rules of Procedure of the Court of Justice that an appeal must
indicate precisely the contested elements of the judgment which the appellant seeks to have set aside and also the legal arguments
specifically advanced in support of the appeal. That requirement is not satisfied by an appeal which, without even including
an argument specifically identifying the error of law allegedly vitiating the contested judgment, merely reproduces the pleas
in law and arguments previously submitted to the General Court. Such an appeal amounts in reality to no more than a request
for re-examination of the application submitted to the General Court, which the Court of Justice does not have jurisdiction
to undertake (see, in particular, Case C‐352/98 P *Bergaderm and Goupil* v *Commission* [2000] ECR I‐5291, paragraphs 34 and 35, and Case C‐76/01 P *Eurocoton and Others* v *Council* [2003] ECR I‐10091, paragraphs 46 and 47).

25      However, provided that the appellant challenges the interpretation or application of European Union law (‘EU law’) by the
General Court, the points of law examined at first instance may be discussed again in the course of an appeal. Indeed, if
an appellant could not thus base his appeal on pleas in law and arguments already relied on before the General Court, an appeal
would be deprived of part of its purpose (see, in particular, Case C‐321/99 P *ARAP and Others* v *Commission* [2002] ECR I‐4287, paragraph 49).

26      In the present case, the first and second grounds of appeal, taken as a whole, are such that the appeal does indeed seek to
call into question the position adopted by the General Court in relation to a number of points of law put to it at first instance
concerning the application of Article 82 EC to the relevant pricing practices of the appellant and observance of certain general
principles of EU law. The appeal includes a precise indication of those aspects of the judgment under appeal which are being
contested and of the pleas in law and complaints on which it is based.

27      It follows from this that the first and second grounds of appeal, viewed as a whole, cannot be regarded as inadmissible. It
will, however, be necessary to examine the admissibility of specific complaints put forward in support of those grounds when
examining them in turn.

B –  *Substance*

28      In support of its appeal, the appellant puts forward three pleas in law alleging, respectively, (i) errors of law concerning
the manner in which the regulation of its activities by RegTP as the competent national regulatory authority was dealt with,
(ii) errors of law in the application of Article 82 EC, and (iii) errors of law in the calculation of fines owing to a failure
to take such regulation into account.

29      It must be borne in mind in that regard that, by the judgment under appeal, the General Court dismissed in its entirety the
action brought by the appellant against the decision at issue, holding, in essence, as can be seen from paragraphs 3 to 6
of the present judgment, that the Commission was entitled to impose a fine on the appellant for infringement of Article 82 EC
on account of the implementation of an unfair pricing practice, resulting for competitors who are at least as efficient as
the appellant in a margin squeeze generated by an inappropriate spread between wholesale charges for local loop access services
and retail charges for end-user access services, preventing them from competing effectively with the appellant for the provision
of the latter services.

30      By its three grounds of appeal, the appellant seeks to challenge, in essence, the General Court’s findings in the judgment
under appeal with regard to:

–        the attributability to the appellant of the infringement on the basis of the appellant’s scope to adjust its retail prices
for end-user access services and the relevance to the application of Article 82 EC of the regulation of prices for telecommunications
services by national regulatory authorities;

–        the appropriateness, for the purpose of establishing an abuse within the meaning of Article 82 EC, of the margin squeeze test
in the circumstances of the case, having regard to the national regulatory authorities’ regulation of wholesale prices for
local loop access services, as well as the lawfulness of the method of calculating that margin squeeze and the analysis of
its effects in the light of Article 82 EC; and

–        whether the amount of the fine is justified in the light of the national regulatory authorities’ regulation of the telecommunications
sector.

31      By contrast, the appellant does not challenge in principle the proposition that a pricing practice adopted by a dominant undertaking
which results in a margin squeeze of its competitors who are at least as efficient is to be regarded as unfair in the light
of Article 82 EC.

32      Indeed, the appellant does not criticise the General Court’s view that an undertaking abuses its dominant position within
the meaning of Article 82 EC if, owing to an inappropriate spread between its wholesale prices for local loop access services
and its retail prices for end-user access services in the markets in which it is dominant, its pricing practices lead to such
a margin squeeze. It merely submits in that regard, by its second ground of appeal, that, in the present case, margin squeeze
is not a relevant basis for establishing that it has committed an infringement of Article 82 EC, since its wholesale prices
for local loop access services are subject to regulation by the national regulatory authorities.

33      That being the case, the Court will consider the grounds of appeal in the order in which they have been presented by the appellant,
which corresponds to the order in which the pleas in law at first instance were presented and considered by the General Court
in the judgment under appeal.

1.     Preliminary observations

34      In order to consider the substance of the appellant’s grounds of appeal against that judgment, it should, in the first place,
be pointed out that, according to Article 113(2) of the Rules of Procedure of the Court of Justice, the subject-matter of
the proceedings before the General Court may not be changed in the appeal. The Court’s jurisdiction in an appeal is confined
to a review of the findings of law on the pleas argued before the General Court. A party may not, therefore, put forward for
the first time before the Court of Justice a plea in law which it has not raised before the General Court, since to do so
would be to allow it to bring before the Court of Justice, whose jurisdiction in appeals is limited, a case of wider ambit
than that which came before the General Court (see, to that effect, in particular Case C‐136/92 P *Commission* v *Brazzelli Lualdi and Others* [1994] ECR I‐1981, paragraph 59; Case C‐68/05 P *Koninklijke Coöperatie Cosun* v *Commission* [2006] ECR I‐10367, paragraph 96; and Case C‐564/08 P *SGL Carbon* v *Commission*[2009] ECR I‐0000, paragraph 22).

35      Both in its appeal and at the hearing, the appellant argued that it did not have any scope to determine wholesale prices for
local loop access services, since those were set by the national regulatory authority, namely RegTP. The margin squeeze at
issue was said to be caused, in reality, by the excessive wholesale prices set by RegTP. In order to end that margin squeeze,
the Commission should, therefore, have brought an action for failure to fulfil obligations under Article 226 EC against the
Federal Republic of Germany for breach of EU law, instead of adopting a decision against the appellant under Article 82 EC.
Furthermore, it is wrong, according to the appellant, to take the view that wholesale prices for local loop access services
are set on the basis of the appellant’s costs. Those prices are determined by RegTP on the basis of the cost of efficient
service provision in accordance with a model laid down by the national regulatory authority.

36      By contrast, the Commission and Versatel contend that wholesale prices for local loop access services are attributable to
the appellant since, according to the provisions of the TKG, those prices are set by RegTP on the basis of an application
made by the appellant by reference to its own costs. The appellant cannot, therefore, complain that those prices are excessive.
As is apparent from the decision at issue, the appellant is, moreover, legally obliged to make a fresh application to RegTP
for a reduction of wholesale prices for local loop access services if its costs decrease.

37      In that regard, Versatel also claimed at the hearing that the appellant had, since 1997, systematically sought to undermine
the proper conduct of the national procedure for setting wholesale prices for local loop access services by withdrawing its
applications for approval and by failing to produce any proof or evidence of the costs that might justify those wholesale
prices, in spite of the obligation to that effect under national law.

38      With regard to those points at issue between the parties, it must nevertheless be observed, first of all, that the question
of the appellant’s scope to adjust its wholesale prices for local loop access services was not argued before the General Court,
which handed down the judgment under appeal having accepted the premiss, undisputed before it, that the appellant did not
have the necessary scope.

39      In paragraph 93 of the judgment under appeal, the General Court observed that although, in the decision at issue, the Commission
did not rule out that the appellant had the possibility of reducing its wholesale prices for local loop access services, it
confined its examination to the question whether the appellant had real room for manoeuvre to adjust its retail prices for
end-user access services.

40      Since that approach was not challenged before the General Court, the latter accordingly confined itself, in paragraphs 85
to 152 of the judgment under appeal, to considering – for the purpose of determining whether the margin squeeze identified
in the decision at issue was attributable to the appellant – whether the Commission had been entitled to conclude in that
decision that the appellant had real scope to adjust its retail prices for end-user access services in order to end or reduce
that margin squeeze. It concluded in that regard, in paragraphs 140 and 151 of the judgment under appeal, that the Commission
had been entitled to take the view that there was such leeway, notwithstanding RegTP’s regulation of retail prices for end-user
access services.

41      Similarly, before rejecting, in paragraphs 183 to 213 of the judgment under appeal, the complaints put forward by the appellant
in contesting the abusive nature of and method of calculating the margin squeeze identified in the decision at issue, the
General Court stated in paragraph 167 of its judgment that the Commission had established only that the appellant had scope
to adjust its retail prices for end-user access services.

42      In those circumstances it is not for the Court of Justice, in the context of the present appeal, to consider to what extent
the appellant could, where appropriate, have adjusted wholesale prices for local loop access services, as claimed by the Commission
and Versatel, since to do so would be to go beyond the pleas in law that were argued before the General Court. According to
the case-law cited in paragraph 34 of the present judgment, any plea or complaint on that issue is beyond the scope of the
present appeal and, therefore, inadmissible.

43      In order to assess the substance of the complaints put forward by the appellant to call into question the lawfulness of the
judgment under appeal, in particular those by which it denies responsibility for the infringement and the abusive nature of
the margin squeeze identified in the decision at issue – complaints put forward by the first and second grounds of appeal
– it is accordingly necessary to rely solely on the premiss accepted in that judgment: that the appellant had scope only to
adjust its retail prices for end-user access services, scope whose existence is undisputed in the context of the present appeal.

44      Second, it should be stressed that, if the subject-matter of the proceedings before the General Court is not to be changed,
it is not possible in the context of the present appeal to accuse the General Court of failure to censure the Commission for
not calling into question the conduct of the national regulatory authorities on the premiss that those authorities, having
set an excessive wholesale price for local loop access services, may be said to be solely responsible for the margin squeeze
identified in the decision at issue.

45      Admittedly, according to the case-law of the Court, it is for each Member State to take all appropriate measures, whether
general or particular, to ensure the fulfilment by the national regulatory authorities of the obligations which are binding
under EU law (see, to that effect, Case C‐268/06 *Impact* [2008] ECR I‐2483, paragraph 85). Furthermore, Articles 81 EC and 82 EC, in conjunction with Article 10 EC, require the Member
States not to introduce or maintain in force measures, even of a legislative or regulatory nature, which may render ineffective
the competition rules applicable to undertakings (see, in particular, Case 13/77 *GB-Inno-BM* [1977] ECR 2115, paragraph 31, and Case C‐96/94 *Centro Servizi Spediporto* [1995] ECR I‐2883, paragraph 20).

46      However, as regards the possibility of the Commission bringing an action for failure to fulfil obligations against the Member
State concerned, since the judgment under appeal in the present case relates solely to the lawfulness of a decision adopted
against the appellant by the Commission pursuant to Article 82 EC, the Court must, in the context of that appeal, confine
itself to ascertaining whether the complaints put forward in support of that appeal show that the General Court’s examination
of the lawfulness of such a decision is vitiated by errors of law, irrespective of whether the Commission could, simultaneously
or alternatively, have adopted a decision finding that the Member State in question had infringed EU law.

47      Consequently, as the General Court itself found in substance, inter alia, in paragraphs 265 and 271 of the judgment under
appeal, even if it is not inconceivable that the national regulatory authorities infringed EU law in this instance, and the
Commission could indeed therefore have chosen to bring an action for failure to fulfil obligations against the Federal Republic
of Germany under Article 226 EC, such possibilities are irrelevant at the stage of the present appeal, not least because,
according to the case-law of the Court, under the system laid down by Article 226 EC, the Commission has a discretion to bring
an action for failure to fulfil obligations, and it is not for the Courts of the European Union (‘Courts of the Union’) to
assess whether it was appropriate to do so (see, in particular, Case C‐233/00 *Commission* v *France* [2003] ECR I‐6625, paragraph 31).

48      As regards the appellant’s claim that the wholesale prices for local loop access services were excessive, it must be observed
furthermore that the appellant did not, in its application to the General Court, in any way attempt to call into question
the lawfulness of those prices in the light of EU law. The appellant confined itself in that respect to submitting that, if
wholesale prices for local loop access services are set by the national regulatory authorities and cannot be adjusted by the
appellant, only the retail prices for end-user access services can be abusive within the meaning of Article 82 EC and, moreover,
that if the pricing policy of those authorities in respect of those services is contrary to EU law, it is incumbent on the
Commission to bring an action against those authorities for failure to fulfil obligations.

49      Consequently, the Court cannot, in the present appeal, review complaints which challenge the lawfulness of wholesale prices
for local loop access services, particularly on the basis of their allegedly excessive nature as compared with the costs incurred
by the appellant in supplying them (see, on that point, Case C‐55/06 *Arcor* [2008] ECR I‐2931, paragraph 69). Such complaints go beyond the pleas argued at first instance and are, therefore, in accordance
with the case-law cited in paragraph 34 of the present judgment, inadmissible in this appeal.

50      Third, it must be noted that, in the proceedings at first instance, the appellant did not, as the General Court observed in
paragraphs 150 and 242 of the judgment under appeal, challenge the Commission’s definition of the relevant markets in the
decision at issue, according to which (i) the relevant geographic market is the German market and (ii) as regards the markets
for the services at issue, the wholesale market in local loop access services is a single market, distinct from the retail
market in end-user access services which comprises two separate segments, namely access to narrowband lines, on the one hand,
and access to broadband lines, on the other.

51      Similarly it must be observed that the appellant did not at any time call into question before the General Court the Commission’s
finding in the decision at issue that the appellant had a dominant position within the meaning of Article 82 EC on all those
service markets.

52      It follows from this that, in accordance with the case-law cited in paragraph 34 of the present judgment, neither the definition
of the relevant markets that was accepted by the General Court in the judgment under appeal, nor the finding that the appellant
had a dominant position on all those markets can be called into question in the examination of the present appeal.

53      In the second place, it should be recalled, concerning specifically the assessment of market data and the competitive situation,
that it is not for the Court of Justice, on an appeal, to substitute its own assessment for that of the General Court. In
accordance with Article 225 EC and the first paragraph of Article 58 of the Statute of the Court of Justice, the appeal must
be limited to questions of law. Assessment of the facts does not, save where there may have been distortion of the facts or
evidence, which has not been pleaded here, constitute a question of law which is subject, as such, to review by the Court
of Justice (see Case C‐95/04 P *British Airways* v *Commission* [2007] ECR I‐2331, paragraph 78 and the case-law cited).

54      The pleas in law put forward by the appellant in support of the present appeal will be examined by the Court in the light
of those considerations.

2.     The first ground of appeal, alleging errors of law concerning the manner in which the regulation of the appellant’s activities
by RegTP as the competent national regulatory authority was dealt with

55      The first ground of appeal relied on by the appellant is subdivided into three parts concerning, respectively, the attributability
of the infringement, the principle of protection of legitimate expectations and the intentional or negligent nature of the
infringement of Article 82 EC.

a)     The first part of the first ground of appeal, concerning the attributability of the infringement

i)     Judgment under appeal

56      As regards the appellant’s scope to avoid the margin squeeze, the General Court recalled in paragraphs 85 to 89 of the judgment
under appeal the principles identified by the relevant case-law of the Court, and went on to consider, in paragraphs 97 to
152 of its judgment, whether the German legal framework, in particular the TKG and the decisions taken by RegTP during the
period covered by the decision at issue, removed any possibility of competitive activity by the appellant, or whether it gave
the appellant sufficient scope to set its prices at a level which would have enabled it to end or reduce the margin squeeze
identified in the decision at issue.

57      As regards, first of all, the period from 1 January 1998 to 31 December 2001, having noted in paragraph 100 of its judgment
that, within the applicable legislative framework, the appellant was able to adjust its prices after obtaining the prior authorisation
of RegTP, the General Court concluded in paragraph 105 of its judgment that the Commission was correct to find that, having
regard to the six applications for reductions in call charges in that period, the appellant had scope during that period to
apply for increases in the retail prices of its narrowband access services to end-users, while respecting the overall ceilings
for baskets of residential and business services.

