JUDGMENT OF THE GENERAL COURT (Eighth Chamber)

29 March 2012 ( *1 )

‛Competition — Abuse of dominant position — Spanish markets for broadband internet access — Decision finding an infringement of Article 82 EC — Price fixing — Margin squeeze — Market definition — Dominant position — Abuse — Calculation of margin squeeze — Effects of the abuse — Competence of the Commission — Rights of the defence — Subsidiarity — Proportionality — Legal certainty — Sincere cooperation — Principle of sound administration — Fines’

In Case T-336/07,

Telefónica, SA, established in Madrid (Spain)

Telefónica de España, SA, established in Madrid,

represented initially by F. González Díaz and S. Sorinas Jimeno, and subsequently by F. González Díaz, lawyers,

applicants,

v

European Commission, represented by F. Castillo de la Torre, É. Gippini Fournier and K. Mojzesowicz, acting as Agents,

defendant,

supported by

France Telecom España, SA, established in Pozuelo de Alarcón (Spain), represented by S. Martínez Lage, H. Brokelmann and M. Ganino, lawyers,

by

Asociación de Usuarios de Servicios Bancarios (Ausbanc Consumo), established in Madrid, represented by L. Pineda Salido and M.I. Cámara Rubio, lawyers,

and by

European Competitive Telecommunications Association, established in Wokingham (United Kingdom), represented by M. Di Stefano and A. Salerno, lawyers,

interveners,

APPLICATION for annulment of Commission Decision C (2007) 3196 final of 4 July 2007 relating to a proceeding under Article 82 [EC] (Case COMP/38.784 — Wanadoo España vs. Telefónica) and, in the alternative, an application for annulment or reduction of the amount of the fine imposed on the applicants,

THE GENERAL COURT (Eighth Chamber),

composed of L. Truchot, President, M.E. Martins Ribeiro (Rapporteur) and H. Kanninen, Judges,

Registrar: J. Palacio González, Principal Administrator,

having regard to the written procedure and further to the hearing on 23 May 2011,

gives the following

Judgment

The applicants

1 Telefónica, SA, an applicant in the present case, is the parent company of the Telefónica group, a former State monopoly in the telecommunications sector in Spain. In the period concerned by Commission Decision C (2007) 3196 final of 4 July 2007 relating to a proceeding pursuant to Article 82 [EC] (Case COMP/38.784 — Wanadoo España vs. Telefónica) (‘the contested decision’), that is to say, from September 2001 until December 2006, Telefónica supplied broadband services through its subsidiary Telefónica de España, SAU (‘TESAU’), also an applicant in the present case, and through two other subsidiaries, Telefónica Data de España, SAU, and Terra Networks España, SA, which merged with TESAU on 30 June 2006 and 7 July 2006 respectively (recitals 11, 13 and 19 to 21 to the contested decision). Telefónica and its subsidiaries (together ‘Telefónica’) constituted a single economic entity for the entire period concerned by the investigation (recital 12 to the contested decision).

2 Before the full liberalisation of the telecommunications markets in 1998, Telefónica was owned by the Spanish State and had a legal monopoly in the retail provision of fixed-line telecommunications services. Currently, it operates the only nationwide fixed telephone network (recital 13 to the contested decision).

Administrative procedure

3 On 11 July 2003 Wanadoo España, SL (now France Telecom España, SA) (‘France Telecom’) submitted a complaint to the Commission of the European Communities, claiming that the margin between the wholesale prices which the subsidiaries of Telefónica charged their competitors for the wholesale supply of broadband access in Spain and the retail prices which they charged end-users was not enough to allow competitors of Telefónica to compete with it (recital 26 to the contested decision).

4 After examining the complaint and after receiving further information, the Commission, on 20 February 2006, sent a statement of objections to Telefónica. Telefónica responded on 19 May 2006. A hearing was held on 12 and 13 June 2006 (recitals 27 and 30 to the contested decision).

5 On 11 January 2007 the Commission sent Telefónica a letter inviting it to submit its comments on the conclusions which the Commission proposed to draw on the basis of new facts not referred to in the statement of objections (‘the letter of facts’). Telefónica replied to that letter on 12 February 2007 (recital 31 to the contested decision).

The contested decision

6 On 4 July 2007 the Commission adopted the contested decision forming the subject-matter of this action.

7 In the first place, the Commission identified in the contested decision three relevant product markets, namely one retail broadband market and two wholesale broadband markets (recitals 145 to 208).

8 The retail market at issue covers, according to the contested decision, all undifferentiated broadband products, whether supplied by ADSL (Asymmetric Digital Subscriber Line) or by any other technology, marketed on the ‘general public market’ to residential and non-residential users. By contrast, it does not cover customised broadband access services aimed principally at ‘large client accounts’ (recital 153 to the contested decision).

9 As regards the wholesale markets, the Commission stated that three main wholesale offers were available, namely a reference offer for local loop unbundling, marketed solely by Telefónica, a regional wholesale offer (GigADSL; ‘the regional wholesale product’), also marketed solely by Telefónica, and several national wholesale offers marketed by Telefónica (ADSL-IP and ADSL-IP Total; ‘the national wholesale product’) and by other operators on the basis of local loop unbundling and/or the regional wholesale product (recital 75 to the contested decision).

10 In order to define the wholesale markets at issue in this case, the Commission analysed whether the wholesale access products described in the preceding paragraph belonged to the same product market or to separate product markets (recital 162 to the contested decision).

11 In that regard, the Commission first of all considered that the regional wholesale product and local loop unbundling were not substitutable (recitals 163 to 182 to the contested decision). As a basis for that conclusion, the Commission referred, with respect to demand-side substitutability, to significant network roll-out investments (recitals 163 and 164 to the contested decision) and to the functional differences between the two types of wholesale access (recital 165 to the contested decision). The Commission also considered that there had been no supply-side substitutability between those products, since that would have entailed an alternative operator being able to offer a network of local loops identical to Telefónica’s throughout the Spanish territory, which would have been economically unfeasible within a reasonable time (recital 167 to the contested decision).

