Case T-851/14

(publication by extracts)

Slovak Telekom, a.s.

v

European Commission

(Competition — Abuse of dominant position — Slovakian market for broadband telecommunications services — Access by third-party undertakings to the ‘local loop’ of the incumbent operator on that market — Decision finding an infringement of Article 102 TFEU and Article 54 of the EEA Agreement — Single and continuous infringement — Definition of ‘abuse’ — Refusal to grant access — Margin squeeze — Calculation of margin squeeze — Equally efficient competitor test — Rights of defence — Imputation of an infringement committed by a subsidiary to its parent company — Decisive influence of the parent company over the subsidiary’s commercial policy — Actual exercise of such influence — Burden of proof — Calculation of the fine — 2006 Guidelines on the method of setting fines)

Summary – Judgment of the General Court (Ninth Chamber, Extended Composition), 13 December 2018

Competition – Fines – Amount – Determination – Determination of the basic amount – Determination of the value of sales – Gravity of the infringement – Determination of the fine in proportion to the factors for assessment of the gravity of the infringement – Turnover achieved with the services in respect of which the infringement was committed – Turnover achieved over the course of the last full business year of their participation in the infringement – Increased turnover during the infringement period – Obligation to take into account the average turnover during the infringement period – Absence

Competition – EU rules – Infringements – Attribution – Parent company and subsidiaries – Economic unit – Criteria for assessment – Exercise of decisive influence over the conduct of the subsidiary that may be inferred from a body of evidence relating to the economic, organisational and legal links with the parent company – Circumstances allowing the existence of decisive influence to be established – Actual control of the board of directors of the subsidiary – Influence over the decision-making processes within the subsidiary’s board of directors – Overlaps in the management staff between the parent company and the subsidiary – Secondment of staff – Regular receipt of information on the subsidiary’s commercial strategy – High level of involvement of the parent company in the definition of the commercial policy of its subsidiary – Influence on the strategic choices

Competition – Administrative procedure – Statement of objections – Necessary content – Commission decision finding an infringement – Decision not identical to the statement of objections – Infringement of the rights of the defence – Conditions – Assessment on a case-by-case basis

Dominant position – Abuse – Refusal by a dominant undertaking to allow another undertaking access to a product or a service – Access by third undertakings to the incumbant operator’s local loop on the broadband telecommunications services market – Implied refusal of access – Regulatory framework requiring access – Obligation for the Commission to show the indispensable nature of that access for competing operators to enter the market – Absence

Procedure – Application initiating proceedings – Formal requirements – Brief summary of the pleas in law on which the application is based – Reference to the annex in support of arguments set out in the pleadings – Admissibility

Procedure – Application initiating proceedings – Formal requirements – Brief summary of the pleas in law on which the application is based – Mere allegation not supported by factual or legal explanations – Inadmissibility

See the text of the decision. (see paras 74-78)

Under the first paragraph of Article 21 of the Statute of the Court of Justice of the European Union, which applies to proceedings before the General Court by virtue of the first paragraph of Article 53 of that statute and of Article 44(1)(c) of the Rules of Procedure of the General Court of 2 May 1991, applicable at the time the action was brought, all applications are required to state the subject matter of the proceedings and a summary of the pleas in law on which the application is based and that it is necessary, for an action to be admissible, that the essential matters of fact and law on which it is based be indicated, at least in summary form, coherently and intelligibly in the application itself. The ‘summary of the pleas in law’ which must be stated in any application, as provided for by the articles cited, means that the application must specify the nature of the grounds on which it is based. Whilst the body of the application may certainly be supported and supplemented on specific points by references to extracts from documents annexed thereto, a general reference to other documents, even those annexed to the application, cannot make up for the absence of the essential arguments in law which, in accordance with the abovementioned provisions, must appear in the application. Furthermore, it is not for the Court to seek and identify in the annexes the pleas on which it may consider the action to be based, since the annexes have a purely evidential and instrumental function. Consequently, the Court may take an annex into consideration only in so far as it supports or supplements pleas or arguments expressly set out by the applicants in the body of the application and in so far as it is possible for the Court to determine precisely what are the matters contained in that annex that support or supplement those pleas or arguments. (see paras 83-87)