58      Next, the General Court considered in paragraphs 106 to 124 of the judgment under appeal whether, notwithstanding that scope,
RegTP’s intervention in the setting of the appellant’s retail prices for end-user access services had the effect that the
appellant was no longer governed by Article 82 EC. In that respect, it held in paragraph 107 of its judgment that the fact
that those retail prices have to be approved by RegTP does not absolve the appellant from responsibility under Article 82 EC,
since the appellant influences the level of its retail prices for end-user access services through applications to RegTP for
authorisation.

59      In that regard, the General Court, in paragraphs 108 to 124 of the judgment under appeal, rejected the appellant’s argument
that it does not have any responsibility under Article 82 EC because RegTP checks the compatibility with Article 82 EC of
its retail prices for end-user access services in advance.

60      In paragraphs 109 to 114 of the judgment under appeal, the General Court stated that the retail prices for access to analogue
lines were based on decisions taken under the legislation in force before the adoption of the TKG by the Federal Ministry
of Post and Telecommunications, that the provisions of the TKG do not indicate that RegTP considers whether applications for
the adjustment of retail prices for access to narrowband services are compatible with Article 82 EC, that the national regulatory
authorities operate under national law, that national law may, as regards telecommunications policy, have objectives which
differ from those of European Union competition policy and that the various decisions of RegTP to which the appellant refers
do not include any reference to Article 82 EC.

61      As to the fact that RegTP has considered, in a number of decisions, the question of the existence of a margin squeeze, the
General Court stated in paragraphs 116 to 119 of the judgment under appeal that the fact that, having found a negative spread
between wholesale prices for local loop access services and the appellant’s retail prices for end-user access services, RegTP
took the view in each case that other operators should be able to offer their end-users competitive prices by resorting to
cross-subsidised charges for access services and call charges shows that RegTP did not consider the compatibility of the charges
in question with Article 82 EC or, at any rate, that it applied Article 82 EC incorrectly.

62      The General Court pointed out in paragraph 120 of the judgment under appeal that, in any event, even on the assumption that
RegTP is obliged to consider whether the retail prices for end-user access services proposed by the appellant are compatible
with Article 82 EC, the Commission cannot be bound by a decision taken by a national body pursuant to that article.

63      Furthermore, the General Court noted in paragraphs 121 to 123 of the judgment under appeal that the attribution of any infringement
to the appellant depends on whether the latter had sufficient scope at the material time to fix its retail prices for narrowband
access services to end-users at a level that would have enabled it to end or reduce the margin squeeze at issue. The General
Court reiterated in that regard that the appellant was able to influence the level of those retail prices through applications
to RegTP for authorisation. It also observed that, in its judgment of 10 February 2004, the Bundesgerichtshof had expressly
confirmed the appellant’s responsibility to make such applications and that the German legal framework did not preclude RegTP
from having authorised prices which are contrary to Article 82 EC.

64      Consequently, the General Court found in paragraph 124 of the judgment under appeal that, notwithstanding RegTP’s intervention
in the setting of the appellant’s retail prices for narrowband access services to end-users, the appellant had sufficient
discretion during the period from 1 January 1998 to 31 December 2001 for its pricing policy to fall within the scope of Article
82 EC.

65      As regards, in the second place, the period from 1 January 2002, having noted in paragraphs 144 and 145 of the judgment under
appeal that the appellant does not deny that it could have increased its retail prices for broadband access services (ADSL)
from that date and that, since it fixes those prices at its own discretion, within the limits imposed under German law, its
pricing practices in that area are capable of being caught by Article 82 EC, the General Court considered in paragraphs 147
to 151 of its judgment whether the appellant could have reduced the margin squeeze by increasing its retail prices for broadband
access services. Paragraphs 148 and 149 of the judgment under appeal are worded as follows:

‘148      It must be noted in that regard that since wholesale [local loop] access services can provide end-users with the whole range
of ... access services, the applicant’s scope to increase its [retail prices for broadband access services] is capable of reducing
the margin squeeze between wholesale prices [for local loop access services], on the one hand, and retail prices for the whole
range of [end-user] access services, on the other. A combined analysis, at end-user level, of ... access services is required
not only because they amount to a single supply of services at wholesale level, but also because, as the Commission explained
in the [decision at issue] without having been challenged by the applicant on that point, ADSL cannot be offered to end-users
on its own because, for technical reasons, it always involves an upgrading of ... narrowband connections.

149      The applicant’s observations concerning the purported cross-price elasticity between ADSL and narrowband connections and between
the different ADSL variants must be rejected. First, those observations do not preclude the existence of scope for the applicant
to increase its ADSL charges. Second, a limited increase in ADSL charges would have led to a higher average retail price for
narrowband and associated broadband access services, and would thus have reduced the margin squeeze identified. In view, in
particular, of the advantages of broadband as regards data transmission, end-users of broadband access services would not
automatically choose to revert to a narrowband connection when ADSL retail access charges are increased.’

ii)  Arguments of the parties

66      As regards, in the first place, the period from 1 January 1998 to 31 December 2001, the appellant submits by its first complaint
that the General Court erred in relying on the premiss that the existence of scope to adjust its retail prices for end-user
access services is a necessary and sufficient requirement in order for an infringement to be attributable. The existence of
such leeway does not resolve the issue whether the failure on the appellant’s part to apply to RegTP for authorisation to
increase those retail prices amounted to wrongful conduct.

67      According to the appellant, the General Court did not take into account the fact that RegTP considered the purported margin
squeeze and took the view that it did not restrict competition. Where a dominant undertaking is subject to regulation by a
national regulatory authority created for that purpose in a legal framework geared towards competition, and particular conduct
is reviewed, and not challenged, by the national regulatory authority which has the relevant power within that framework,
the dominant undertaking’s responsibility for preserving the structure of the market is supplanted by the responsibility of
that authority. In such a situation, the responsibility of the dominant undertaking is limited to the obligation to send the
national regulatory authority all the information necessary in order for its conduct to be reviewed.

68      In those circumstances, the appellant maintains that paragraph 113 of the judgment under appeal is incorrect since RegTP was
obliged to respect European Union competition law (‘EU competition law’). Likewise, paragraph 123 of that judgment is vitiated
by an error. The Bundesgerichtshof did not hold that the appellant’s responsibility to make applications for the adjustment
of its charges means that it has to substitute its own assessment of the application of Article 82 EC for that of the national
regulatory authority. Furthermore, paragraph 120 of the judgment under appeal, according to which the appellant must be responsible
for the margin squeeze on the ground that the Commission cannot be bound by a decision taken by a national body pursuant to
Article 82 EC is not compelling. First, the issue in the present case is solely that of attributability, not whether RegTP’s
assessment binds the Commission as to the substance. Second, the national regulatory authorities have an autonomous role in
the creation of a competition regime in the telecommunications sector. Lastly, the principle of legal certainty requires that
a dominant undertaking which is subject to regulation at national level should be able to rely on the correctness of that
regulation.

69      By its second complaint, the appellant claims that the considerations in paragraphs 111 to 119 of the judgment under appeal
are irrelevant or are vitiated by errors of law. The General Court’s reasoning leads to an unlawful vicious circle as a result
of the inference from the alternative conclusion reached that the appellant was not entitled to rely on the outcome of the
review carried out by RegTP. Furthermore, the concept of ‘cross-subsidisation’ used by RegTP did not give rise to any doubt
as to the correctness of its findings. In addition, paragraphs 111 to 114 of that judgment contain errors of law for the reasons
already set out in paragraph 66 of the present judgment.

70      By its third complaint, the appellant submits that, contrary to what the General Court held in paragraphs 109 and 110 of the
judgment under appeal, the fact that its retail prices for analogue lines were based on authorisation by the Federal Ministry
of Post and Telecommunications is irrelevant to the consideration of attributability. RegTP’s rejection of the complaint of
a margin squeeze restricting competition is, by contrast, decisive.

71      As regards, in the second place, the period from 1 January 2002 to 21 May 2003, the appellant submits by its first complaint
that the judgment under appeal is erroneous in so far as, just as in the case of the previous period, the margin squeeze cannot
be attributed to the appellant.

72      By its second complaint, the appellant takes the view that in the judgment under appeal there is a contradiction between the
examination of the attributability of the infringement and the calculation of the margin squeeze. The General Court required
‘cross-subsidisation’ between two markets, namely the narrowband access market, on the one hand, and the broadband access
market, on the other. Yet, in the context of the calculation of the margin squeeze, the General Court failed to take into
account the revenues which competitors obtain from call services, in particular on the ground that they cannot be subject
to the possibility of cross-subsidisation between two markets, namely the end-user access services market, on the one hand,
and the call services market, on the other.

73      By its third complaint, the appellant claims that the General Court erred in law in making unfounded assumptions as to the
possibility of a reduction of the margin squeeze. The finding in paragraph 149 of the judgment under appeal that cross-price
elasticity does not remove the appellant’s scope to increase its ADSL prices is accurate but irrelevant. However, the General
Court did not consider whether, and to what extent, an end-user of a narrowband line would decline to switch to a broadband
line as a result of an increase in its price.

74      The Commission points to the erroneous nature of the appellant’s key argument that the infringement cannot be attributed to
the appellant because the matter is within the remit of the national regulatory authority and that the Commission cannot issue
proceedings directly against a regulated undertaking in a case in respect of which RegTP has already taken a decision. It
contends that the appellant’s complaints should, therefore, be rejected in their entirety.

75      Vodafone contends that the first part of the first ground of appeal is inadmissible because the appellant merely reproduces
the arguments on which it relied during the proceedings before the General Court, solely for the purpose of securing a re-examination
of that argument by the Court of Justice. In the alternative, the appellant’s complaints should be rejected as unfounded.

76      Versatel also contended at the hearing that the General Court had correctly held that the appellant had sufficient scope to
increase its retail prices for end-user access services.

iii)  Findings of the Court

77      As a preliminary point it must be observed that, although, by the first part of the present ground of appeal, the appellant
largely reiterates the arguments put forward before the General Court, it claims, in essence, that the General Court erred
in law by adopting a legally incorrect test in respect of the attributability of the infringement of Article 82 EC. Contrary
to Vodafone’s contention, that part of the first ground of appeal is, therefore, admissible in accordance with the case-law
cited in paragraph 25 of the present judgment.

78      As regards the substance of the first part of the first ground of appeal, it must be noted that the appellant claims, in essence,
that the General Court considered the margin squeeze identified in the decision at issue to be attributable to the appellant
under Article 82 EC solely on the ground that it had the scope to adjust its retail prices for end-user access services. The
whole of that part of the first ground of appeal is based on the premiss that such scope is not a sufficient condition for
the application of Article 82 EC where, as in this instance, the relevant pricing practice was approved by the national regulatory
authority responsible for the regulation of the telecommunications sector, RegTP.

79      However, that premiss is incorrect.

80      According to the case-law of the Court of Justice, it is only if anti-competitive conduct is required of undertakings by national
legislation, or if the latter creates a legal framework which itself eliminates any possibility of competitive activity on
their part, that Articles 81 EC and 82 EC do not apply. In such a situation, the restriction of competition is not attributable,
as those provisions implicitly require, to the autonomous conduct of the undertakings. Articles 81 EC and 82 EC may apply,
however, if it is found that the national legislation leaves open the possibility of competition which may be prevented, restricted
or distorted by the autonomous conduct of undertakings (Joined Cases C‐359/95 P and C‐379/95 P *Commission and France* v *Ladbroke Racing* [1997] ECR I‐6265, paragraphs 33 and 34 and the case-law cited).

81      The possibility of excluding anti-competitive conduct from the scope of Articles 81 EC and 82 EC on the ground that it has
been required of the undertakings in question by existing national legislation or that the legislation has precluded all scope
for any competitive conduct on their part has thus been accepted only to a limited extent by the Court of Justice (see Case
41/83 *Italy*v *Commission*[1985] ECR 873, paragraph 19; Joined Cases 240/82 to 242/82, 261/82, 262/82, 268/82 and 269/82 *Stichting Sigarettenindustrie and Others*v *Commission* [1985] ECR 3831, paragraphs 27 to 29; and Case C‐198/01 *CIF* [2003] ECR I‐8055, paragraph 67).

82      Thus, the Court has held that if a national law merely encourages or makes it easier for undertakings to engage in autonomous
anti-competitive conduct, those undertakings remain subject to Articles 81 EC and 82 EC (Joined Cases 40/73 to 48/73, 50/73,
54/73 to 56/73, 111/73, 113/73 and 114/73 *Suiker Unie and Others* v *Commission* [1975] ECR 1663, paragraphs 36 to 73, and *CIF*, paragraph 56).

83      According to the case-law of the Court, dominant undertakings have a special responsibility not to allow their conduct to
impair genuine undistorted competition on the common market (Case 322/81 *Nederlandsche Banden-Industrie-Michelin* v *Commission* [1983] ECR 3461, paragraph 57).

84      It follows from this that the mere fact that the appellant was encouraged by the intervention of a national regulatory authority
such as RegTP to maintain the pricing practices which led to the margin squeeze of competitors who are at least as efficient
as the appellant cannot, as such, in any way absolve the appellant from responsibility under Article 82 EC (see, to that effect,
Case 123/83 *Clair* [1985] ECR 391, paragraphs 21 to 23).

85      Since, notwithstanding such interventions, the appellant had scope to adjust its retail prices for end-user access services,
the General Court was entitled to find, on that ground alone, that the margin squeeze at issue was attributable to the appellant.

86      In the present case, it must be noted that the appellant does not deny the existence of such scope in the arguments put forward
in the first part of the first ground of appeal. In particular, the appellant does not challenge the General Court’s findings
in paragraphs 97 to 105 and 121 to 151 of the judgment under appeal that, in essence, the appellant was able to make applications
to RegTP for authorisation to adjust its retail prices for end-user access services, specifically retail prices for narrowband
access services for the period between 1 January 1998 and 31 December 2001, and retail prices for broadband access services
for the period from 1 January 2002.

87      Instead, in its various complaints and arguments the appellant merely underlines the encouragement provided by RegTP’s intervention,
and states, in particular, that RegTP itself considered and approved the margin squeeze at issue in the light both of national
and European Union telecommunications law and of Article 82 EC and, moreover, that the Bundesgerichtshof held in a judgment
of 10 February 2004 that the appellant cannot take the place of RegTP in assessing whether a pricing practice is contrary
to Article 82 EC.

88      For the reasons set out in paragraphs 80 to 85 of the present judgment, such arguments cannot, however, in any way alter the
fact that that pricing practice is attributable to the appellant, since it is common ground that the appellant had scope to
adjust its retail prices for end-user access services, and, therefore, such arguments are ineffective as a means of challenging
the General Court’s findings on that point.

89      In particular, the appellant cannot complain that the General Court did not consider whether there was ‘fault’ on its part
by failing to use the scope which it had to apply to RegTP for authorisation to adjust its retail prices for end-user access
services. The existence or otherwise of any ‘fault’ in such conduct cannot alter the finding that the appellant had scope
to adopt that conduct, and can be taken into account only in determining whether that conduct was an infringement and at the
stage of setting the level of the fines.

90      Moreover, as the General Court held in paragraph 120 of the judgment under appeal, the Commission cannot, in any event, be
bound by a decision taken by a national body pursuant to Article 82 EC (see, to that effect, Case C‐344/98 *Masterfoods and HB* [2000] ECR I‐11369, paragraph 48). In the present case, the appellant does not, indeed, deny that RegTP’s decisions are not
binding on the Commission.