12 Next, the Commission took the view that the substitutability of the national and regional wholesale products was not sufficient (recitals 183 to 195 to the contested decision), adding that the precise boundaries between the national and regional wholesale markets were not determinative, because Telefónica was dominant in each of those markets (recital 195 to the contested decision). As regards demand-side substitutability, the Commission considered that the alternative operator wishing to provide retail ADSL services on a national basis using the regional wholesale product must sustain significant one-off and recurrent costs relating to the deployment and maintenance of a network allowing interconnection with Telefónica’s 109 indirect access points (recital 183 to the contested decision). Furthermore, switching from a regional wholesale product to the national wholesale product would not make economic sense, since it would be irrational and unlikely that operators that have already invested in the roll-out of a network would bear the cost of not using their network and using the national wholesale product which would not give them the same possibilities with respect to control of the quality of service of the retail product as the regional wholesale product (recital 187 to the contested decision). As regards supply-side substitutability, the Commission observed that while, admittedly, an operator wishing to provide a national wholesale offer could do so on the basis of the regional wholesale offer, which would entail considerable investments, those investments bore no comparison with the investment necessary for the local loop unbundling which was required upstream in order for the operator to be able to offer a regional wholesale access product that would compete with Telefónica’s (recital 191 to the contested decision).

13 Last, the Commission considered that broadband access technologies other than ADSL, and in particular cable, could not be regarded as substitutable for ADSL offers (recitals 196 to 207 to the contested decision). As regards demand-side substitutability, the Commission referred to the considerable costs that would have to be borne in the event of a switch from an ADSL wholesale product to a cable-based wholesale product and also to the low coverage and fragmentation of cable networks in Spain (recital 199 to the contested decision). The Commission also observed that, even though it was technically possible for cable operators to provide wholesale broadband access to third parties equivalent to the national and regional wholesale products, practical and economic difficulties would prevent them from doing so, so that such an offer would not be economically viable.

14 The Commission concluded that the wholesale markets at issue for the purposes of the contested decision covered the regional wholesale product and the national wholesale product, excluding wholesale services by cable and technologies other than ADSL (recitals 6 and 208 to the contested decision).

15 The relevant geographic wholesale and retail markets are, according to the contested decision, nationwide (Spain) (recital 209).

16 In the second place, the Commission found that Telefónica had a dominant position on the two wholesale markets at issue (recitals 223 to 242 to the contested decision). Thus, during the period under consideration, Telefónica had a monopoly in the supply of the regional wholesale product and more than 84% of the national wholesale product market (recitals 223 and 235 to the contested decision). According to the contested decision (recitals 243 to 277), Telefónica also had a dominant position on the retail market.

17 In the third place, the Commission examined whether Telefónica had abused its dominant position on the relevant markets (recitals 278 to 694 to the contested decision). In that regard, the Commission considered that Telefónica had infringed Article 82 EC by imposing unfair prices on its competitors in the form of a margin squeeze between the prices for retail broadband access in the Spanish ‘mass market’ and the prices on the regional and national wholesale broadband access markets, throughout the period from September 2001 until December 2006 (recital 694 to the contested decision).

18 In order to demonstrate that there was a margin squeeze in the present case, the Commission first noted the legislative context of Telefónica’s supply of the national and regional wholesale products and, in particular, the obligation imposed on Telefónica by Spanish law to supply wholesale access at regional and national levels under fair conditions. The Commission also noted the obligation imposed by the Comisión del Mercado de las Telecomunicaciones (Spanish Commission for the Telecommunications Markets; ‘the CMT’) on Telefónica since March 1999 to supply the regional wholesale product and stated that Telefónica had begun offering its ADSL-IP Total product on its own initiative from September 1999 onwards, whereas the CMT had imposed on Telefónica the obligation to supply access to ADSL-IP from April 2002 (recitals 288 and 289 to the contested decision).

19 Second, as regards the method of calculating the margin squeeze, the Commission considered (i) that the efficiency of Telefónica’s competitors had to be measured against Telefónica’s downstream costs (the ‘equally efficient competitor’ method) (recitals 311 to 315 to the contested decision); (ii) that the appropriate method for the evaluation of costs was, in the present case, that of long-run average incremental costs (‘LRAIC’) (recitals 316 to 324 to the contested decision); (iii) that the assessment of profitability over time could be established by two methods, namely the so-called ‘period-by-period’ method and the discounted cash flow (‘the DCF’) method (recitals 325 to 385 to the contested decision); (iv) that the margin squeeze had to be calculated on the basis of the range of services marketed by Telefónica in the relevant retail market (recitals 386 to 388 to the contested decision); and (v) as regards the choice of upstream inputs for the calculation of whether the downstream prices could be reproduced, that Telefónica’s tariffs had to be capable of reproduction by an as-efficient competitor using at least one wholesale product of Telefónica in each of the relevant wholesale markets (recitals 389 to 396 to the contested decision).

20 Third, the Commission calculated whether the difference between Telefónica’s upstream and downstream prices covered at least Telefónica’s downstream LRAIC (recitals 397 to 511 to the contested decision). By applying the methodology described in the preceding paragraph, the Commission calculated that Telefónica’s retail prices could not be reproduced on the basis of its national or regional wholesale products between September 2001 and December 2006 (recitals 512 to 542 to the contested decision).

21 Fourth, as regards the effects of the abuse, the Commission considered that Telefónica’s conduct had probably restricted the capacity of ADSL operators to achieve sustainable growth in the retail market and had probably harmed the interests of end-users. The Commission also took the view that Telefónica’s conduct had had actual exclusionary effects and had harmed the interests of consumers (recitals 544 to 618 to the contested decision).

22 Fifth, the Commission stated that Telefónica’s conduct was not objectively justified and had not produced efficiency gains (recitals 619 to 664 to the contested decision).

23 Sixth, and last, the Commission stated that Telefónica had room for manoeuvre to avoid the margin squeeze. Thus, Telefónica could have increased its retail prices or lowered its wholesale prices. The Commission added that the CMT decisions sent to Telefónica and relating to the margin squeeze were not capable of relieving Telefónica of responsibility (recitals 665 to 694 to the contested decision).