In order for the refusal by a dominant undertaking to grant access to a service to constitute an abuse within the meaning of Article 102 TFEU, that refusal must be likely to eliminate all competition on the market on the part of the person requesting the service, such refusal must not be capable of being objectively justified, and the service must in itself be indispensable to carrying on that person’s business. Moreover, it is clear from paragraphs 43 and 44 of the judgment of 26 November 1998, Bronner, that, in order to determine whether a product or service is indispensable for enabling an undertaking to carry on business in a particular market, it must be determined whether there are products or services which constitute alternative solutions, even if they are less advantageous, and whether there are technical, legal or economic obstacles capable of making it impossible or at least unreasonably difficult for any undertaking seeking to operate in the market to create, possibly in cooperation with other operators, alternative products or services. According to paragraph 46 of that judgment, in order to accept the existence of economic obstacles, it must be established, at the very least, that the creation of those products or services is not economically viable for production on a scale comparable to that of the undertaking which controls the existing product or service. However, 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 telecommunication undertaking carries on its business in the relevant markets, that legislation constitutes a relevant factor in the application of Article 102 TFEU to the conduct of that undertaking, in particular for assessing the abusive nature of such conduct. Therefore, where the relevant regulatory framework clearly requires the incumbent operator on the broadband telecommunications services to grant all reasonable and justified requests for unbundling of its local loop in order to enable alternative operators to use that loop with a view, on that basis, to offer their own services on the retail mass market for broadband services at a fixed location, the demonstration, by the Commission, that such access was indeed indispensable, is not required. (see paras 115-117, 119, 121)

See the text of the decision. (see paras 178-184, 207-209)

See the text of the decision. (see paras 228-231, 252-254)

As regards practices resulting in the margin squeeze, to the extent that a dominant undertaking sets its prices at a level covering the great bulk of the costs attributable to the supply of the goods or services in question, it is, as a general rule, possible for a competitor as efficient as that undertaking to compete with those prices without suffering losses that are unsustainable in the long term. Admittedly, if a margin is positive, it is not ruled out that the Commission can, in the context of the examination of the exclusionary effect of a pricing practice, demonstrate that the application of that practice was, by reason, for example, of reduced profitability, likely to have the consequence that it would be at least more difficult for the operators concerned to trade on the market concerned. However, in the light of the presence of positive margins over a certain period, the Commission is subject to a particular obligation relating to the proof of exclusionary effects of the practice of a margin squeeze alleged against the undertaking during that period. That case-law can be read in conjunction with Article 2 of Regulation No 1/2003, according to which, in any proceedings for the application of Article 102 TFEU, the burden of proving an infringement of that article rests on the party or the authority alleging the infringement, namely, in the present case, the Commission. In that context, the mere claim by the Commission that the operators other than the dominant company consider their ability to earn a reasonable return over a longer period, lasting several years, cannot constitute such proof. Such a fact, assuming it is established, is based on a prospective examination of profitability, which is necessarily hypothetical. Furthermore, such a claim cannot constitute proof of proof of exclusionary effects and does not satisfy the requirement arising from the principle of legal certainty, according to which a dominant undertaking must be in a position to assess the conformity of its conduct with Article 102 TFEU. For that reason, the finding of negative margins, by means of the application of the multi-period (multi-year) approach, cannot undermine that assessment, since that approach resulted in such a finding only by means of a weighting of the positive margins for a certain year with the negative margins found for the other years. (see paras 257, 259, 261, 262, 264)

See the text of the decision. (see paras 280-288, 295-299, 308, 309, 311, 313, 321, 328, 332, 344, 357, 358, 362, 368, 384, 393, 396, 420-423)

See the text of the decision. (see paras 432-436, 439, 444)

See the text of the decision. (see paras 441-444)