91      Admittedly it is not inconceivable, as the appellant observes, that the national regulatory authorities may themselves have
infringed Article 82 EC in conjunction with Article 10 EC, and therefore that the Commission could have brought an action
for failure to fulfil obligations against the Member State concerned. However, that circumstance also does not affect the
scope which the appellant had to adjust its retail prices for end-user access services and, accordingly, it is, as paragraphs
44 to 49 of the present judgment have already shown, ineffective in the present appeal for the purpose of challenging the
General Court’s findings as to whether the infringement can be attributed to the appellant.

92      The same applies to the appellant’s claim that the purpose of RegTP’s regulation is to open the relevant markets up to competition.
It is common ground that that regulation did not in any way deny the appellant the possibility of adjusting its retail prices
for end-user access services or, therefore, of engaging in autonomous conduct that is subject to Article 82 EC, since the
competition rules laid down by the EC Treaty supplement in that regard, by an *ex post* review, the legislative framework adopted by the Union legislature for *ex ante* regulation of the telecommunications markets*.*

93      Similarly, the Court must reject the complaint that, by reason of the cross-price elasticity of retail prices for broadband
access services and retail prices for narrowband access services, the General Court erred in law in paragraph 149 of the judgment
under appeal with regard to the possibility of the appellant reducing the margin squeeze from 1 January 2002 by increasing
its retail prices for broadband access services. As the General Court stated in the same paragraph, that complaint does not
in any way preclude the existence of scope for the appellant to adjust its retail prices for broadband access services. Furthermore,
in so far as the appellant also seeks to deny that that increase led to a higher average retail price for narrowband and broadband
access services taken together, the present complaint must, in accordance with the case-law cited in paragraph 53 of the present
judgment, be rejected as inadmissible, since it seeks to call into question the General Court’s definitive assessment of the
facts in the judgment under appeal, while making no claim as to distortion of those facts.

94      Finally, the complaint as to contradictory grounds, mentioned in paragraph 72 of the present judgment, cannot be upheld because
it is founded on an incorrect premiss. While it is true that, particularly in paragraphs 119 and 199 to 201 of the judgment
under appeal, the General Court rejected the possibility of cross-subsidisation between two separate markets – namely the
market in end-user access services and that in call services for subscribers – at the stage of calculating the margin squeeze,
it is wrong to take the view that the General Court required such cross-subsidisation when it was examining the attributability
of the infringement.

95      In paragraphs 148 to 150 of the judgment under appeal, the General Court merely found in that regard that the appellant’s
scope to increase its retail prices for broadband access services was capable of reducing the margin squeeze generated by
the spread between wholesale prices for local loop access services and retail prices for all end-user access services. In
doing so, the General Court did not in any way require there to be a practice of cross-subsidisation between narrowband and
broadband access services, particularly since – as stated in paragraph 148 of the judgment under appeal, which the appellant
has not challenged in the present appeal – there is a single, separate services market at the level of wholesale local loop
access services, the access services provided at that level allowing the appellant’s competitors to supply both narrowband
and broadband access services to their end-users, whereas for technical reasons the latter services cannot be offered on their
own to end-users.

96      Consequently, the first part of the first ground of appeal must be rejected in its entirety as, in part, inadmissible and,
in part, ineffective or unfounded.

b)     The second part of the first ground of appeal, concerning the principle of the protection of legitimate expectations

i)     Judgment under appeal

97      After recalling in paragraph 267 of the judgment under appeal that RegTP had taken the view in a number of decisions adopted
in the period at issue that, even though there was a negative spread between the appellant’s wholesale prices for local loop
access services and its retail prices for end-user access services, other operators should be able to offer their end-users
competitive prices by resorting to cross-subsidisation of access services and call services, the General Court found, in paragraph
268 of its judgment, that RegTP’s decisions do not include any reference to Article 82 EC, and that it follows implicitly
but necessarily from RegTP’s decisions that the appellant’s pricing practices have an anti-competitive effect, since the appellant’s
competitors have to resort to cross-subsidisation in order to be able to remain competitive on the market in access services.

98      The General Court concluded from this in paragraph 269 of the judgment under appeal:

‘In those circumstances, RegTP’s decisions could not have created for the applicant a legitimate expectation that its pricing
practices were compatible with Article 82 EC. It must be observed furthermore that, in its judgment of 10 February 2004 setting
aside the judgment of the Oberlandesgericht Düsseldorf of 16 January 2002, the Bundesgerichtshof confirmed that “the administrative
examination procedure [undertaken by RegTP] does not preclude the possibility in practice of an undertaking submitting a charge
by which it abuses its dominant position and obtains authorisation for it because the abuse is not revealed during the examination
procedure”.’

ii)  Arguments of the parties

99      The appellant takes the view that the General Court applied the principle of the protection of legitimate expectations incorrectly.
RegTP’s decisions repeatedly denied the existence of a margin squeeze that restricted competition, and this created a legitimate
expectation on the part of the appellant that its charges were lawful.

100    In that regard, the appellant claims, by its first complaint, that whether or not RegTP’s decisions expressly refer to Article
82 EC is irrelevant, since RegTP had in any event found that there was no margin squeeze that restricted competition.

101    By its second complaint, the appellant submits that, contrary to the view taken by the General Court in paragraphs 267 and
268 of the judgment under appeal, it follows neither from RegTP’s statement concerning the possibility of ‘cross-subsidisation’
with the prices of call services, nor from the use of the term ‘cross-subsidisation’, that its pricing practices have an anti-competitive
effect.

102    By its third complaint, the appellant submits that the reference in paragraph 269 of the judgment under appeal to a judgment
of the Bundesgerichtshof of 10 February 2004 is of no relevance. That judgment was delivered after the reference period and
cannot, therefore, determine whether the appellant was entitled to rely on the accuracy of RegTP’s decisions during that period.
On the contrary, the appellant could have inferred from a judgment of the Oberlandesgericht Düsseldorf of 16 January 2002
that it was entitled to rely on the decisions of RegTP, since that court held that RegTP’s decisions precluded any infringement
of Article 82 EC.

103    The Commission contends that, while RegTP’s pronouncements do not anticipate its assessment with regard to Article 82 EC,
neither can they form the basis of a legitimate expectation that the Commission will share the opinion of RegTP. The appellant’s
complaints should, therefore, be rejected as ineffective or unfounded.

104    Vodafone takes the view that the second part of the first ground of appeal is inadmissible, since the appellant, in essence,
merely repeats the complaints already raised before the General Court concerning the significance of RegTP’s earlier decisions,
its statements concerning the possibility of cross-subsidisation and the meaning of a judgment of the Oberlandesgericht Düsseldorf.
In any event, that part of the ground of appeal is unfounded since a legitimate expectation can be created only by the authority
responsible for the legal situation at issue.

iii)  Findings of the Court

105    By the present complaints, the appellant merely claims that decisions adopted by RegTP or handed down by certain national
courts were capable of creating for the appellant a legitimate expectation that its pricing practices were compatible with
Article 82 EC, reiterating or developing the arguments relied on at first instance before the General Court in order to show
that the Commission infringed the principle of the protection of legitimate expectations, but it fails to expound any legal
arguments to demonstrate why paragraphs 267 to 269 of the judgment under appeal are vitiated by an error of law.

106    The appellant thereby seeks, by calling into question the decision at issue in this way, to secure a re-examination of the
application that was made before the General Court. Consequently, in accordance with the case-law cited in paragraph 24 of
the present judgment, its complaints are inadmissible on that point.

107    As to the remainder, in so far as the appellant denies, in its second complaint, that it could have inferred from the decisions
of RegTP that its pricing practices had had a restrictive effect on competition, it must be held that the appellant seeks
to call into question the General Court’s assessment of the facts without alleging any distortion of those facts, and that,
therefore, in accordance with the case-law cited in paragraph 53 of the present judgment, such a complaint must also be considered
inadmissible.

108    Finally, in so far as the third complaint seeks to call into question the relevance of the judgment delivered by the Bundesgerichtshof
on 10 February 2004, it must be rejected as ineffective since it concerns a ground that was included in the judgment purely
for the sake of completeness in support of other findings made by the General Court (see, to that effect, Case C‐431/07 P
*Bouygues and Bouygues Télécom* v *Commission* [2009] ECR I‐2665, paragraph 148 and the case-law cited).

109    As the use of the word ‘furthermore’ near the beginning of the second sentence of paragraph 269 of the judgment under appeal
shows, the General Court referred to findings in that Bundesgerichtshof judgment solely in order to confirm the conclusion
drawn from the grounds in paragraphs 267 and 268 of the judgment under appeal and which is set out in the first sentence of
paragraph 269: that RegTP’s decisions could not have created for the appellant a legitimate expectation that its pricing practices
were compatible with Article 82 EC.

110    Consequently, the second part of the first ground of appeal must be dismissed as, in part, inadmissible and, in part, ineffective.

c)     The third part of the first ground of appeal, concerning the intentional or negligent nature of the infringement of Article
82 EC

i)     Judgment under appeal

111    The General Court rejected the appellant’s plea alleging a failure to state reasons in relation to the intentional or negligent
nature of the infringement, noting, in paragraph 286 of the judgment under appeal, that the decision at issue contains a reference
to Article 15(2) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81] and [82] of the
Treaty (OJ, English Special Edition 1959-1962, p. 87), the first subparagraph of which lays down the conditions which must
be fulfilled to enable the Commission to impose fines, including the condition that the infringement was committed intentionally
or negligently.

112    Furthermore, the General Court stated in paragraph 287 of its judgment that, in the decision at issue, the Commission set
out in detail the grounds on which it considers the appellant’s pricing practices to be abuses within the meaning of Article
82 EC and the grounds on which the appellant must be deemed responsible for the infringement found, even though the German
authorities have to approve the appellant’s charges.

113    The General Court also rejected the appellant’s plea regarding the absence of any negligence or intentional misconduct. In
that regard, the General Court stated in paragraph 296 of the judgment under appeal that the appellant could not be unaware
that, notwithstanding the authorisation decisions of RegTP, it had genuine scope to reduce the margin squeeze, nor that that
margin squeeze entailed serious restrictions on competition, particularly in view of its monopoly on the market in wholesale
local loop access services and its virtual monopoly on the market in end-user access services.

114    In addition, the General Court held, in paragraph 298 of the judgment under appeal, that the initiation of a pre-litigation
procedure against the Federal Republic of Germany did not affect the conditions in the first subparagraph of Article 15(2)
of Regulation No 17, since the appellant could not have been unaware that it had genuine scope to increase its retail prices
for end-user access services and that its pricing practices were hindering the growth of competition in the market in local
loop access services, a market in which the degree of competition was already weakened as a result, in particular, of its
presence.

115    Lastly, in paragraph 299 of the judgment under appeal, the General Court rejected the complaint based on RegTP’s examination
of the margin squeeze for the reasons set out in paragraphs 267 to 269 of its judgment, which are referred to in paragraphs
97 and 98 of the present judgment.

ii)  Arguments of the parties

116    The appellant submits by its first complaint that, in paragraphs 284 to 289 of the judgment under appeal, the General Court
misconstrues the requirements of Article 253 EC by proceeding, erroneously, on the principle that the allegation of negligence
or intentional misconduct was sufficiently reasoned in the decision at issue. In fact that decision does not include any finding
of law or of fact in relation to the question of negligence or fault.

117    In the first place, the appellant submits that it is not sufficient, from a legal perspective, for the Commission to refer
to Article 15(2) of Regulation No 17 in the second citation of the decision at issue. The citation does not form part of the
statement of reasons for the decision; it merely indicates the legal basis. In any event, such a citation does not disclose
why the Commission takes the view that the infringement was committed intentionally or negligently.

118    In the second place, the appellant takes the view that the Commission’s substantive findings, to which the General Court refers
in paragraph 287 of the judgment under appeal, do not support the complaint of an intentional or negligent infringement of
Article 82 EC, since they are unrelated to the issue of the individual attributability of the conduct, that is to say to the
question whether the appellant could or could not have been unaware of the anti-competitive nature of its conduct.

119    By its second complaint, the appellant submits that the General Court’s assessment of fault is vitiated by a failure to state
reasons, and, moreover, the grounds of the judgment under appeal are based on a misapplication of the first subparagraph of
Article 15(2) of Regulation No 17. The imputability to the appellant of any infringement of Article 82 EC is lacking. In the
light of RegTP’s decisions, and in the absence of any precedent in the European Union, the appellant was unaware of the purportedly
anti-competitive nature of its conduct.

120    According to the appellant, the considerations relating to the decisions of RegTP which appear in paragraphs 267 to 269 of
the judgment under appeal and to which the General Court refers in paragraph 299 of its judgment do not support the conclusion
that the appellant acted wrongfully. The fact that RegTP does not expressly refer to Article 82 EC is not conclusive, since
the assessment of fault does not depend on whether the undertaking concerned is aware that its conduct infringes Article 82 EC.
Furthermore, it cannot be inferred either from the concept of cross-subsidisation used by RegTP or from the judgment of the
Bundesgerichtshof of 10 February 2004 that the appellant acted wrongfully. Lastly, the General Court failed to consider the
conclusions which the appellant was entitled to draw from the Commission’s overall conduct as a result not only of the initiation
of proceedings for failure to fulfil obligations against the Federal Republic of Germany, but also from the fact that the
Commission informed the appellant of its intention not to pursue the procedure initiated against it.

121    The Commission contends that the regulation of the industry is relevant only to the issue whether the appellant knew that
its actions were unlawful and not to the determination of the intentional nature of the infringement. The third part of the
first ground of appeal is, therefore, ineffective or, in any event, unfounded.

122    Vodafone takes the view that the appellant is again reproducing the arguments relied on before the General Court in order
to argue that there was no fault. In any event, the appellant’s arguments are inadmissible in so far as they require the Court
of Justice, on the grounds of fairness, to substitute its own assessment for that of the General Court in the context of its
review of the grounds of the General Court’s judgment. As to the remainder, the third part of the first ground of appeal is
unfounded.

iii)  Findings of the Court

123    As a preliminary point, it must be noted that the present complaints, while repeating in part the arguments put before the
General Court, are admissible in accordance with the case-law cited in paragraph 25 of the present judgment, because they
criticise the General Court for having adopted an incorrect legal test in relation to the application of the condition that
an infringement be negligent or intentional, and in relation to the review of the Commission’s observance of that condition
in the light of its obligation to state reasons. Furthermore, it must be borne in mind that the question whether the grounds
of a judgment of the General Court are adequate is a question of law which is amenable, as such, to judicial review on appeal
(see, in particular, Joined Cases C‐120/06 P and C‐121/06 P *FIAMM and FIAMM Technologies* v *Council and Commission* [2008] ECR I‐6513, paragraph 90).

124    As regards, in the first place, the complaints as to whether the General Court’s findings are well founded, it must be borne
in mind, in relation to the question whether the infringements were committed intentionally or negligently and are, therefore,
liable to be punished by a fine in accordance with the first subparagraph of Article 15(2) of Regulation No 17, that it follows
from the case-law of the Court that that condition is satisfied where the undertaking concerned cannot be unaware of the anti-competitive
nature of its conduct, whether or not it is aware that it is infringing the competition rules of the Treaty (see Joined Cases
96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 *IAZ International Belgium and Others* v *Commission* [1983] ECR 3369, paragraph 45, and *Nederlandsche Banden-Industrie-Michelin* v *Commission*, paragraph 107).

125    In the present case, the General Court took the view in paragraphs 296 and 297 of the judgment under appeal that that condition
was satisfied, since the appellant could not have been unaware that, notwithstanding the authorisation decisions of RegTP,
it had genuine scope to set its retail prices for end-user access services and, moreover, the margin squeeze entailed serious
restrictions on competition, particularly in view of its monopoly on the wholesale market in local loop access services and
its virtual monopoly on the retail market in end-user access services.

126    It must be held that such reasoning, which is based on findings of fact which, in the absence of any allegation of distortion,
are for the General Court alone to assess, is not vitiated by any error of law.