24 In the fourth place, the Commission found that in the present case trade between Member States was affected, since Telefónica’s pricing policy related to the access services of a dominant operator, extending to the entire Spanish territory, which constitutes a substantial part of the internal market (recitals 695 to 697 to the contested decision).

25 For the purpose of calculating the amount of the fine, the Commission applied in the contested decision the 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) [CS] (OJ 1998 C 9, p. 3; ‘the 1998 Guidelines’).

26 First, the Commission assessed the gravity and the impact of the infringement and also the size of the relevant geographic market. First of all, as regards the gravity of the infringement, the Commission considered that it was dealing with a clear-cut abuse on the part of an undertaking holding what was virtually a monopoly position, that must be qualified as ‘very serious’ under the 1998 Guidelines (recitals 739 to 743 to the contested decision). At recitals 744 to 750 to the contested decision, the Commission distinguished the present case from Commission Decision 2003/707/EC of 21 May 2003 relating to a proceeding under Article 82 [EC] (Case COMP/C 1/37.451, 37.578, 37.579 – Deutsche Telekom AG) (OJ 2003 L 263, p. 9; ‘the Deutsche Telekom decision’), in which the abuse on the part of Deutsche Telekom, which also concerned a margin squeeze, had not been qualified as ‘very serious’ within the meaning of the 1998 Guidelines. Next, so far as the impact of the infringement found was concerned, the Commission took account of the fact that the relevant markets were of considerable economic importance, that they played a crucial role in the creation of the information society and that the impact of Telefónica’s abuse on the retail market had been significant (recitals 751 and 753 to the contested decision). Last, as regards the size of the relevant geographic market, the Commission observed, in particular, that the Spanish broadband market was the fifth largest national broadband market in the European Union (EU) and that, while margin squeeze cases were necessary limited to a single Member State, it prevented operators from other Member States from entering a fast-growing market (recitals 754 and 755 to the contested decision).

27 According to the contested decision, the starting amount of the fine, EUR 90 000 000, takes account of the fact that the gravity of the abusive practice became clear over the period under consideration and, more particularly, after the adoption of the Deutsche Telekom decision (recitals 756 and 757). A multiplier of 1.25 was applied to that amount to take account of Telefónica’s significant economic capacity and to ensure that the fine was sufficiently deterrent, and the starting amount of the fine was thus increased to EUR 112 500 000 (recital 758).

28 Second, as the infringement had lasted from September 2001 until December 2006, that is to say, for five years and four months, the Commission increased the starting amount of the fine by 50%. The basic amount of the fine was thus increased to EUR 168 750 000 (recitals 759 to 761 to the contested decision).

29 Third, on the basis of all the evidence available, the Commission considered that the existence of certain attenuating circumstances could be recognised in this case, since the infringement had at least been committed as a result of negligence. A reduction of 10% of the amount of the fine was thus granted to Telefónica, which reduced the amount of the fine to EUR 151 875 000 (recitals 765 and 766 to the contested decision).

30 The operative part of the contested decision reads as follows: ‘Article 1 [Telefónica] and [TESAU] have infringed Article 82 EC by applying unfair price tariffs to the supply of wholesale and retail broadband access services from September 2001 to December 2006. Article 2 For the infringement referred to in Article 1, a fine of EUR 151 875 000 is imposed on [Telefónica] and [TESAU], jointly and severally liable.’

Procedure and forms of order sought by the parties

31 By application lodged at the Court Registry on 1 October 2007, the applicants brought the present action.

32 By documents lodged at the Court Registry on 10 and 24 December 2007, respectively, France Telecom and the Asociación de Usuarios de Servicios Bancarios (Ausbanc Consumo) (‘Ausbanc’) sought leave to intervene in support of the form of order sought by the Commission.

33 By letter of 7 January 2008 the applicants requested confidential treatment vis-à-vis any interveners of certain material in the application and the annexes thereto.

34 By letter of 22 February 2008 the applicants requested confidential treatment vis-à-vis Ausbanc of certain material in the application and the annexes thereto.

35 By letters of 15 April 2008 the applicants requested confidential treatment vis-à-vis Ausbanc and France Telecom of certain material in the defence and the annexes thereto.

36 By letters of 25 July 2008 the applicants requested confidential treatment vis-à-vis Ausbanc and France Telecom of certain material in the reply and the annexes thereto.

37 By order of the President of the Eighth Chamber of the Court of 31 July 2008 France Telecom and Ausbanc were granted leave to intervene in support of the form of order sought by the Commission. The decision on the merits of the request for confidential treatment was reserved.

38 Non-confidential versions of various procedural documents, prepared by the applicants, were sent to the interveners.

39 By letter of 12 September 2008 Ausbanc disputed the confidential nature of the deleted passages in the non-confidential versions of the procedural documents which it had received.

40 By letter of 15 September 2008 France Telecom disputed the requests for confidential treatment in so far as they related to certain entire annexes to the application, the defence and the reply.

41 On 28 October 2008 France Telecom and Ausbanc lodged their statements in intervention.

42 By letter of 25 November 2008 the applicants informed the Court that the statements in intervention did not contain any confidential data.

43 By letter of 27 November 2008 the applicants requested confidential treatment vis-à-vis Ausbanc and France Telecom of certain material in the rejoinder and the annexes thereto.

44 On 6 February 2009 the applicants lodged their observations on the statements in intervention.

45 By letter of 6 February 2009 the applicants requested confidential treatment of certain material in their observations on France Telecom’s statement in intervention and in an annex to those observations.

46 By letter of 9 February 2009 the Commission waived its right to submit observations on the statements in intervention.

47 By order of 2 March 2010 the President of the Eighth Chamber granted in part the applicants’ request for confidentiality.

48 By document lodged at the Court Registry on 4 November 2010 the European Competitive Telecommunications Association (‘ECTA’) also sought leave to intervene in support of the form of order sought by the Commission.

49 By letter of 7 December 2010 the applicants objected to that request.

50 By order of the President of the Eighth Chamber of the Court of 28 February 2011 ECTA was granted leave to intervene in support of the form of order sought by the Commission.

51 The applicants claim that the Court should: — principally, annul the contested decision, pursuant to Article 230 EC; — in the alternative, annul or reduce, on the basis of Article 229 EC, the amount of the fine imposed on them in the contested decision; — in any event, order the Commission to pay the costs.

52 The Commission contends that the Court should: — dismiss the application; — order the applicants to pay the costs.

53 Ausbanc claims that the Court should: — dismiss the applicants’ principal and alternative claims; — order the applicants to pay the costs.

54 France Telecom claims that the Court should: — dismiss the applicants’ application in its entirety; — order the applicants to pay all the costs resulting from the intervention.

55 Upon hearing the report of the Judge-Rapporteur, the Court (Eighth Chamber) decided to open the oral procedure. The parties presented oral argument and answered the oral questions put to them by the Court at the hearing on 23 May 2011.

56 At the hearing, ECTA claimed that the Court should: — dismiss the action; — order the applicants to pay the costs.

Law

A – Admissibility of the applicants’ arguments allegedly contained in the annexes

57 In the rejoinder, the Commission disputed the admissibility of certain of the applicants’ arguments allegedly contained in the annexes to their application and their reply. The Commission claimed that the applicants thus submitted arguments of a legal or economic nature that did not merely support or supplement elements of fact or of law expressly asserted in the text of those procedural documents, but which add new assertions. Thus, in the Commission’s submission, ‘whole sections of the applicants’ pleadings’ refer in full to those annexes, without which they would be devoid of content.

58 Under Article 21 of the Statute of the Court of Justice and Article 44(1)(c) of the Rules of Procedure of the General Court, each application is required to state the subject-matter of the proceedings and a summary of the pleas in law on which the application is based. That statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the action, if necessary without any further information. In order to guarantee legal certainty and the sound administration of justice, it is necessary, in order for an action to be admissible, that the essential matters of law and fact relied on be stated, at least in summary form, coherently and intelligibly in the application itself. Whilst the body of the application may be supported and supplemented on specific points by references to certain extracts from documents annexed to it, a general reference to other documents, even those annexed to the application, cannot make up for the absence of the essential submissions in law, which must appear in the application (see Case T-201/04 Microsoft v Commission [2007] ECR II-3601, paragraph 94 and the case-law cited).

60 The annexes cannot therefore be used to develop a plea set out summarily in the application by putting forward complaints or arguments not set out in the application (see Case T-340/03 France Télécom v Commission [2007] ECR II-107, paragraph 167 and the case-law cited).

61 That interpretation of Article 21 of the Statute of the Court of Justice and Article 44(1)(c) of the Rules of Procedure also applies to the conditions for admissibility of a reply, which according to Article 47(1) of the Rules of Procedure is intended to supplement the application (see Microsoft v Commission, paragraph 58 above, paragraph 95 and the case-law cited).

62 In the present case, the applicants have made numerous references in their written pleadings to what are sometimes voluminous documents annexed to those pleadings. However, some of those references mention the annexed documents concerned only in a general way and therefore do not allow the Court to identify precisely the elements that it might regard as supporting or supplementing on specific points, by references to precise passages in those documents, the pleas and arguments set out in the application or the reply. Furthermore, in particular, the documents to which certain references are made are not intended solely to support and supplement on specific points certain arguments in the body of the pleading to which they are annexed, but contain the actual explanation of those arguments, so that, unless the documents are analysed, the arguments cannot be comprehended.

63 It follows that, in the present case, the annexes to the application and the reply will be taken into consideration only in so far as they support or supplement pleas or arguments expressly set out by the applicants in the body of their written pleadings and in so far as it is possible to determine precisely what are the elements contained in those annexes that support or supplement those pleas or arguments (see, to that effect, Microsoft v Commission, paragraph 58 above, paragraph 99).

B – Substance

64 In their action, the applicants put forward a number of principal claims and a number of alternative claims.

65 In support of their principal claims, seeking annulment of the contested decision, the applicants put forward six pleas in law. The first plea alleges breach of the rights of the defence. The second plea alleges errors of fact and of law in the definition of the relevant wholesale markets. The third plea alleges errors of fact and of law in the establishment of Telefónica’s dominant position on the relevant markets. The fourth plea alleges errors of law in the application of Article 82 EC as concerns Telefónica’s abusive conduct. The fifth plea alleges errors of fact and/or errors of assessment of the facts and errors of law with respect to Telefónica’s abusive conduct and its anti-competitive impact. Last, the sixth plea alleges an ultra vires application of Article 82 EC and breach of the principles of subsidiarity, proportionality, legal certainty, sincere cooperation and sound administration.

66 In the alternative, the applicants rely on two pleas whereby they seek annulment of the fine or a reduction of its amount. The first plea alleges errors of fact and of law, infringement of Article 15(2) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81 EC] and [82 EC] (OJ, English Special Edition 1959-62, p. 87), and Article 23(2) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 [EC] and 82 [EC] (OJ 2003 L 1, p. 1), and breach of the principles of legal certainty and legitimate expectations. The second plea, which is formulated further in the alternative, alleges errors of fact and of law and breach of the principles of proportionality and equal treatment, the principle that the penalty must be specific to the offender and the offence and the obligation to state reasons in the determination of the amount of the fine.

1. The principal claims, seeking annulment of the contested decision

(a) The extent of review by the Courts of the European Union and the burden of proof

67 It follows from Article 2 of Regulation No 1/2003 and from consistent case-law delivered in connection with the application of Articles 81 EC and 82 EC that, where there is a dispute as to the existence of an infringement of competition law, it is incumbent on the Commission to prove the infringements found by it and to adduce evidence capable of demonstrating to the requisite legal standard the existence of the circumstances constituting an infringement (Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraph 58, and Joined Cases C-2/01 P and C-3/01 P BAI and Commission v Bayer [2004] ECR I-23, paragraph 62; see also, to that effect, Microsoft v Commission, paragraph 58 above, paragraph 688). In order to do so, it must obtain sufficiently precise and consistent evidence to support the firm conviction that the alleged infringement took place (see, to that effect, Case T-38/02 Groupe Danone v Commission [2005] ECR II-4407, paragraph 217 and the case-law cited).