127    In so far as the appellant complains that the General Court did not take RegTP’s decisions or the lack of any precedent in
the European Union into account, it is sufficient to note that such arguments are merely intended to show that the appellant
was unaware that the conduct complained of in the decision at issue was unlawful in the light of Article 82 EC. Such arguments
must, therefore, in accordance with the case-law cited in paragraph 124 of the present judgment, be rejected as unfounded.

128    The same applies to the complaint concerning the General Court’s failure to take into account the initiation of the pre-litigation
procedure against the Federal Republic of Germany pursuant to Article 226 EC, which, even if it is accepted that the Commission
informed the appellant of its intention not to pursue the infringement procedure under Article 82 EC in respect of the appellant,
does not in any way alter the finding that the appellant could not have been unaware of the anti-competitive nature of its
conduct. The General Court did not, therefore, commit an error of law when it held, in paragraph 298 of the judgment under
appeal, that the initiation of the procedure in question had no bearing on the intentional or negligent nature of an infringement
for the purposes of Article 15(2) of Regulation No 17.

129    As to the complaint put forward by the appellant in respect of paragraph 299 of the judgment under appeal, it must, in accordance
with the case-law cited in paragraph 108 of the present judgment, be rejected as ineffective, since it concerns a ground that
was included in the judgment purely for the sake of completeness to support the findings made in paragraphs 296 and 297 of
the judgment under appeal, which suffice to demonstrate the intentional or negligent nature of the infringement.

130    As regards, in the second place, the complaints concerning the General Court’s review of the statement of reasons for the
decision at issue in relation to the intentional or negligent nature of the infringement, it must be noted that the obligation
to provide a statement of reasons laid down in Article 253 EC is an essential procedural requirement which must be distinguished
from the question whether the reasoning is well founded, which is concerned with the substantive legality of the measure at
issue. To that end, the statement of reasons required by Article 253 EC must be appropriate to the measure at issue and must
disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure in such a
way as to enable the persons concerned to ascertain the reasons for it and to enable the competent European Union judicature
to exercise its power of review (Case C‐17/99 *France* v *Commission* [2001] ECR I‐2481, paragraph 35).

131    The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content
of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other
parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning
to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements
of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules
governing the matter in question (see, in particular, Case C‐367/95 P *Commission* v *Sytraval and Brink’s France* [1998] ECR I‐1719, paragraph 63, and Case C‐413/06 P *Bertelsmann and Sony Corporation of America* v *Impala* [2008] ECR I‐4951, paragraph 166).

132    In the present case, as regards the statement of reasons for the decision at issue, the General Court held in paragraph 286
of the judgment under appeal that that decision contained a reference to Article 15(2) of Regulation No 17 which refers to
the conditions required to be fulfilled to enable the Commission to impose fines, including the condition that the infringement
was committed intentionally or negligently, and, moreover, in paragraph 287 of its judgment, that the Commission set out in
detail in its decision the grounds on which it considers the appellant’s pricing practices to be abuses and those on which
the appellant must be deemed responsible for the infringement found, in spite of the approval of its charges by the national
regulatory authorities.

133    Those findings disclose the grounds on which the decision at issue was taken and enabled the appellant to ascertain the Commission’s
reasoning for the application to the appellant of the conditions laid down by Article 15(2) of Regulation No 17 for the imposition
of fines. The General Court was able, therefore, without infringing Article 253 EC, to infer from them that the decision at
issue contained sufficient reasoning on that point in the light of the requirements laid down by that provision. The appellant’s
complaint in that respect is, therefore, unfounded.

134    In so far as the appellant further submits in that regard that the Commission’s findings, which are restated in paragraph
287 of the judgment under appeal, are irrelevant to the determination of the intentional or negligent nature of an infringement,
it is sufficient to note that that complaint, which seeks to call into question the substance of the statement of reasons
adopted in the decision at issue, is inadmissible in the present appeal, in accordance with the case-law cited in paragraph
24 of the present judgment.

135    As regards, in the third place, the grounds of the judgment under appeal, it must be observed that the obligation to state
the reasons on which a judgment is based arises under Article 36 of the Statute of the Court of Justice, which applies to
the General Court by virtue of the first paragraph of Article 53 of the Statute, and Article 81 of the Rules of Procedure
of the General Court (see judgment of 4 October 2007 in Case C‐311/05 P *Naipes Heraclio Fournier* v *OHIM*, paragraph 51 and the case-law cited).

136    It has consistently been held that the statement of the reasons on which a judgment is based must clearly and unequivocally
disclose the General Court’s reasoning in such a way as to enable the persons concerned to ascertain the reasons for the decision
taken and the Court of Justice to exercise its power of review (see, in particular, Case C‐259/96 P *Council*v *de Nil and Impens*[1998] ECR I‐2915, paragraphs 32 and 33, and Case C‐449/98 P *IECC* v *Commission* [2001] ECR I‐3875, paragraph 70).

137    In that regard, suffice it to note that, as is already apparent from paragraph 125 of the present judgment, paragraphs 296
and 297 of the judgment under appeal clearly and unequivocally disclose the General Court’s reasoning in regard to the negligent
or intentional nature of the alleged infringement. Consequently, the complaint alleging a failure to state reasons for the
judgment under appeal in that respect is without substance.

138    Therefore, the third part of the first ground of appeal must be rejected as, in part, inadmissible and, in part, ineffective
or unfounded.

d)     Conclusion as to the first ground of appeal

139    It follows from all of the foregoing that the first ground of appeal must be rejected in its entirety.

3.     The second ground of appeal, alleging errors of law in the application of Article 82 EC

140    The second ground of appeal put forward by the appellant is divided into three parts relating, respectively, to the relevance
of the margin squeeze test for the purpose of establishing abuse within the meaning of Article 82 EC, the adequacy of the
method of calculating the margin squeeze and the effects of the margin squeeze.

a)     Judgment under appeal

141    In paragraphs 153 to 207 of the judgment under appeal, the General Court rejected the appellant’s complaints concerning the
unlawfulness of the method used by the Commission to find that a margin squeeze existed.

142    First, in paragraphs 166 to 168 of the judgment under appeal, the General Court rejected the appellant’s complaint that the
abusive nature of a margin squeeze can arise only from the abusive nature of its retail prices for end-user access services.
Having found in paragraph 166 of its judgment that, according to the decision at issue, the abuse committed by the appellant
consists in the imposition of unfair prices in the form of a margin squeeze to the detriment of the appellant’s competitors,
with the Commission taking the view that such a margin squeeze exists if the difference between the retail prices charged
by a dominant undertaking and the wholesale prices it charges its competitors for comparable services is negative, or insufficient
to cover the product-specific costs to the dominant operator of providing its own retail services to end-users, the General
Court held in paragraph 167:

‘It is true that, in the [decision at issue], the Commission establishes only that the applicant has scope to adjust its retail
prices [for end-user access services]. However, the abusive nature of the applicant’s conduct is connected with the unfairness
of the spread between its [wholesale] prices for [local loop] access [services] and its retail prices [for end-user access
services], which takes the form of a margin squeeze. Therefore, in view of the abuse found in the [decision at issue], the
Commission was not required to demonstrate in that decision that the applicant’s retail prices were, as such, abusive.’

143    Second, in paragraphs 183 to 194 of the judgment under appeal, the General Court rejected the appellant’s complaint that the
Commission had calculated the margin squeeze on the basis of the charges and costs of a vertically integrated dominant undertaking,
disregarding the particular situation of competitors on the market. The General Court pointed out in paragraph 185 of its
judgment that its review of complex economic appraisals made by the Commission is limited to verifying whether the relevant
rules on procedure and on the statement of reasons have been complied with, whether the facts have been accurately stated
and whether there has been any manifest error of appraisal or misuse of powers, and went on to hold, inter alia, as follows:

‘186      It must be observed first of all that the Commission considered in the [decision at issue] whether the pricing practices of
the dominant undertaking could have the effect of removing from the market an economic operator that was just as efficient
as the dominant undertaking. The Commission therefore relied exclusively on the applicant’s charges and costs, instead of
on the particular situation of the applicant’s actual or potential competitors, in order to assess whether the applicant’s
pricing practices were abusive.

187      According to the Commission, “there is an abusive margin squeeze if the difference between the retail prices charged by a
dominant undertaking and the wholesale prices it charges its competitors for comparable services is negative, or insufficient
to cover the product-specific costs to the dominant operator of providing its own retail services on the [retail] market”
... In the present case, the margin squeeze is said to be abusive because the applicant itself “would have been unable to offer
its own retail services without incurring a loss if ... it had had to pay the wholesale access price as an internal transfer
price for its own retail operations” ... In those circumstances, “competitors [who] are just as efficient” as the applicant
cannot “offer retail access services at a competitive price unless they find additional efficiency gains” ...

188      [I]t must be noted that, although the Community judicature has not yet explicitly ruled on the method to be applied in determining
the existence of a margin squeeze, it nevertheless follows clearly from the case-law that the abusive nature of a dominant
undertaking’s pricing practices is determined in principle on the basis of its own situation, and therefore on the basis of
its own charges and costs, rather than on the basis of the situation of actual or potential competitors.

...

192      It must be added that any other approach could be contrary to the general principle of legal certainty. If the lawfulness
of the pricing practices of a dominant undertaking depended on the particular situation of competing undertakings, particularly
their cost structure – information which is generally not known to the dominant undertaking – the latter would not be in a
position to assess the lawfulness of its own activities.

193      The Commission was therefore correct to analyse the abusive nature of the applicant’s pricing practices solely on the basis
of the applicant’s particular situation and therefore on the basis of the applicant’s charges and costs.

194      Since it is necessary to consider whether the applicant itself, or an undertaking just as efficient as the applicant, would
have been in a position to offer retail services otherwise than at a loss if it had first been obliged to pay wholesale access
[services] charges as an internal transfer price, the applicant’s argument that its competitors are not seeking to replicate
its own customer pattern and can acquire additional revenue from innovative products which they alone supply on the market
(as to which the applicant provides no details however) is ineffective. For the same reasons, the argument that competitors
can exclude the possibility of (pre)selection cannot succeed.’

144    Third, in paragraphs 195 to 206 of the judgment under appeal, the General Court rejected the complaint that the Commission
had taken into account only revenues from all access services and excluded revenues from other services, particularly those
from call services.

145    In that regard, the General Court stated, first of all, in paragraph 196 of the judgment under appeal, that Directive 96/19
which, as regards the tariff structure of incumbent operators, makes a distinction between the initial connection, the monthly
rental, local calls, regional calls and long-distance calls, aimed to effect tariff rebalancing between those different elements
on the basis of actual costs in order to ensure full competition in telecommunications markets, and that, specifically, that
operation had to take the form of a reduction in the charges for regional and international calls and an increase in connection
charges, the monthly rental and local call rates. In paragraph 197 of its judgment, the General Court concluded from this
that the Commission had therefore correctly observed that separate consideration of access charges and call charges is in
fact therefore required by the EU law principle of tariff rebalancing.

146    Next, the General Court noted in paragraph 198 of the judgment under appeal that a system of undistorted competition between
the appellant and its competitors can be guaranteed only if equality of opportunity is secured as between the various economic
operators. In that regard, it held:

‘199      While it is true that, from the point of view of the end-user, access services and call services constitute a whole, the fact
remains that, as far as the applicant’s competitors are concerned, the provision of call services to end-users via the applicant’s
fixed network requires access to the local loop. Equality of opportunity as between the incumbent operator and owner of the
fixed network, such as the applicant, on the one hand, and its competitors, on the other, therefore means that prices for
access services must be set at a level which places competitors on an equal footing with the incumbent operator as regards
the provision of call services. Equality of opportunity is secured only if the incumbent operator sets its retail prices [for
end-user access services] at a level which enables competitors – presumed to be just as efficient as the incumbent operator
– to reflect all the wholesale costs [in respect of local loop access services] in their retail prices. However, if the incumbent
operator does not adhere to that principle, new entrants can only offer access services to their end-users at a loss. They
would then be obliged to offset losses incurred in relation to local network access by higher call charges, which would also
distort competition in telecommunications markets.

200      Therefore it follows that, even if, as the applicant claims, it were true that access services and telephone calls constitute
a “cluster” as far as the end-user is concerned, the Commission was entitled to conclude in recital 119 [of] the [decision
at issue] that, in order to assess whether the applicant’s pricing practices distort competition, it was necessary to consider
the existence of a margin squeeze in relation to access services alone, and thus without including telephone call charges
in its calculation.

201      Furthermore, the calculation offsetting access charges and call charges to which the applicant itself refers confirms that
the applicant and its competitors are not on an equal footing as regards local network access, which is, however, a prerequisite
for undistorted competition in the telephone calls market.

202      In any event, since the applicant significantly lowered its telephone call charges in the period covered by the [decision
at issue] ..., it is conceivable that competitors did not even have the economic opportunity to offset charges suggested by
the applicant. In fact, the competitors, already at a competitive disadvantage by comparison with the applicant in relation
to local network access, had to apply even lower call charges than the applicant in order to encourage potential customers
to discontinue their subscription to the applicant and to subscribe to them instead.’

147    The General Court concluded from this in paragraph 203 of the judgment under appeal that, for the purposes of calculating
the margin squeeze, the Commission was entitled to take account only of revenues from access services and to exclude revenues
from other services, such as call services.

148    In addition, after stating in paragraph 223 of the judgment under appeal that the Commission’s calculation error in relation
to the calculation of the appellant’s product-specific costs did not affect the lawfulness of the decision at issue owing
to the fact that the unfair – within the meaning of Article 82 EC – nature of the appellant’s pricing practices is linked
to the very existence of the margin squeeze rather than to its precise spread, the General Court rejected, in paragraphs 234
to 244 of that judgment, the appellant’s complaints concerning the lack of any effect on the market, stating, in particular:

‘234      According to the Commission, the applicant’s pricing practices restricted competition in the market for [end-user] access
services. It reaches that conclusion in the [decision at issue] ... on the basis of the very existence of the margin squeeze.
It maintains that it is not necessary to demonstrate an anti-competitive effect, although, in the alternative, it examines
that effect in recitals 181 to 183 [of] the [decision at issue].

235      Given that, until the entry of a first competitor on the market for [end-user] access services, in 1998, the applicant had
a monopoly on that retail market, the anti-competitive effect which the Commission is required to demonstrate relates to the
possible barriers which the applicant’s pricing practices could have created for the growth of competition in that market.

236      In that respect it must be borne in mind that the applicant owns the fixed telephone network in Germany and, moreover, that
it is not disputed that, as the Commission notes in recitals 83 to 91 [of] the [decision at issue], there was no other infrastructure
in Germany at the time of the adoption of the decision that would have enabled competitors of the applicant to make a viable
entry onto the market in retail access services.

237      Having regard to the fact that the applicant’s wholesale [local loop access] services are ... indispensable to enabling a competitor
to enter into competition with the applicant on the [retail] market in [end-user] access services, a margin squeeze between
the applicant’s wholesale [charges for local loop access services] and retail charges [for end-user access services] will
in principle hinder the growth of competition in the [retail] markets. If the applicant’s retail prices [for end-user access
services] are lower than [the] wholesale charges [for its local loop access services], or if the spread between the applicant’s
wholesale [charges for those wholesale services] and [those] retail charges is insufficient to enable an equally efficient
operator to cover its product-specific costs of supplying [end-user] access services, a potential competitor who is just as
efficient as the applicant would not be able to enter the [end-user] access services market without suffering losses.