68 Next, it must be borne in mind that, in an action for annulment brought under Article 230 EC, all that is required of the EU judicature is to verify the legality of the contested measure (Joined Cases T-67/00, T-68/00, T-71/00 and T-78/00 JFE Engineering and Others v Commission [2004] ECR II-2501, paragraph 174). Thus, the role of a Court hearing an application for annulment of a Commission decision finding the existence of an infringement of competition law and imposing fines on the addressees is to assess whether the evidence and other information relied on by the Commission in its decision are sufficient to establish the existence of the alleged infringement (see, to that effect, Joined Cases T-305/94 to T-307/94, T-313/94 to T-316/94, T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others v Commission [1999] ECR II-931, paragraph 891, and JFE Engineering and Others v Commission, paragraph 175).

70 Likewise, in so far as the Commission’s decision is the result of complex technical appraisals, those appraisals are in principle subject to only limited judicial review, which means that the EU judicature cannot substitute its own assessment of matters of fact for the Commission’s (Microsoft v Commission, paragraph 58 above, paragraph 88, and Case T-301/04 Clearstream v Commission [2009] ECR II-3155, paragraph 94).

71 However, while the EU judicature recognises that the Commission has a margin of discretion in economic matters, that does not mean that it must decline to review the Commission’s interpretation of economic data. The EU judicature must not only establish whether the evidence put forward is factually accurate, reliable and consistent but must also determine whether that evidence contains all the relevant data that must be taken into consideration in appraising a complex situation and whether it is capable of substantiating the conclusions drawn from it (Case C-12/03 P Commission v Tetra Laval [2005] ECR I-987, paragraph 39; Microsoft v Commission, paragraph 58 above, paragraph 89; and Clearstream v Commission, paragraph 70 above, paragraph 95).

72 In that regard, where there is doubt in the Court’s mind the benefit of that doubt must be given to the undertaking to which the decision finding an infringement was addressed (see, to that effect, Case 27/76 United Brands and United Brands Continentaal v Commission [1978] ECR 207, paragraph 265). The Court cannot therefore conclude that the Commission has established the infringement at issue to the requisite legal standard if it still entertains any doubts on that point, in particular in the context of an action for annulment of a decision imposing a fine (JFE Engineering and Others v Commission, paragraph 68 above, paragraph 177).

73 In the latter situation, it is necessary to take account of the principle of the presumption of innocence resulting in particular from Article 6(2) of the Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950, which is one of the fundamental rights which, according to the case-law of the Court of Justice and as reaffirmed in the preamble to the Single European Act, in Article 6(2) EU and in Article 47 of the Charter of Fundamental Rights of the European Union proclaimed on 7 December 2000 in Nice (OJ 2000 C 364, p. 1), are protected in the EU legal order. Given the nature of the infringements in question and the nature and degree of severity of the ensuing penalties, the principle of the presumption of innocence applies in particular to the procedures relating to infringements of the competition rules applicable to undertakings that may result in the imposition of fines or periodic penalty payments (see JFE Engineering and Others v Commission, paragraph 68 above, paragraph 178 and the case-law cited; see also, to that effect, Case C-199/92 P Hüls v Commission [1999] ECR I-4287, paragraphs 149 and 150, and Case C-235/92 P Montecatini v Commission [1999] ECR I-4539, paragraphs 175 and 176).

74 The legality of the contested decision must be examined in the light of the foregoing considerations by reference to the applicants’ pleas.

(b) First plea, alleging breach of the rights of the defence

75 The applicants claim that in the contested decision the Commission used for the first time, in support of its finding that Telefónica had committed an infringement, certain evidence which had not been communicated to Telefónica during the administrative procedure and on which Telefónica did not have the opportunity to express its views. That evidence cannot be used against Telefónica and should therefore be disregarded as evidence supporting the contested decision. Furthermore, that evidence is vitiated by serious errors and omissions. In the applicants’ submission, if Telefónica had been in a position to express its views on the evidence it would have been able to indicate the existence of those errors and omissions to the Commission and, accordingly, enable them to be corrected before the contested decision was adopted, in such a way that its content and findings would necessarily have been different.

76 It should be borne in mind that it is settled case-law that in all proceedings in which sanctions, especially fines or penalty payments, may be imposed observance of the rights of the defence is a fundamental principle of EU law which must be complied with even if the proceedings in question are administrative proceedings (Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 9, and 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 34).

77 A corollary of the principle of protection of the rights of the defence, the right of access to the file means that the Commission must give the undertaking concerned the opportunity to examine all the documents in the investigation file which may be relevant for its defence. Those documents include both incriminating and exculpatory evidence, save where the business secrets of other undertakings, the internal documents of the Commission or other confidential information are involved (see Aalborg Portland and Others v Commission, paragraph 69 above, paragraph 68 and the case-law cited).

78 The failure to communicate a document constitutes a breach of the rights of the defence only if the undertaking concerned shows, first, that the Commission relied on that document to support its objection concerning the existence of an infringement and, second, that the objection could be proved only by reference to that document. If there was other documentary evidence of which the undertakings concerned were aware during the administrative procedure that specifically supported the Commission’s findings, the fact that an incriminating document not communicated to the person concerned is inadmissible as evidence does not affect the validity of the objections upheld in the contested decision. It is thus for the undertaking concerned to show that the result at which the Commission arrived in its decision would have been different if a document which was not communicated to that undertaking and on which the Commission relied to make a finding of infringement against it had to be disallowed as evidence (see Aalborg Portland and Others v Commission, paragraph 69 above, paragraphs 71 to 73 and the case-law cited).

79 Furthermore, Article 27(1) of Regulation No 1/2003 provides that the parties are to be sent a statement of objections which must clearly set out all the essential matters on which the Commission relies at that stage of the proceedings. That statement of objections constitutes the procedural safeguard applying the fundamental principle of EU law which requires observance of the rights of the defence in all proceedings (see, to that effect, Papierfabrik August Koehler and Others v Commission, paragraph 76 above, paragraph 35 and the case-law cited).