238      Admittedly, as the applicant maintains, its competitors will normally resort to cross-subsidisation, in that they will offset
the losses suffered on the [end-user] access [services] market with the profits made on other markets, such as the telephone
calls markets. However, in view of the fact that, as the owner of the fixed network, the applicant does not need to rely on
wholesale [local loop access] services in order to be able to offer [end-user] access services and therefore, unlike its competitors,
does not have to try to offset losses suffered on the retail access market on account of the pricing practices of a dominant
undertaking, the margin squeeze identified in the [decision at issue] distorts competition not only on the [end-user] access
market but also on the telephone calls market ...

239      Furthermore, the small market shares acquired by the applicant’s competitors in the [end-user] access [services] market since
the market was liberalised by the entry into force of the TKG on 1 August 1996 are evidence of the restrictions which the
applicant’s pricing practices have imposed on the growth of competition in those markets. ...

240      In addition, it is not disputed that, taking only analogue connections into consideration – which, at the time of adoption
of the [decision at issue], accounted for 75% of all connections in Germany – the applicant’s competitors’ share fell from
21% in 1999 to 10% in 2002 ...

...

244      ... In any event, the applicant, which fails to quantify the extent to which competitors are present on the national market,
does not produce any evidence to rebut the findings in recitals 180 to 183 [of] the [decision at issue] that its pricing practices
actually restrict competition on the German [end-user] access [services] market.’

b)     The first part of the second ground of appeal, concerning the relevance of the margin squeeze test for the purpose of establishing
an abuse within the meaning of Article 82 EC

i)     Arguments of the parties

149    By its first complaint, the appellant submits that the judgment under appeal is vitiated by a failure to state reasons, owing
to a failure to consider the appellant’s argument that the Commission should not have applied the margin squeeze test because
charges for wholesale local loop access services are set by RegTP. The judgment under appeal is, in that respect, based on
a vicious circle. The General Court applied the test chosen by the Commission itself to determine matters which should be
covered by an examination of the appellant’s charges. However, the appellant’s objection relates to an earlier stage of reasoning,
namely the issue of whether the margin squeeze test chosen by the Commission is appropriate in any event.

150    By its second complaint, the appellant submits that the General Court applied Article 82 EC incorrectly in paragraphs 166
to 168 of the judgment under appeal, in that the analysis of the margin squeeze does not establish that its charges are an
abuse, since wholesale charges for local loop access services are imposed by the competent national regulatory authority.

151    The appellant takes the view that, in such a situation, the appropriateness of the test of the effect of the margin squeeze
depends on the level of the wholesale charge for local loop access services set by the authority which, as such, cannot –
in the absence of any leeway on the part of the regulated undertaking – be criticised for an abuse. If the national regulatory
authority sets an inflated wholesale charge for local loop access services, the dominant undertaking that is subject to regulation
is obliged, in turn, to set an inflated retail price for end-user access services in order to ensure an appropriate margin.
In that case, the undertaking would be obliged to choose between two different forms of abuse, namely a margin squeeze or
an abusive price increase. The dominant undertaking could not, therefore, avoid committing an abuse.

152    According to the appellant, in a situation such as that in the present case, the dominant undertaking commits an abuse only
if the retail price for end-user access services is, in itself, so low as to constitute an abuse.

153    The Commission takes the view that the judgment under appeal is sufficiently reasoned and that the appellant’s other arguments
are unfounded.

154    According to Vodafone, whether or not the complaints in the first part of the second ground of appeal are inadmissible because
they are a repetition of the arguments put forward at first instance and concern a factual assessment that is incorrect, they
are both factually and legally irrelevant.

ii)  Findings of the Court

155    As a preliminary point it must be noted that, contrary to Vodafone’s contention, the first part of the second ground of appeal
is admissible, for the same reasons as those held in paragraph 123 of the present judgment, since the appellant, while essentially
repeating the arguments which it advanced before the General Court, complains that the latter committed an error of law by
adopting an incorrect legal test for the application of Article 82 EC and by failing to provide sufficient reasoning for the
judgment under appeal in that respect.

156    As to whether the first part of the second ground of appeal is well founded, it should be noted as regards, in the first place,
the complaint concerning a failure to state reasons for the judgment under appeal, that the appellant is wrong to complain
that the General Court failed to respond in a reasoned manner in its judgment to the appellant’s argument that the margin
squeeze test is irrelevant where, as in the present case, wholesale prices for local loop access services are set by a national
regulatory authority and, therefore, that the General Court failed to give proper reasons for the appropriateness of the Commission’s
choice of the margin squeeze test in finding an abuse under Article 82 EC.

157    In paragraphs 166 to 168 of the judgment under appeal, the General Court stated that, in the decision at issue, the Commission
established only that the appellant had scope to adjust its retail prices for end-user access services and, moreover, found
that the abusive nature of the appellant’s conduct – consisting in the margin squeeze of its competitors who are at least
as efficient as the appellant – was connected with the unfairness of the spread between its wholesale prices for local loop
access services and those retail prices, and therefore that the Commission was not required to demonstrate the abusive nature
of those retail prices. In addition, in paragraphs 183 to 213 of its judgment, the General Court explained why it had to reject
the appellant’s complaints about the method adopted by the Commission in order to calculate that margin squeeze.

158    It must be observed that, in so doing, the General Court implicitly but necessarily indicated why the national regulatory
authorities’ purported regulation of wholesale prices for local loop access services did not, in the present case, preclude
the appellant’s pricing practices from being categorised as abusive for the purposes of Article 82 EC.

159    It is clear from the various considerations in paragraphs 166 to 168 and 183 to 213 of the judgment under appeal that, according
to the General Court, it is not the level of the wholesale prices for local loop access services – which, as has already been
stated in paragraphs 48 and 49 of the present judgment, cannot be challenged in the present appeal – or the level of retail
prices for end-user access services which is contrary to Article 82 EC, but the spread between them.

160    In accordance with the case-law cited in paragraphs 135 and 136 of the present judgment, the appellant was therefore in a
position, on reading those passages of the judgment under appeal, to ascertain why the national regulatory authorities’ purported
regulation of wholesale prices for local loop access services was, according to the General Court, irrelevant to the application
in the present case of Article 82 EC to the appellant’s pricing practices.

161    It follows from this that paragraphs 166 to 168 of the judgment under appeal, read in conjunction with paragraphs 183 to 213
thereof, contain sufficient reasoning for the grounds on which the General Court held that, notwithstanding the setting by
the national regulatory authorities of wholesale prices for local loop access services, the Commission’s choice of the margin
squeeze test was appropriate for the purpose of determining whether the appellant’s pricing practices were abusive within
the meaning of Article 82 EC.

162    The complaint concerning a failure to state the grounds for the judgment under appeal must, therefore, be rejected as unfounded.

163    As regards, in the second place, the complaint concerning the erroneous nature of the margin squeeze test for determining
an abuse within the meaning of Article 82 EC, it will be recalled that, as already indicated at the outset in paragraphs 31
and 32 of the present judgment, the appellant is not, by that complaint, contesting the notion that a dominant undertaking’s
pricing practice resulting in a margin squeeze of its equally efficient competitors is capable, in principle, of constituting
an abusive practice for the purposes of Article 82 EC. By contrast, it submits by that complaint that, in the circumstances
of this case, since its wholesale prices for local loop access services are set by the national regulatory authorities, the
margin squeeze test applied by the judgment under appeal is not appropriate for the purpose of determining that its pricing
practices are abusive within the meaning of Article 82 EC.

164    Admittedly, as is apparent from paragraphs 38 to 43 of the present judgment, it is necessary in the present appeal to adopt
the premiss that was accepted by the General Court in the judgment under appeal and by the Commission in the decision at issue
that the appellant does not have any scope to adjust those wholesale prices.

165    That being the case, the appellant cannot, in connection with the present complaint, rely on the premiss that the wholesale
prices for local loop access services set by the national regulatory authorities are excessive in order to demonstrate the
inappropriateness of the margin squeeze test. Even if it were to be accepted that, as the appellant claimed at the hearing,
the complaints of competitors which led to the adoption of the decision at issue were based on that circumstance, such a premiss,
as has already been stated in paragraphs 48 and 49 of the present judgment, must be regarded as being outside the scope of
the present appeal.

166    Consequently, there is no need to consider the appellant’s complaint that the erroneousness of the margin squeeze test stems
from the fact that, in order to avoid the abuse complained of, it had no choice in the present case – given the excessive
level of its wholesale prices for local loop access services which were set by the national regulatory authorities – but
to increase, in a manner amounting to an abuse, its retail prices for end-user access services to an excessive level, since
such a complaint is based on a hypothetical premiss which falls outside the scope of the Court’s review in the present appeal.

167    Furthermore, in so far as the appellant submits that the appropriateness of the margin squeeze test depends on the level of
wholesale prices for local loop access services set by the national regulatory authority, it must be stated that, as is apparent
from paragraphs 166 to 168 of the judgment under appeal, the abusive nature for the purpose of Article 82 EC of the appellant’s
pricing practices at issue in that judgment arises from the unfairness of the spread – resulting in a margin squeeze of its
equally efficient competitors – between the wholesale prices in question and its retail prices for end-user access services.
As the General Court explained in paragraph 223 of its judgment, which has not been challenged in the present appeal, the
unfairness for the purpose of Article 82 EC of the appellant’s pricing practices is therefore linked to the very existence
of the margin squeeze and not to its precise spread.

168    It follows from this that the level of wholesale prices for local loop access services is, in itself, irrelevant to any challenge
of the substance of the General Court’s finding with regard to the application of Article 82 EC to the pricing practices at
issue.

169    By contrast, in order to consider whether the present complaint is well founded, the Court must consider whether the General
Court was right, in particular in paragraphs 166 and 168 of the judgment under appeal, to find that, even if the appellant
does not have scope to adjust its wholesale prices for local loop access services, its pricing practices can nevertheless
be categorised as an abuse within the meaning of Article 82 EC where, irrespective of whether those wholesale prices and the
retail prices for end-user access services are, in themselves, abusive, the spread between them is unfair, namely, according
to that judgment, where that spread is either negative or insufficient to cover the appellant’s product-specific costs of
providing its own services, so that a competitor who is as efficient as the appellant is prevented from entering into competition
with the appellant for the provision of end-user access services.

170    In that regard, it has consistently been held that Article 82 EC is an application of the general objective of European Community
action, namely the institution of a system ensuring that competition in the common market is not distorted. Thus, the dominant
position referred to in Article 82 EC relates to a position of economic strength enjoyed by an undertaking which enables it
to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable
extent independently of its competitors, its customers and ultimately of consumers (see Case 85/76 *Hoffmann-La Roche* v *Commission* [1979] ECR 461, paragraph 38, and Case C‐202/07 P *France Télécom* v *Commission* [2009] ECR I‐2369, paragraph 103).

171    In the present case, it must be borne in mind that, as is apparent from paragraphs 50 to 52 of the present judgment, the appellant
does not deny that it enjoys a dominant position on all the relevant service markets, namely both on the wholesale market
in local loop access services and on the retail market in end-user access services.

172    As regards the abusive nature of the appellant’s pricing practices, it must be noted that subparagraph (a) of the second paragraph
of Article 82 EC expressly prohibits a dominant undertaking from directly or indirectly imposing unfair prices.

173    Furthermore, the list of abusive practices contained in Article 82 EC is not exhaustive, so that the practices there mentioned
are merely examples of abuses of a dominant position. The list of abusive practices contained in that provision does not exhaust
the methods of abusing a dominant position prohibited by the Treaty (see *British Airways* v *Commission*, paragraph 57 and the case-law cited).

174    In that regard, it must be borne in mind that, in prohibiting the abuse of a dominant position in so far as trade between
Member States is capable of being affected, Article 82 EC refers to the conduct of a dominant undertaking which, on a market
where the degree of competition is already weakened precisely because of the presence of the undertaking concerned, through
recourse to methods different from those governing normal competition in products or services on the basis of the transactions
of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market
or the growth of that competition (see, to that effect, *Hoffman-La Roche* v *Commission*, paragraph 91; *Nederlandsche Banden-Industrie-Michelin* v *Commission*, paragraph 70; Case C‐62/86 *AKZO* v *Commission* [1991] ECR I‐3359, paragraph 69; *British Airways* v *Commission*, paragraph 66; and *France Télécom* v *Commission*, paragraph 104).

175    It is apparent from the case-law of the Court that, in order to determine whether the undertaking in a dominant position has
abused such a position by its pricing practices, it is necessary to consider all the circumstances and to investigate whether
the practice tends to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access
to the market, to apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them
at a competitive disadvantage, or to strengthen the dominant position by distorting competition (see, to that effect, *Nederlandsche Banden-Industrie-Michelin* v *Commission*, paragraph 73, and *British Airways* v *Commission*, paragraph 67).

176    Since Article 82 EC thus refers not only to practices which may cause damage to consumers directly, but also to those which
are detrimental to them through their impact on competition, a dominant undertaking, as has already been observed in paragraph
83 of the present judgment, has a special responsibility not to allow its conduct to impair genuine undistorted competition
on the common market (see, to that effect, *France Télécom*v *Commission*, paragraph 105 and the case-law cited).

177    It follows from this that Article 82 EC prohibits a dominant undertaking from, inter alia, adopting pricing practices which
have an exclusionary effect on its equally efficient actual or potential competitors, that is to say practices which are capable
of making market entry very difficult or impossible for such competitors, and of making it more difficult or impossible for
its co-contractors to choose between various sources of supply or commercial partners, thereby strengthening its dominant
position by using methods other than those which come within the scope of competition on the merits. From that point of view,
therefore, not all competition by means of price can be regarded as legitimate (see, to that effect, *Nederlandsche Banden-Industrie-Michelin* v *Commission*, paragraph 73; *AKZO* v *Commission*, paragraph 70; and *British Airways* v *Commission*, paragraph 68).

178    In the present case, it must be noted that the appellant does not deny that, even on the assumption that it does not have
the scope to adjust its wholesale prices for local loop access services, the spread between those prices and its retail prices
for end-user access services is capable of having an exclusionary effect on its equally efficient actual or potential competitors,
since their access to the relevant service markets is, at the very least, made more difficult as a result of the margin squeeze
which such a spread can entail for them.

179    At the hearing the appellant submitted, however, that the test applied in the judgment under appeal for the purpose of establishing
an abuse within the meaning of Article 82 EC required it, in the circumstances of the case, to increase its retail prices
for end-user access services to the detriment of its own end-users, given the national regulatory authorities’ regulation
of its wholesale prices for local loop access services.

180    It is true, as paragraphs 175 to 177 of the present judgment have already shown, that Article 82 EC aims, in particular, to
protect consumers by means of undistorted competition (see Joined Cases C‐468/06 to C‐478/06 *Sot. Lélos kai Sia* *and Others*[2008] ECR I‐7139, paragraph 68).

181    However, the mere fact that the appellant would have to increase its retail prices for end-user access services in order to
avoid the margin squeeze of its competitors who are as efficient as the appellant cannot in any way, in itself, render irrelevant
the test which the General Court applied in the present case for the purpose of establishing an abuse under Article 82 EC.

182    By further reducing the degree of competition existing on a market – the end-user access services market – already weakened
precisely because of the presence of the appellant, thereby strengthening its dominant position on that market, the margin
squeeze also has the effect that consumers suffer detriment as a result of the limitation of the choices available to them
and, therefore, of the prospect of a longer-term reduction of retail prices as a result of competition exerted by competitors
who are at least as efficient in that market (see, to that effect, *France Télécom* v *Commission*, paragraph 112).

183    In those circumstances, in so far as the appellant has scope to reduce or end such a margin squeeze, as observed in paragraphs
77 to 86 of the present judgment, by increasing its retail prices for end-user access services, the General Court correctly
held in paragraphs 166 to 168 of the judgment under appeal that that margin squeeze is capable, in itself, of constituting
an abuse within the meaning of Article 82 EC in view of the exclusionary effect that it can create for competitors who are
at least as efficient as the appellant. The General Court was not, therefore, obliged to establish, additionally, that the
wholesale prices for local loop access services or retail prices for end-user access services were in themselves abusive on
account of their excessive or predatory nature, as the case may be.