80 That principle requires, in particular, that the statement of objections which the Commission sends to an undertaking on which it envisages imposing a penalty for an infringement of the competition rules contains the essential elements used against it, such as the facts, the characterisation of those facts and the evidence on which the Commission relies, so that the undertaking may submit its arguments effectively in the administrative proceedings brought against it (see Papierfabrik August Koehler and Others v Commission, paragraph 76 above, paragraph 36 and the case-law cited).

81 That requirement is satisfied where the Commission’s decision does not allege that the undertakings concerned have committed infringements other than those referred to in the statement of objections and takes into consideration only facts on which they have had the opportunity of providing an explanation (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 94; Case T-213/00 CMA CGM and Others v Commission [2003] ECR II-913, paragraph 109; and France Télécom v Commission, paragraph 60 above, paragraph 18).

82 The Commission’s final decision is not, however, necessarily required to be a replica of the statement of objections. Thus, it is permissible to supplement the statement of objections in the light of the response supplied by the parties, whose arguments show that they have in fact been able to exercise their rights of defence. The Commission may also, in the light of the administrative procedure, revise or supplement the arguments of fact or of law on which it has relied in support of its objections (see Case T-86/95 Compagnie générale maritime and Others v Commission [2002] ECR II-1011, paragraph 442, and France Télécom v Commission, paragraph 60 above, paragraph 18 and the case-law cited).

83 In effect, the Commission must take into account the factors emerging from the administrative procedure, in order either to abandon such objections as have been shown to be unfounded or to amend and supplement its arguments, both in fact and in law, in support of the objections which it maintains (see Joined Cases 209/78 to 215/78 and 218/78 van Landewyck and Others v Commission [1980] ECR 3125, paragraph 68, and Case C-534/07 P Prym and Prym Consumer v Commission [2009] ECR I-7415, paragraph 40 and the case-law cited).

84 Thus, the rights of the defence are breached as a result of a discrepancy between the statement of objections and the final decision only where an objection stated in the final decision was not set out in the statement of objections in a manner sufficient to enable the addressees to defend their interests (see Case T-48/00 Corus UK v Commission [2004] ECR II-2325, paragraph 100 and the case-law cited).

85 That is not the case where the alleged differences between the statement of objections and the final decision do not concern any conduct other than that in respect of which the undertakings concerned had already submitted observations and are therefore unrelated to any new objection (see, to that effect, Joined Cases C-238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C-250/99 P to C-252/99 P and C-254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002] ECR I-8375, paragraph 103).

86 In the first place, the applicants claim that the Commission relied in the contested decision on ‘new factors’ in the context of the ‘period-by-period’ margin squeeze test.

87 First, they maintain that the Commission used ‘new factors’ to support the need to retain, with respect to the average lifetime of the commercial relationship between Telefónica and its retail market subscribers, an ‘average lifetime’ of [confidential] ( 1 ) years, on the one hand by referring to Telefónica’s original business plan, which expected that the costs of acquiring customers would be recovered in one or two years and, on the other, by indicating that the calculation formula proposed by Telefónica would not have been appropriate for a growing market (recitals 474 to 489 to the contested decision). The applicants thus claim that if they had been able to comment in that regard before the contested decision was adopted they would have been able to demonstrate that the average lifetime of its subscribers was [confidential].

88 In that regard, it must be emphasised, first of all, that the period for amortising subscribers’ acquisition costs of [confidential] years used at recital 489 to the contested decision is the same as that set out at paragraph 383 of the statement of objections. Annex H to the statement of objections (paragraphs 595 to 598), entitled ‘[e]stimate of the average lifetime of Telefónica’s subscribers’, mentioned in that respect Telefónica’s estimates relating to that lifetime, and also reasons why the Commission considers that those estimates underestimated that lifetime (paragraph 598 of the statement of objections). Furthermore, Telefónica set out its arguments in that regard in Section 4.1 of and Annex 5 to its response to the statement of objections.

89 Next, as regards the reference, at recital 476 to the contested decision, to the recovery of subscribers’ acquisition costs on the basis of Telefónica’s initial business plan, it should be observed that the reference, which relies on Annex 10iii to Telefónica’s letter of 21 July 2006 which post-dates the statement of objections (see footnote 492 to the contested decision), was not used in the contested decision to fix the period for amortising subscribers’ acquisition costs (recitals 476 and 489 to the contested decision), although that indication none the less makes it possible to find that the duration of [confidential] years, used by the Commission in order to calculate the ‘period-by-period’ test, is more favourable to Telefónica that the one set out in the business plan.

90 Last, as regards the Commission’s assertion, at recital 482 to the contested decision, that the formula for calculation proposed by Telefónica was not appropriate in a growing market, it should be observed that the applicants were duly informed in the statement of objections of the importance of the calculation of the appropriate amortisation of Telefónica’s costs of acquiring new customers, in particular in growing markets. Thus, at paragraph 380 of the statement of objections, the Commission had already observed that, in a growing market such as the retail market in the present case, the costs of acquiring customers were significant costs that must be amortised over an appropriate period, so that adjustments should be made to Telefónica’s accounts. The assertion at recital 482 to the contested decision constitutes, in that regard, merely a response to the calculations proposed by Telefónica in its letter of 26 March 2004, to which the Commission had already made reference in Annex H (paragraph 595, footnote 504) to the statement of objections.

91 In any event, the Court also rejects the applicants’ argument, set out in their reply, that, if they had been aware of the fact that the Commission would not take account of the average lifetime of Telefónica’s subscribers, they would have been able to show that that lifetime was very [confidential] to that applied by the Commission in the contested decision and that the practice of the national regulatory authorities (‘the NRAs’) was irrelevant. As already stated at paragraph 88 above, the period for amortising subscribers’ acquisition costs of [confidential] years had already appeared at paragraph 383 of the statement of objections, and the Commission had already referred to the practice of the national competition authorities and the NRAs at paragraph 382 of the statement of objections. The Commission had also stated in the statement of objections, moreover, that it was possible that, owing to Telefónica’s anti-competitive conduct, the average duration of its subscriptions was greater than it would have been in a competitive market (paragraph 381 of the statement of objections).