184    It follows from this that the appellant’s complaint that the test applied by the General Court in order to establish an abuse
within the meaning of Article 82 EC was erroneous must be rejected as, in part, inadmissible and, in part, unfounded.

185    Consequently, the first part of the second ground of appeal must be rejected.

c)     The second part of the second ground of appeal, concerning the adequacy of the method of calculating the margin squeeze

186    The appellant submits that, in its analysis of the method used by the Commission to calculate the margin squeeze, the judgment
under appeal is vitiated by several errors of law, in so far as the General Court relies, in respect of several key aspects
of the issue, on criteria which are not compatible with Article 82 EC. The appellant puts forward two complaints concerning,
first, the misapplication of the as-efficient-competitor test and, second, an error of law in that call services and other
telecommunications services were not taken into account in calculating the margin squeeze.

i)     The complaint concerning the misapplication of the as-efficient-competitor test

–       Arguments of the parties

187    The appellant claims that, given that the General Court fails to take account of the fact that, as a dominant undertaking,
the appellant is not subject to the same regulatory conditions as its competitors and that, on material grounds, its competitive
situation differs from that of its competitors, the General Court misapplied to the facts of the present case the as-efficient-competitor
test, which relates to the dominant undertaking’s own charges and costs.

188    According to the appellant, contrary to the General Court’s finding in paragraph 188 of the judgment under appeal, it is not
the situation of the dominant undertaking that is decisive for the assessment of conduct from the point of view of Article
82 EC, but that of competitors and their opportunities to compete with that undertaking on services in the light of the particular
conditions of competition in the relevant market.

189    In that regard, the appellant explains that the situation of the dominant undertaking can be a reliable indicator if historical,
material and legal market conditions of competition in the market are the same for the dominant undertaking and its competitors,
and that the as-efficient-competitor test can be a useful tool in such cases in so far as it lessens the advancement of inefficient
competitors and increases legal certainty for the dominant undertaking. Nevertheless, such is not the case where competitors
are subject to different legal or material conditions. If such a situation arises, the as-efficient-competitor test should
be adjusted.

190    In the present case, the appellant states that it was obliged to accept all end-users, regardless of their economic attractiveness.
In addition, from a legal perspective, it was obliged to offer its customers operator (pre)selection, or ‘call-by-call’ selection.
Its competitors are not subject to those obligations and, in general, exclude operator (pre)selection and accordingly market
connections and calls as a single product.

191    The appellant takes the view that the as-efficient-competitor test should have been modified on account of those specific
features of the case. Although the actual wholesale charges for local loop access services and retail charges for end-user
access services as well as the appellant’s product-specific costs could be relied upon in order to determine the average costs
and revenue of the appellant’s competitors, there is no justification for relying on the appellant’s customer structure. In
addition, calls and other telecommunications services should have been incorporated in the margin squeeze analysis.

192    According to the appellant, the principle of legal certainty does not mean that obvious anomalies in the appellant’s customer
structure or differences between the regulatory conditions under which the dominant undertaking and its competitors do business
should be disregarded.

193    The Commission points out that the appellant cannot defend itself by asserting that it was not as efficient as its competitors,
since competition law does not protect inefficient undertakings. The appellant’s arguments are, therefore, unfounded.

194    Vodafone contends that the present complaint is inadmissible. The appellant is reproducing the complaints on which it relied
before the General Court and during the Commission procedure. In addition, it is, in essence, raising complaints which are
not subject to review by the Court. In any event, the as-efficient-competitor test is the appropriate test for ascertaining
whether certain conduct can have an exclusionary effect on the market. The appellant’s arguments are, therefore, unfounded.

–       Findings of the Court

195    As a preliminary point, it must be noted that, contrary to Vodafone’s contention, the present complaint is admissible even
though it partly reiterates the arguments put forward at first instance, since, in accordance with the case-law cited in paragraph
25 of the present judgment, the complaint is that, by resorting to the as-efficient-competitor test notwithstanding the fact
that the appellant is not subject to the same legal and material conditions as its competitors, the General Court applied
an incorrect legal test to the application of Article 82 EC to the pricing practices at issue and, therefore, committed an
error of law on that point.

196    As to whether that complaint is well founded, as is apparent from paragraph 186 of the judgment under appeal and from paragraphs
4 and 12 of the present judgment, the as-efficient-competitor test used by the General Court in the judgment under appeal
consists in considering whether the pricing practices of a dominant undertaking could drive an equally efficient economic
operator from the market, relying solely on the dominant undertaking’s charges and costs, instead of on the particular situation
of its actual or potential competitors.

197    In the present case, as is apparent from paragraph 169 of the present judgment, the appellant’s costs were taken into account
by the General Court in order to establish the abusive nature of the appellant’s pricing practices where the spread between
its wholesale prices for local loop access services and its retail prices for end-user access services was positive. In such
circumstances, the General Court considered that the Commission was entitled to regard those pricing practices as unfair within
the meaning of Article 82 EC, where that spread was insufficient to cover the appellant’s product-specific costs of providing
its own services.

198    In that regard, it must be borne in mind that the Court has already held that, in order to assess whether the pricing practices
of a dominant undertaking are likely to eliminate a competitor contrary to Article 82 EC, it is necessary to adopt a test
based on the costs and the strategy of the dominant undertaking itself (see *AKZO* v *Commission*, paragraph 74, and *France Télécom* v *Commission*, paragraph 108).

199    The Court pointed out, inter alia, in that regard that a dominant undertaking cannot drive from the market undertakings which
are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources, are incapable
of withstanding the competition waged against them (see *AKZO* v *Commission*, paragraph 72).

200    In the present case, since, as is apparent from paragraphs 178 and 183 of the present judgment, the abusive nature of the
pricing practices at issue in the judgment under appeal stems in the same way from their exclusionary effect on the appellant’s
competitors, the General Court did not err in law when it held, in paragraph 193 of the judgment under appeal, that the Commission
had been correct to analyse the abusive nature of the appellant’s pricing practices solely on the basis of the appellant’s
charges and costs.

201    As the General Court found, in essence, in paragraphs 187 and 194 of the judgment under appeal, since such a test can establish
whether the appellant would itself have been able to offer its retail services to end-users otherwise than at a loss if it
had first been obliged to pay its own wholesale prices for local loop access services, it was suitable for determining whether
the appellant’s pricing practices had an exclusionary effect on competitors by squeezing their margins.

202    Such an approach is particularly justified because, as the General Court indicated, in essence, in paragraph 192 of the judgment
under appeal, it is also consistent with the general principle of legal certainty in so far as the account taken of the costs
of the dominant undertaking allows that undertaking, in the light of its special responsibility under Article 82 EC, to assess
the lawfulness of its own conduct. While a dominant undertaking knows what its own costs and charges are, it does not, as
a general rule, know what its competitors’ costs and charges are.

203    Those findings are not affected by what the appellant claims are the less onerous legal and material conditions to which its
competitors are subject in the provision of their telecommunications services to end-users. Even if that assertion were proved,
it would not alter either the fact that a dominant undertaking, such as the appellant, cannot adopt pricing practices which
are capable of driving equally efficient competitors from the relevant market, or the fact that such an undertaking must,
in view of its special responsibility under Article 82 EC, be in a position itself to determine whether its pricing practices
are compatible with that provision.

204    The appellant’s complaint concerning the misapplication of the as-efficient-competitor test must, therefore, be rejected.

ii)  The complaint concerning an error of law in that call services and other telecommunications services were not taken into account
in calculating the margin squeeze

–       Arguments of the parties

205    By this complaint, the appellant claims that the General Court erred in law in failing to take into account in its analysis
of the pricing practice at issue, in addition to end-user access services, call services and other telecommunications services
provided to end-users. That approach is said not to be compatible with current economic thinking or with the decision-making
practice of comparable authorities in Europe and in the United States. It is also said to be at odds with the realities of
the market, given that end-users do not consider connections in isolation when choosing their operator, and nor do operators
when structuring the range of their services.

206    In the first place, the appellant submits that, from an economic standpoint, the analysis of the margin squeeze does not give
any indication of a restriction of competition unless account is taken of all the revenue and costs associated with the provision
of wholesale services. In the case of undertakings which provide several products and which offer wholesale services which
can be used for various end-user services, the margin squeeze must be analysed at different levels of aggregation. In the
present case, the analysis of the margin squeeze adopted by the General Court is, therefore, incomplete. The appellant’s competitors
are entitled to exclude operator (pre)selection and to offer bundles of connections, calls and other services provided via
the local loop.

207    In the second place, the appellant submits that paragraphs 196 to 202 of the judgment under appeal are based on several errors
of law. The issue whether, in determining the existence of a margin squeeze, the Commission was entitled not to take call
charges into account depends on the legal question of principle concerning the method to be used to determine the existence
of a margin squeeze where undertakings provide a range of products. The General Court cannot avoid that assessment by emphasising
the restricted nature of its review.

208    First, the appellant submits that paragraphs 196 and 197 of the judgment under appeal, concerning the principle of EU law
in relation to tariff rebalancing, are wrong in law.

209    In that regard, the appellant takes the view that the judgment under appeal contradicts its own paragraph 113 in which the
General Court stated, in order to justify attributing the infringement to the appellant, that the objectives of the legislation
relating to the telecommunications sector may differ from those of European Union competition policy. In paragraphs 196 and
197 of its judgment, the General Court infers from a regulatory principle that access services and call services must be analysed
separately in order to calculate the margin squeeze in the light of Article 82 EC.

210    Also, the appellant submits that paragraphs 196 and 197 of the judgment under appeal are insufficiently reasoned in so far
as the General Court does not explain why its understanding is correct or consider the objections raised by the appellant,
in particular the fact that the principle of tariff rebalancing applies only to the appellant and that its competitors provide
bundled access and call services.

211    The appellant claims further in that regard that paragraphs 196 and 197 of the judgment under appeal are wrong in substance
and infringe Article 82 EC. The principle of tariff rebalancing is not a means of testing the application of Article 82 EC
but is intended only to ensure that the Member States ease the financial burden on undertakings responsible for universal
service provision. Moreover, since the appellant is not subject to the same regulatory conditions as its competitors, the
principle of tariff rebalancing applies only to the appellant. That principle does not, however, reveal anything about its
competitors’ competitive opportunities. Therefore, the principle of tariff rebalancing does not support the conclusion that
the bundling of access services and local loop telecommunications services must be ruled out, on normative grounds, for the
purposes of a margin squeeze analysis.

212    Second, the appellant submits that paragraphs 199 to 202 of the judgment under appeal, concerning equality of opportunity,
are wrong in law.

213    In that regard, the appellant takes the view that paragraph 199 of the judgment under appeal is not sufficiently reasoned
in so far as the General Court should have considered which services are based on the local loop as wholesale services, as
it is only on the basis of the result of that examination that the General Court could have drawn any conclusions as to the
equality of opportunity of the appellant and one or other competitor. Equality of opportunity is assured where an overall
analysis of all charges and costs of all telecommunications services based on the local loop shows that wholesale prices for
local loop access services together with product-specific costs do not exceed retail prices for end-user access services.

214    Next, the appellant claims that the General Court acted contrary to the laws of logic. In paragraph 238 of the judgment under
appeal, the General Court assumes that the appellant suffers no loss as a result of the provision of telephone connections
to end-users, and that it is not, therefore, obliged to offset any losses by means of call revenues. Yet the General Court
considers that the prices of the appellant’s access services to its end-users are lower than wholesale prices for local loop
access services and recognises that those are set on the basis of the appellant’s costs. The General Court’s assumption that
the appellant does not incur any costs for access services is, therefore, manifestly incorrect and incompatible with the premisses
accepted by the General Court.

215    Furthermore, the appellant claims that the General Court’s statement in paragraph 202 of the judgment under appeal is contradictory.
The view that its competitors had to apply even lower call charges than the appellant’s own in order to encourage potential
customers to discontinue their subscription to the appellant is directly at odds with the as-efficient-competitor test, according
to which only the appellant’s cost and tariff structure is decisive.

216    Lastly, the appellant submits that the General Court applies an incorrect legal test with regard to the allocation of the
burden of proof in so far as, in paragraphs 201 and 202 of the judgment under appeal, it merely allows that ‘it is conceivable’
that competitors did not have an opportunity to offset any losses generated by telephone connections by means of call revenues,
whereas the appellant sought to demonstrate in its application at first instance that cross-subsidisation was possible.

217    The Commission takes the view that the General Court did not err in law in confirming the Commission’s approach in paragraphs
195 to 207 of the judgment under appeal. It contends, therefore, that the appellant’s arguments should be rejected.

218    Vodafone claims that the present complaint is inadmissible. The appellant is reproducing the submissions it made before the
General Court and during the procedure before the Commission. Moreover, it is essentially raising complaints which are not
subject to review by the Court. In any event, the General Court has given sufficient consideration to the appellant’s complaints.

–       Findings of the Court

219    As a preliminary point it must be noted that, contrary to Vodafone’s contention and for the same reasons as those held in
paragraph 155 of the present judgment, the present complaint is admissible – notwithstanding the fact that it partly repeats
the arguments put forward at first instance – in so far as it criticises the General Court for having adopted an incorrect
legal test for the application of Article 82 EC to the pricing practices at issue by resorting to the criteria of tariff rebalancing
and equality of opportunity.

220    As to whether that complaint is well founded, it must be observed that, since it relates, in the first place, to the alleged
incompleteness of the General Court’s analysis of the margin squeeze, on the ground that it failed to recognise that access
to wholesale local loop access services enables competitors to provide their end-users with bundled services including calls,
that complaint is based on a misreading of the judgment under appeal.

221    As is clear from paragraphs 199 and 200 of its judgment, the General Court did not in any way, contrary to the appellant’s
submission, rule out the notion that, from the point of view of the end-user, access services and call services can indeed
constitute a whole, but considered that, even if that were the case, the Commission was entitled to consider the existence
of a margin squeeze in relation to access services alone, without call services being included. As is apparent from paragraphs
196 to 201 of the judgment under appeal, the General Court came to that conclusion, inter alia, as a result of the Commission’s
consideration of the principles of tariff rebalancing and equality of opportunity.

222    It follows from this that the present complaint must, to that extent, be rejected as unfounded.

223    In the second place, in so far as the present complaint concerns the General Court’s findings in respect of the principle
of tariff rebalancing, it must be held, first of all, that the General Court did not commit any error of law in taking account
in paragraphs 196 and 197 of the judgment under appeal of such a principle, which arises from the legislation relating to
the telecommunications sector, in order to consider the merits of the Commission’s application of Article 82 EC to the appellant’s
pricing practices.

224    Since the legislation relating to the telecommunications sector defines the legal framework applicable to it and, in so doing,
contributes to the determination of the competitive conditions under which an undertaking such as the appellant carries on
its business in the relevant markets, it is, as has already been shown in paragraphs 80 to 82 of the present judgment, a relevant
factor in the application of Article 82 EC to the conduct of that undertaking, whether for the purposes of defining the relevant
markets, assessing the abusive nature of such conduct or setting the amount of the fines.

225    That finding is not affected by the fact, as alleged by the appellant, that the tariff rebalancing principle applies only
to the appellant itself and not to its competitors. For the reasons set out in paragraphs 196 to 203 of the present judgment,
the General Court was fully entitled to rely, in accordance with the as-efficient-competitor test, on the situation and the
costs of the dominant undertaking for the purpose of determining whether the pricing practices at issue constituted an abuse
in the light of Article 82 EC.

226    Consequently, since the General Court held in paragraph 196 of the judgment under appeal – unchallenged by the appellant in
the present appeal – that the tariff rebalancing referred to in European Union legislation in relation to the telecommunications
sector had to take the form, in particular, of a reduction in the charges for regional and international calls and an increase
in the monthly rental and local call rates, it could lawfully infer from this, in paragraph 197 of its judgment, that the
principle of tariff rebalancing does require that retail prices for access services and retail prices for call services be
considered separately for the purpose of determining whether the relevant pricing practices of the appellant are abusive.

227    Contrary to the appellant’s submission, there is no contradiction in the grounds for the latter findings and the finding which
appears in paragraph 113 of the judgment under appeal, according to which national legislation relating to the telecommunications
sector may have different objectives from those envisaged by European Union competition policy. That point has no bearing
on the issue whether legislation relating to the telecommunications sector may be taken into account for the purpose of the
application of Article 82 EC to the conduct of a dominant undertaking. In particular, contrary to what is claimed by the appellant,
it does not in any way suggest that that legislation could be disregarded altogether in the application of Article 82 EC.

228    The appellant is also incorrect in claiming that the General Court gave insufficient grounds for the judgment under appeal
on that point. As is apparent from the foregoing review, the General Court clearly stated in paragraphs 196 and 197 of its
judgment how the principle of tariff rebalancing enables the Commission to disregard call services in its calculation of the
margin squeeze. Furthermore, as is apparent from paragraph 221 of the present judgment, the General Court addressed the appellant’s
argument that its competitors provide bundled access and call services in paragraphs 199 and 200 of the judgment under appeal.
Likewise, it set out in paragraphs 186 to 194 of its judgment why the Commission was entitled to base its analysis of the
abusive nature of the pricing practices at issue solely on the appellant’s particular situation. In so doing, the General
Court observed the requirements of Article 36 of the Statute of the Court of Justice, which apply to the General Court by
virtue of the first paragraph of Article 53 of the Statute, and Article 81 of the Rules of Procedure of the General Court,
as noted in paragraphs 135 and 136 of the present judgment.

229    It follows from this that, on those various points, the present complaint must be rejected as unfounded.

230    In the third place, in so far as the present complaint relates to the General Court’s findings as to equality of opportunity,
it should be noted that the Court of Justice has consistently held that a system of undistorted competition can be guaranteed
only if equality of opportunity is secured as between the various economic operators (see, in particular, Case C‐18/88 *GB-Inno-BM* [1991] ECR I‐5941, paragraph 25; Case C‐462/99 *Connect Austria* [2003] ECR I‐5197, paragraph 83; Joined Cases C‐327/03 and C‐328/03 *ISIS Multimedia Net and Firma O2* [2005] ECR I‐8877, paragraph 39; and Case C‐49/07 *MOTOE* [2008] ECR I‐4863, paragraph 51).

231    In the present case, the appellant does not deny that, as the General Court in essence held, in particular in paragraphs 199,
236 and 237 of the judgment under appeal, in the absence of an alternative infrastructure, its competitors’ wholesale access
to the local loop on the fixed network held by the appellant is indispensable to enabling them to make a viable entry onto
the retail markets in services to end-users and to compete effectively with the appellant in those markets (see, to that effect,
*Arcor*, paragraph 103).

232    Furthermore, as noted in paragraph 50 of the present judgment, the appellant does not deny that the wholesale market in local
loop access services and the retail market in end-user access services are separate markets, particularly as against retail
markets for the provision of other telecommunications services. Nor, moreover, as observed in paragraph 51 of the present
judgment, does the appellant deny having a dominant position on the wholesale market in local loop access services and on
the retail market in end-user access services.

233    In those circumstances, the General Court did not err in law in ruling, in paragraphs 199 and 237 of the judgment under appeal,
that equality of opportunity means that the appellant and its equally efficient competitors are placed on an equal footing
in the retail market in end-user access services, and that such is not the case where wholesale prices paid to the appellant
for local loop access services cannot be reflected in their retail prices for end-user access services other than by providing
those services at a loss.

234    Since the retail market for end-user access services constitutes a separate market, and wholesale local loop access services
are indispensable to enabling competitors who are at least as efficient as the appellant to enter into effective competition
on that market with an undertaking which, as in the appellant’s case, has a dominant position largely as a result of the legal
monopoly it enjoyed before the liberalisation of the telecommunications sector, the establishment of a system of undistorted
competition requires that the dominant undertaking should not be able – by means of its pricing practices on that retail market
– to impose on all its equally efficient competitors a competitive disadvantage such as to prevent or restrict their access
to that market or the growth of their activities on it.

235    That is particularly the case given that, since any provision by those competitors of other telecommunications services to
end-users across the appellant’s fixed network also requires them to acquire wholesale local loop access services from the
appellant, that competitive disadvantage on the retail market for end-user access services is necessarily reflected in the
markets for those other telecommunications services, as the General Court noted in essence in paragraph 199 of the judgment
under appeal.

236    Contrary to the appellant’s submission, that last point does not, however, mean that revenues from those other telecommunications
services have to be taken into account in order to ascertain whether competitors who are at least as efficient as the appellant
are subject to inequality in competitive conditions on the retail market for end-user access services. Those other telecommunications
services fall within markets that are distinct from the latter market. The General Court was therefore entitled, in paragraph
199 of the judgment under appeal, not to include them in its analysis for the purpose of ascertaining whether there was equality
of opportunity in the relevant market.

237    Neither can the appellant properly plead a failure to state reasons in that regard. The arguments set out by the General Court
in paragraphs 199 and 237 of the judgment under appeal are not vitiated by any failure to state reasons, since they allow
the appellant, in accordance with the case-law cited in paragraphs 135 and 136 of the present judgment, to ascertain the reasons
for the General Court’s finding that equality of opportunity had to be secured on the retail market for end-user access services.

238    The Court must also reject the allegation of a failure to observe the laws of logic in so far as paragraph 238 of the judgment
under appeal is said to show that the General Court relied on the false and contradictory premiss that the appellant suffers
no loss on the market for end-user access services that it would have to offset on other markets, while finding that the appellant’s
retail prices for those services are lower than the wholesale prices for local loop access services set on the basis of its
costs.

239    First, it must be borne in mind that it follows from paragraphs 48 and 49 of the present judgment that the factual premiss
of that line of argument cannot be regarded as having been established in the present appeal, since the question whether wholesale
prices for local loop access services are consistent with the appellant’s costs is not among the pleas that were discussed
before the General Court.

240    Second, it must be held that, in establishing in paragraphs 199 and 237 of the judgment under appeal that the appellant’s
pricing practices on the retail market for end-user access services places all of its equally efficient competitors on an
unequal footing on that market by comparison with the appellant, resulting, as is apparent in particular from paragraphs 166
to 168 and 194 of that judgment, in a margin squeeze of those competitors in relation to access services, the General Court
demonstrated sufficiently that equality of opportunity was not observed on the relevant market and, therefore, that a system
of undistorted competition was not assured on that market. The General Court was not, therefore, in any way required, additionally,
to consider whether that equality was observed on other, separate, markets, such as the call services market, or, therefore,
whether an infringement of Article 82 EC could also be identified on those markets. It follows from this that the General
Court’s findings in paragraph 238 of its judgment are included for the sake of completeness.

241    Consequently, in accordance with the case-law cited in paragraph 108 of the present judgment, the appellant’s present line
of argument must be rejected as ineffective.

242    Similarly, since they are directed against grounds which were included for the sake of completeness, the appellant’s criticisms
in respect of paragraphs 201 and 202 of the judgment under appeal must also be rejected. In common with paragraph 238 of that
judgment, those grounds, introduced by the expressions ‘furthermore’ and ‘in any event’, respectively, also relate to the
question included for the sake of completeness of the extent to which the pricing practices at issue were able to affect competitive
conditions on the retail markets other than the retail market in end-user access services.

243    It follows from this that the present complaint must, on those various points, therefore, be rejected as ineffective or unfounded,
as the case may be.

244    Finally, as to the remainder, in so far as the appellant complains in the second part of the second ground of appeal that
the General Court’s review of the decision at issue was much too limited and that it adopted a method incompatible with current
economic thinking, the decision-making practices of comparable authorities and the realities of the market, the present complaint
is inadmissible in accordance with the case-law cited in paragraph 24 of the present judgment, since it does not identify
the error of law which the General Court is said to have committed.

245    The Court must, therefore, reject the second part of the second ground of appeal as, in part, inadmissible and, in part, ineffective
or unfounded.

d)     The third part of the second ground of appeal, concerning the effects of the margin squeeze

i)     Arguments of the parties

246    By its first complaint, the appellant submits that the General Court correctly rejects the Commission’s view that it is not
necessary for any anti-competitive effect to be demonstrated. However, in its analysis of the effects, the General Court relied
in paragraph 237 of the judgment under appeal on a margin squeeze that took into account only charges relating to access services.
In addition, in paragraph 238 of its judgment, the General Court relied on the mistaken premiss that the appellant’s competitors
are disadvantaged by comparison with the appellant with regard to the practice of cross-subsidisation between access services
and call services to end-users.

247    By its second complaint, the appellant claims that the General Court’s findings regarding the anti-competitive effects of
the practice at issue are vitiated by errors of law. In paragraph 239 of the judgment under appeal, the General Court merely
indicated that the market share of the appellant’s competitors in the broadband access services and narrowband access services
markets remained small, but made no finding as regards the causal connection between those market shares and the purported
margin squeeze. It is not surprising that network operators’ market penetration is slow in the field of telecommunications,
given the investment required for the network infrastructure of the local loop.

248    Furthermore, the appellant takes the view that, in paragraph 240 of the judgment under appeal, the General Court misread recital
182 of the decision at issue, since that recital refers to the decline in the share of analogue lines in all access services
to end-users provided by those competitors, not to the decline in the competitors’ market share in the field of analogue lines.

249    The Commission challenges the appellant’s assertion that the General Court rejected its view that there was no need for proof
of an anti-competitive effect in the case of a margin squeeze. In any event, the appellant’s complaints are unfounded.

ii)  Findings of the Court

250    With regard to the third part of the second ground of appeal, it must be held at the outset that, in paragraphs 234 to 244
of the judgment under appeal, the General Court correctly rejected the Commission’s arguments to the effect that the very
existence of a pricing practice of a dominant undertaking which leads to the margin squeeze of its equally efficient competitors
constitutes an abuse within the meaning of Article 82 EC, and that it is not necessary for an anti-competitive effect to be
demonstrated.

251    It should be borne in mind that, in accordance with the case-law cited in paragraph 174 of the present judgment, by prohibiting
the abuse of a dominant position in so far as trade between Member States is capable of being affected, Article 82 EC refers
to the conduct of a dominant undertaking which, through recourse to methods different from those governing normal competition
in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance
of the degree of competition still existing in the market or the growth of that competition.

252    The General Court therefore held in paragraph 235 of the judgment under appeal, without any error of law, that the anti-competitive
effect which the Commission is required to demonstrate, as regards pricing practices of a dominant undertaking resulting in
a margin squeeze of its equally efficient competitors, relates to the possible barriers which the appellant’s pricing practices
could have created for the growth of products on the retail market in end-user access services and, therefore, on the degree
of competition in that market.

253    As is already apparent from paragraphs 177 and 178 of the present judgment, a pricing practice such as that at issue in the
judgment under appeal that is adopted by a dominant undertaking such as the appellant constitutes an abuse within the meaning
of Article 82 EC if it has an exclusionary effect on competitors who are at least as efficient as the dominant undertaking
itself by squeezing their margins and is capable of making market entry more difficult or impossible for those competitors,
and thus of strengthening its dominant position on that market to the detriment of consumers’ interests.

254    Admittedly, where a dominant undertaking actually implements a pricing practice resulting in a margin squeeze of its equally
efficient competitors, with the purpose of driving them from the relevant market, the fact that the desired result is not
ultimately achieved does not alter its categorisation as abuse within the meaning of Article 82 EC. However, in the absence
of any effect on the competitive situation of competitors, a pricing practice such as that at issue cannot be classified as
exclusionary if it does not make their market penetration any more difficult.

255    In the present case, since, as has already been noted in paragraph 231 of the present judgment, the wholesale local loop access
services provided by the appellant are indispensable to its competitors’ effective penetration of the retail markets for the
provision of services to end-users, the General Court was entitled to hold in paragraph 237 of the judgment under appeal,
as paragraphs 233 to 236 of the present judgment have already shown, that a margin squeeze resulting from the spread between
wholesale prices for local loop access services and retail prices for end-user access services, in principle, hinders the
growth of competition in the retail markets in services to end-users, since a competitor who is as efficient as the appellant
cannot carry on his business in the retail market for end-user access services without incurring losses.

256    The appellant has not challenged that finding. For the reasons already set out in paragraphs 233 to 236 of the present judgment,
the complaint concerning the failure to take into account revenues from any provision of other telecommunications services
to end-users must be rejected as unfounded. The argument relating to paragraph 238 of the judgment under appeal concerning
the possibility of cross-subsidisation must be rejected as ineffective for the reasons stated in paragraphs 238 to 241 of
the present judgment.

257    In addition, in paragraph 239 of the judgment under appeal, the General Court found – as, in the absence of an allegation
of distortion, it is for the General Court alone to do – that ‘the small market shares acquired by ... competitors in the retail
... market [in end-user access services] since the market was liberalised by the entry into force of the TKG on 1 August 1996
are evidence of the restrictions which the applicant’s pricing practices have imposed on the growth of competition in those
markets’. In that regard, contrary to what is claimed by the appellant, it is clear from the expression ‘have imposed’ that
the General Court did find a causal connection between the appellant’s pricing practices and the small market shares acquired
by competitors. The appellant’s complaint on that point is, therefore, unfounded.

258    Furthermore, the General Court concluded in paragraph 244 of its judgment, which also remained unchallenged in the present
appeal, that the appellant had not produced any evidence to rebut the findings in the decision at issue that its pricing practices
actually restricted competition in the retail market in end-user access services.

259    In those circumstances, it must be concluded that the General Court was correct to hold that the Commission had established
that the particular pricing practices of the appellant gave rise to actual exclusionary effects on competitors who were at
least as efficient as the appellant itself.

260    That conclusion is not altered by the appellant’s objection in relation to paragraph 240 of the judgment under appeal. Even
if the General Court were, in that respect, to have misread the decision at issue, the error would be ineffective in the context
of the present appeal because it relates to a ground that was included for completeness’ sake to support paragraphs 237 and
239 of that judgment, and it is apparent from the foregoing review that those paragraphs adequately show that the General
Court was entitled to hold that the pricing practice at issue had an exclusionary effect in the retail market in end-user
access services.

261    Consequently, the third part of the second ground of appeal must be rejected as, in part, ineffective and, in part, unfounded.

e)     Conclusion as to the second ground of appeal

262    It follows from all the foregoing that the second ground of appeal must be rejected in its entirety.

4.     The third ground of appeal, alleging errors of law in the calculation of the fines owing to the failure to take the regulation
of charges into account

a)     Judgment under appeal

263    In paragraphs 306 to 321 of the judgment under appeal, the General Court rejected the appellant’s pleas that insufficient
account was taken of the regulation of charges in the calculation of the amount of the fine, and that insufficient account
was taken of mitigating circumstances.

264    As regards the gravity of the infringement, the General Court held, in paragraphs 310 to 313 of the judgment under appeal:

‘310      It must be held that, contrary to the applicant’s claim, the Commission was entitled to characterise the infringement as serious
for the period from 1 January 1998 to 31 December 2001 .... The pricing practices complained of strengthen the barriers to
entry to the recently liberalised markets and thus jeopardise the proper functioning of the common market. In that regard,
it must be borne in mind that the Guidelines [on the method of setting fines imposed pursuant to Article 15(2) of Regulation
No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3; ‘the Guidelines’)] (second paragraph of Section 1A) describe
the exclusionary behaviour of dominant firms as serious infringements, or even very serious infringements if committed by
undertakings holding a virtual monopoly.