92 The applicants’ complaint that the Commission relied on ‘new factors’ in order to justify the need to apply an average lifetime of [confidential] years must therefore be rejected.

93 Second, in the contested decision the Commission considered that the allocation of the costs achieved by Telefónica underestimated the marginal costs of marketing the broadband services although it had previously stated that that allocation constituted the ‘upper limit’ (paragraphs 407 and 424 of the statement of objections) or that it included a reasonable part of the marketing structure (paragraph 27 of the letter of facts).

94 In that regard, it should be observed that the Commission had already stated, at paragraphs 401 to 407 and 424 of the statement of objections, that Telefónica had underestimated the marketing costs in its analysis of the LRAIC. Thus, the Commission had observed, at paragraph 401 of the statement of objections, that Telefónica had ‘underestimated the [LRAIC] of certain activities, in particular the marketing costs’. The Commission stated that ‘TESAU [had] included only the cost directly attributable to each new subscriber (“premiums and commission”) but [had] not included any costs linked with its marketing structure’. At paragraph 403 of the statement of objections, moreover, the Commission had also stated that ‘TESAU’s ADSL retail activity [generated] a significant share of TESAU’s marketing structure and [that] a part of that structure [should] therefore be taken into consideration in TESAU’s [LRAIC]’. Last, at paragraph 29 of the letter of facts the Commission had emphasised that TESAU’s marketing structure was mainly dedicated to broadband growth. Furthermore, the applicants submitted observations in that regard in their response to the statement of objections and to the letter of facts.

95 As regards the applicants’ assertion, in relation to marketing costs, that the Commission ‘abandoned the lower hypothesis [set out at paragraph 406 of the statement of objections] in favour of the higher hypothesis [set out at paragraph 407 of the statement of objections]’, relying for the first time, at recital 468 to the contested decision, on the increase in Telefónica’s marketing capabilities, it should be emphasised that that development had already been clearly mentioned at paragraph 402 of the statement of objections and paragraph 27 of the letter of facts. At paragraph 402 of the statement of objections, the Commission had also already stated that the ‘lower hypothesis’, namely the calculation of the minimum likely level of LRAIC, was likely to reduce them to a level below the real LRAIC. It had also observed, at paragraph 30 of the letter of facts, relying on paragraph 407 of the statement of objections, which itself referred to the maximum level of LRAIC, that the Commission considered that there was justification for including a part of Telefónica’s marketing costs in its evaluation of the LRAIC with a view to a possible decision. Furthermore, at paragraph 424 of the statement of objections, the Commission had emphasised that the marketing network costs did not include just the costs relating to that network (lower hypothesis), but also the increase in costs of TESAU’s marketing structure attributable to its ADSL retail activity (higher hypothesis). The applicants’ complaint cannot therefore succeed.

96 In the second place, the applicants claim that in the contested decision the Commission introduced elements relating to the DCF method on which Telefónica was not given the opportunity to express its view.

97 First, the applicants maintain that, by altering the reference sources in the context of the ‘period-by-period’ analysis, the Commission also altered the ‘sources of most of the costs and revenues used in its analysis [of the] DCF’, so that the applicants’ considerations in relation to the ‘period-by-period’ analysis are also relevant for the purposes of the analysis of the DCF. However, since the applicants’ arguments in that regard have been rejected (see paragraphs 86 to 95 above), and in the absence of further information on the applicants’ part, in the context of the present plea, concerning any other modifications of the sources of the costs and revenues used in the analysis of the DCF, the present complaint must also be rejected.

98 Second, the applicants submit that in the contested decision the Commission undertook for the first time a ‘sensitivity analysis’ of the terminal value used in its analysis of the DCF, since it calculated such a value on the basis of a hypothetical estimate of the future profitability of Telefónica’s retail trade, using expected future profits for the period 2007 to 2011 generated by customers acquired before 2006, without having mentioned it in the letter of facts. In their reply, the applicants assert in that regard that it follows from recital 372 to the contested decision that the Commission relied on those ‘new calculations’ in order to justify the choice of the terminal value.

99 However, that argument is based on a false premiss. Contrary to the applicants’ contention, the Commission did not calculate a terminal value based on a hypothetical estimate of the future profitability of Telefónica’s retail trade, using expected future profits for the period 2007 to 2011. At recital 370 to the contested decision, the Commission stated specifically that it ‘[was] irrelevant in the present case to assess whether Telefónica’s losses over the period 2001-2006 [could] be recovered by hypothetical future profits from 2007 onwards’. Furthermore, it should be observed that recital 372 to the contested decision is intended to reject the alternative approach proposed by Telefónica in the administrative procedure for the purposes of calculating the terminal value (recital 368 to the contested decision), and to show that Telefónica’s calculation of the terminal value incorporated a number of major flaws that had the effect of overestimating the terminal value (recital 371 to the contested decision). As stated at paragraphs 82 and 83 above, in its final decision the Commission must take into account the factors emerging from the administrative procedure to amend and supplement, both in fact and in law, its arguments in support of the objections which it maintains.

100 In any event, the Commission has stated that the method which it used to calculate the terminal value in the contested decision had already been announced at paragraph 446 of, footnote 302 to and Table 47 in the statement of objections (see also paragraphs 21 and 22 of the letter of facts). That method was also criticised by Telefónica in Section 6.3 of its response to the statement of objections and in Section 5.1.2 of its response to the letter of facts.