311      As regards the intervention of RegTP in setting the applicant’s tariffs, it must be borne in mind that, when the level of
the penalty is set, the conduct of the undertakings concerned may be assessed in the light of the national legal framework,
which is a mitigating factor ...

312      At the hearing, the Commission explained that the 10% reduction of the fine to take account of the fact that ‘the [applicant’s]
retail [charges for end-user access services] and wholesale charges [for local loop access services] ... were subject to sector
specific regulation ... on national level’ (recital 212 [of] the [decision at issue]) relates to RegTP’s intervention in setting
the applicant’s prices and to the fact that that national authority has, on several occasions during the period covered by
the [decision at issue], considered the question of the existence of a margin squeeze resulting from the applicant’s tariff
practices.

313      Having regard to the Commission’s discretion when determining the amount of a fine ..., it must be held that the Commission
duly took into account the matters referred to in the preceding paragraph when reducing the basic amount of the fine by 10%.’

265    The General Court went on, in paragraphs 315 to 320 of the judgment under appeal, to reject the appellant’s arguments that,
as in the case of the dominant undertaking in Commission Decision 2001/892/EC of 25 July 2001 relating to a proceeding under
Article 82 of the EC Treaty (COMP/C‐1/36.915 – Deutsche Post AG – Interception of cross-border mail) (OJ 2001 L 331, p. 40;
‘the Deutsche Post decision’), the Commission should have imposed a symbolic fine on the appellant.

266    In that regard, the General Court held, in particular, in paragraphs 317 to 319 of the judgment under appeal:

‘317      ... it must be held that the applicant’s situation is fundamentally different from that of the undertaking referred to in the
Deutsche Post decision.

318      It follows from ... the Deutsche Post decision ... that the Commission deemed it appropriate to impose only a symbolic fine on
the undertaking referred to in that decision on three grounds: (1) the undertaking concerned had behaved in accordance with
the case-law of German courts; (2) there was no Community case-law relating specifically to the cross-border letter mail services
concerned; and (3) the undertaking concerned had undertaken to introduce a procedure for the processing of incoming cross-border
letter mailings which would avoid practical difficulties and facilitate the detection of future interference with free competition,
should it occur.

319      In the present case, first, it must be noted that the only judgment of the German courts to which the applicant refers is
the judgment of the Oberlandesgericht Düsseldorf, which was delivered on 16 January 2002, thus in the period during which
the infringement was characterised in the [decision at issue] as minor ... In any event, that judgment was set aside by the
judgment of the Bundesgerichtshof of 10 February 2004. Second, it follows from the [decision at issue] ... that the Commission
applied the same principles as those underlying [Commission Decision 88/518/EEC of 18 July 1988 relating to a proceeding under
Article [82] of the EEC Treaty (Case No IV/30.178 Napier Brown – British Sugar) (OJ 1988 L 284, p. 41)]. In its Notice of
22 August 1998 on the application of the competition rules to access agreements in the telecommunications sector – framework,
relevant markets and principles [OJ 1998 C 265, p. 2] (paragraphs 117 to 119), the Commission had already announced that it
proposed to apply the principles of [Decision 88/518] in the telecommunications sector. ... Finally, third, the applicant in
the present case has not given any undertaking to avoid any other future infringement.’

b)     Arguments of the parties

267    The appellant’s third ground of appeal is divided into three parts relating to the serious nature of the infringement, the
failure to take the regulation of charges into appropriate consideration as an attenuating circumstance and the imposition
of a symbolic fine, respectively.

i)     The first part of the third ground of appeal, concerning the serious nature of the infringement

–       Arguments of the parties

268    The appellant claims that the General Court infringed Article 15(2) of Regulation No 17 in that neither the Commission’s arguments
nor the grounds of the judgment under appeal, in paragraphs 306 to 310 thereof, support the assertion that, as regards the
period from 1 January 1998 to 31 December 2001, it committed a serious infringement within the meaning of the Guidelines.

269    In addition, the appellant submits that the General Court disregarded the fact that, according to Section 1A of the Guidelines,
exclusion may indeed constitute a serious infringement but will not necessarily do so. The General Court failed, therefore,
to consider the arguments against categorisation as a serious infringement, in particular the small contribution of the appellant
to the infringement that was acknowledged in paragraph 312 of the judgment under appeal by a 10% reduction of the basic amount.

270    The Commission contends that those arguments should be rejected as ineffective or unfounded.

–       Findings of the Court

271    It must be borne in mind that, according to settled case-law, the Commission enjoys a broad discretion as regards the method
for calculating fines. That method, set out in the Guidelines, displays flexibility in a number of ways, enabling the Commission
to exercise its discretion in accordance with Article 15(2) of Regulation No 17 (see Joined Cases C‐322/07 P, C‐327/07 P and
C‐338/07 P *Papierfabrik August Koehler and Others* v *Commission* [2009] ECR I‐7191, paragraph 112 and the case-law cited).

272    Within that framework, it is for the Court of Justice to verify whether the General Court has correctly assessed the Commission’s
exercise of that discretion (Case C‐308/04 P *SGL Carbon* v *Commission* [2006] ECR I‐5977, paragraph 48, and Case C‐407/04 P *Dalmine* v *Commission* [2007] ECR I‐829, paragraph 134).

273    It is apparent from settled case-law that the gravity of the infringements of EU competition law must be assessed in the light
of numerous factors, such as, inter alia, the particular circumstances of the case, its context and the dissuasive effect
of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up (see, in particular, Joined
Cases C‐189/02 P, C‐202/02 P, C‐205/02 P to C‐208/02 P and C‐213/02 P *Dansk Rørindustri and Others* v *Commission* [2005] ECR I-5425, paragraph 241; *Dalmine* v *Commission*, paragraph 129; and Case C‐534/07 P*Prym and Prym Consumer* v *Commission* [2009] ECR I‐7415, paragraph 54).

274    The factors capable of affecting the assessment of the gravity of infringements include the conduct of the undertaking concerned,
the role it played in the establishment of the practice in question, the profit which it was able to derive from that practice,
its size, the value of the goods concerned and the threat that infringements of that type pose to the objectives of the European
Union (see, by analogy, Joined Cases 100/80 to 103/80 *Musique Diffusion française and Others* v *Commission*[1983] ECR 1825, paragraph 129, and *Dansk Rørindustri and Others* v *Commission*, paragraph 242).

275    In the present case, the General Court did not, therefore, commit any error of law in holding, in paragraph 310 of the judgment
under appeal, that the Commission had been entitled to characterise the infringement committed by the appellant as serious
for the period from 1 January 1998 to 31 December 2001, since, by strengthening the barriers to entry to the recently liberalised
markets, the pricing practices at issue were jeopardising the proper functioning of the internal market. As is apparent from
the case-law of the Court, exclusionary practices of dominant undertakings, such as the practice at issue in the present case,
are particularly serious infringements of Article 82 EC (see, to that effect, Joined Cases 6/73 and 7/73 *Istituto Chemioterapico Italiano and Commercial Solvents* v *Commission* [1974] ECR 223, paragraph 51, and *AKZO* v *Commission*, paragraph 162).

276    Thus, according to the second paragraph of Section 1A of the Guidelines, such exclusion of competitors from the market can,
quite rightly, be described as a serious infringement, or even a very serious infringement, if committed by an undertaking
holding a virtual monopoly.

277    The appellant’s small contribution to the purported infringement in the light of the regulation of its charges by RegTP cannot
alter those findings, since the role played by the undertaking concerned in the infringement is, in principle, not a mandatory
factor but just one of a number of other factors to be taken into account in assessing the gravity of the infringement (see,
to that effect, *Dalmine* v *Commission*, paragraph 132).

278    In addition, it is apparent from the case-law of the Court of Justice that, as the General Court noted in paragraph 311 of
the judgment under appeal, when the level of the penalty is set, the conduct of the undertaking concerned may be assessed
in the light of the national legal framework, which is a mitigating factor (see, to that effect, Joined Cases 40/73 to 48/73,
50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 *Suiker Unie and Others*v *Commission* [1975] ECR 1663, paragraph 620, and *CIF*, paragraph 57).

279    Accordingly, the General Court was also correct to consider, in paragraphs 311 to 313 of the judgment under appeal, that,
having regard to the Commission’s discretion when determining the amount of a fine, the Commission had duly taken into account
the appellant’s limited role, in view of RegTP’s intervention in setting the appellant’s charges, when it reduced the basic
amount of the fine by 10%.

280    Furthermore, as is apparent from the foregoing, in drawing such conclusions in paragraphs 310 to 313 of the judgment under
appeal, the General Court gave sufficient reasons for its judgment, in so far as it clearly indicated, in accordance with
the case-law cited in paragraphs 135 and 136 of the present judgment, why the infringement was serious and did not merit any
other description on account of the limited role played by the appellant.

281    Consequently, the first part of the third ground of appeal must be rejected as unfounded.

ii)  The second part of the third ground of appeal, concerning the failure to take the regulation of charges into appropriate consideration
as a mitigating circumstance

–       Arguments of the parties

282    The appellant observes that, in recital 212 of the decision at issue, the Commission took account only of the existence of
sector-specific regulation on a national level but not of the content of that regulation, namely, in particular, RegTP’s consideration
and denial of the existence of any margin squeeze restricting competition.

283    The appellant takes the view that the General Court erred in law by failing to criticise the Commission’s disregard of two
other attenuating circumstances for the purposes of Section 3 of the Guidelines. It was as a result of the review and denial
of the existence of an anti-competitive margin squeeze in a series of decisions that the appellant was convinced that its
conduct was lawful. Furthermore, the infringement was committed, at most, negligently.

284    The Commission contends that those complaints of the appellant must be rejected as unfounded.

–       Findings of the Court

285    With regard, in the first place, to the complaint concerning a failure to take into account the fact that RegTP ruled out
the existence of a margin squeeze, it must be held that that complaint is based on a misreading of the judgment under appeal.

286    In paragraph 312 of the judgment under appeal, the General Court explicitly found – which, in the absence of an allegation
of distortion, it is for the General Court alone to do – that the Commission’s 10% reduction of the fine in the decision at
issue to take account of the fact that the appellant’s retail prices for end-user access services and wholesale prices for
local loop access services are subject to sector-specific regulation on a national level related both to RegTP’s intervention
in setting the appellant’s prices and to the fact that, on several occasions during the period concerned, RegTP had considered
the question of the existence of a margin squeeze resulting from the appellant’s pricing practices.

287    In those circumstances, the Court must reject the present complaint of the appellant as unfounded.

288    With regard, in the second place, to the complaint concerning the negligent nature of the infringement, it must be recalled
that, in paragraphs 295 to 298 of the judgment under appeal, the General Court set out the grounds on which the complaint
that there was no negligence or intention on the part of the appellant had to be rejected. As is apparent from paragraphs
124 to 137 of the present judgment, the review of the complaints raised by the appellant in relation to the third part of
the first ground of appeal did not reveal any error of law or failure to state reasons that might vitiate those grounds.

289    By the present complaint, the appellant merely submits that the infringement was committed, at most, negligently. In so doing,
it asks the Court to assess the facts itself, although no distortion is alleged. In accordance with the case-law cited in
paragraph 53 of the present judgment, that complaint is, therefore, inadmissible in the present appeal.

290    Consequently, the second part of the third ground of appeal must be rejected as, in part, inadmissible and, in part, unfounded.

iii)  The third part of the third ground of appeal, concerning the imposition of a symbolic fine

–       Arguments of the parties

291    The appellant claims that, in paragraph 319 of the judgment under appeal, the General Court failed to have regard to the right
to equal treatment by failing to impose on it a symbolic fine, as in the Deutsche Post decision, even though the three conditions
which the Commission set to that end in that decision have also been fulfilled in the present case.

292    The appellant states, first of all, that it behaved in a manner that is consistent with the case-law of the German courts,
since RegTP has, on a number of occasions during the period in question, ruled that the purported margin squeeze is not anti-competitive.
It is irrelevant that the judgment of the Oberlandesgericht Düsseldorf, delivered on 16 January 2002, was set aside by the
Bundesgerichtshof in 2004, since that setting aside was the result of the possibility of an objection which is not applicable
in the present case and it is only after the delivery of the judgment of the Bundesgerichtshof that the appellant could proceed
on the basis that it might be liable under Article 82 EC. Second, there was no relevant case-law from the Courts of the Union
during the period in question. The Notice of 22 August 1998 referred to in paragraph 319 of the judgment under appeal cannot
be described as ‘case-law’ and reveals nothing about the crucial issue in the present case of whether a margin squeeze can
be established in the case of regulated charges. Furthermore, the General Court contradicts itself in so far as it states
in paragraph 188 of the judgment under appeal that the Courts of the Union have not yet explicitly ruled on the method to
be applied in order to determine the existence of a margin squeeze. Third, a commitment to end the infringement cannot constitute
a binding condition for the imposition of a symbolic fine where, as in the present case, detection of the purported infringement
poses no difficulty, since it is only the assessment of the conduct that is being contested.

293    The Commission contends that the appellant’s allegation is irrelevant and, in the alternative, that it is unfounded.

–       Findings of the Court

294    According to the case-law of the Court, the fact that the Commission, in the past, imposed fines of a certain level for particular
types of infringement does not mean that it is stopped from raising that level within the limits indicated in Regulation No 17,
if that is necessary to ensure the implementation of European Union competition policy. The proper application of the European
Union’s competition rules requires that the Commission be able at any time to adjust the level of fines to the needs of that
policy (*Musique Diffusion française and Others* v *Commission*, paragraph 109).

295    In any event, in the present case, the General Court set out in detail in paragraphs 317 to 320 of the judgment under appeal
the reasons why the appellant’s situation had to be regarded as fundamentally different from that of the undertaking referred
to in the Deutsche Post decision.

296    By its present arguments, the appellant confines itself, in essence, to challenging the General Court’s assessment in that
regard, claiming that it is in the same situation as the undertaking referred to in the Deutsche Post decision in so far as
the three grounds on which the Commission imposed a symbolic fine in that decision also obtain in the present case; it does
not, however, allege any distortion of the facts or indicate why that assessment is vitiated by one or more errors of law.

297    It follows from this that, by those arguments which essentially reiterate those already advanced before the General Court,
the appellant is really seeking to secure a re-examination of the application submitted at first instance, which, in accordance
with the case-law cited in paragraph 24 of the present judgment, is outside the jurisdiction of the Court of Justice in the
present appeal.

298    Furthermore, in so far as the appellant relies on a contradiction between the grounds and paragraph 188 of the judgment under
appeal, its complaint must be rejected as unfounded. The fact, noted by the General Court in that paragraph, that the Courts
of the Union have not yet explicitly ruled on the method to be applied in determining the existence of a margin squeeze in
no way contradicts the finding in paragraph 319 of the same judgment that, for its part, the Commission had already applied
the principles contained in the decision at issue and announced their application to the telecommunications industry.

299    Consequently, the third part of the third ground of appeal must be rejected as, in part, inadmissible and, in part, unfounded.

c)     Conclusion as to the third ground of appeal

300    It follows from all the foregoing that the third ground of appeal must be rejected in its entirety.

301    It follows from this that the present appeal must be dismissed.

**Costs**

302    In accordance with the first paragraph of Article 122 of the Rules of Procedure of the Court of Justice, where the appeal
is unfounded, the Court shall make a decision as to costs. Under Article 69(2) of those Rules, which apply to the procedure
on appeal by virtue of Article 118 of those Rules, the unsuccessful party shall be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Since the Commission, Vodafone and Versatel have applied for costs against
the appellant, and the latter has been unsuccessful, the appellant must be ordered to pay the costs of the present appeal.

On those grounds, the Court (Second Chamber) hereby

1.      **Dismisses the appeal;**

2.      **Orders Deutsche Telekom AG to pay the costs.**

[Signatures]

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- Language of the case: German.