101 When questioned in that regard at the hearing, first of all, the applicants stated that there was an obvious difference between Table 47 in the statement of objections and Table 67 in the contested decision, since the data relating to 2006 are not mentioned in the statement of objections. However, it must be held that the absence of such data, which may be explained by the date of the statement of objections, 21 February 2006, does not invalidate the Commission’s assertion that it used the same method in the statement of objections and the contested decision. Next, the applicants reiterate that Table 67 in the contested decision incorporated an ‘analysis of sensitivity’ (relating to the years 2007 to 2011) intended to ‘confirm’ the analysis of terminal value, which is new. However, that argument must be rejected for the reasons set out at paragraph 99 above. Last, the applicants asserted that the Commission had used the minimum LRAIC in the statement of objections, whereas it used the maximum LRAIC in the contested decision. That argument has none the less already been rejected at paragraphs 93 to 95 above.

102 Third, the applicants maintain that the Commission took issue with the use of multiples of revenues proposed by Telefónica in its response to the statement of objections and readjusted the DCF calculations submitted by Telefónica in that response, without Telefónica being heard in that regard (recitals 367 to 377 and 533 to 536 to the contested decision). The Commission also refers in the contested decision to Telefónica’s recent acquisitions of Terra Networks SA and O2 plc (recital 377), thus relying on documents not in the file.

103 In that regard, recital 377 to the contested decision is intended merely to reject the argument submitted by Telefónica in its response to the statement of objections. Thus, as observed at paragraphs 82 and 83 above, additions to the statement of objections made in the light of the responses of the parties, whose arguments demonstrate that they were in fact able to exercise the rights of the defence, are permissible. Furthermore, the evaluation method used at the time of Telefónica’s acquisition of Terra Networks and O2 was mentioned, for the sake of completeness, at that recital solely by way of example, in order to reject the method of multiples of revenues adopted by Telefónica to evaluate its downstream activities in its response to the statement of objections. The Commission therefore did not rely on the documents in question in order to support, in the present case, its objection relating to the existence of an infringement. In accordance with the case-law set out at paragraph 78 above, the applicants’ complaint cannot therefore be upheld. Furthermore, it is apparent from the documentation relating to the hearing of 12 June 2006, placed in the Court’s file, that the calculation of terminal value as a multiple of revenues to which the applicants refer was discussed at the hearing in question.

104 In the third place, the applicants claim that the Commission, in the contested decision, compares market shares for broadband products and narrowband products (recitals 574 to 578), whereas no such comparison was made in the statement of objections or mentioned in the letter of facts.

105 It should be observed that the Commission did not deny in its written pleadings or, when questioned on that point, at the hearing that that comparison was not to be found in the statement of objections or in the letter of facts. However, the assessment of the actual effects of the infringement at recitals 564 to 573 and 579 to 613 to the contested decision is based on numerous other facts already set out at paragraphs 475 to 532 of the statement of objections. As it has not been shown that the removal as evidence of the comparison between market shares for broadband products and market shares for narrowband products would undermine the validity of the objections upheld in the contested decision, it must be considered that the statement of objections contained in the present case the essential facts forming the basis of the Commission’s finding in relation to the existence of the actual effects of the infringement.

106 In the fourth place, in the applicants’ submission, in order to establish the existence of actual effects on the wholesale market, the Commission ought to have used new data concerning Telefónica’s additional net additional shares by comparison with its competitors (recitals 579 to 581 to and Figure 18 in the contested decision).

107 As the Commission stated at the hearing, it had already indicated, at paragraph 38 of and footnote 45 to the letter of facts, [confidential]. It must be held, moreover, as the Commission emphasises, that Figure 18 in the contested decision is a representation of the data relating to market shares or volumes that already appears in Table 64 in the statement of objections. In that regard, the argument put forward by the applicants at the hearing, that, unlike Figure 18 in the contested decision, Table 64 in the statement of objections also refers to the year 2001 and to the operator British Telecom, must be rejected, as those elements do not appear in the contested decision. The applicants’ argument cannot therefore succeed.

108 In the fifth place, the applicants submit that the Commission made criticisms (recitals 606 to 609 to the contested decision) of the price study which Telefónica attached to its response to the statement of objections, which are new and different from those made by the Commission’s head economist at the hearing. It is sufficient to observe in that regard that, since the Commission’s criticisms are merely a rejection of the calculations proposed by Telefónica in the expert’s report attached as Annex 6 to its response to the statement of objections and not new elements in order to support the Commission’s finding relating to the actual effects of Telefónica’s conduct on the relevant markets, no breach of Telefónica’s rights of defence can be established.

109 It follows that the present plea must be rejected in its entirety.

(c) Second plea, alleging errors of fact and of law in the definition of the relevant wholesale markets

110 In the context of the present plea, the applicants dispute the definition of the relevant wholesale markets given by the Commission at recitals 162 to 208 to the contested decision (see paragraphs 9 to 14 above).

111 According to consistent case-law, for the purposes of investigating the possibly dominant position of an undertaking on a given product market, the possibilities of competition must be judged in the context of the market comprising the totality of the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products. Moreover, since the determination of the relevant market is useful in assessing whether the undertaking concerned is in a position to prevent effective competition from being maintained and to behave to an appreciable extent independently of its competitors, its customers and consumers, an examination to that end cannot be limited solely to the objective characteristics of the relevant products, but the competitive conditions and the structure of supply and demand on the market must also be taken into consideration (see Case 322/81 Nederlandsche Banden-Industrie-Michelin v Commission [1983] ECR 3461, paragraph 37; France Télécom v Commission, paragraph 60 above, paragraph 78; and Clearstream v Commission, paragraph 70 above, paragraph 48 and the case-law cited).

112 The concept of the relevant market implies that there can be effective competition between the products which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market in so far as a specific use of such products is concerned (Hoffmann-La Roche v Commission, paragraph 76 above, paragraph 28, and Clearstream v Commission, paragraph 70 above, paragraph 49).

113 It also follows from the Commission notice on the definition of the relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5), paragraph 7, that ‘[a] relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use’. From an economic point of view, for the definition of the relevant market, demand-side substitution constitutes the most immediate and effective disciplinary force on the suppliers of a given product, in particular in relation to their pricing decisions (paragraph 13 of that notice). Supply-side substitutability may also be taken into account when defining markets in those situations in which its effects are equivalent to those of demand-side substitution in terms of effectiveness and immediacy. That means that suppliers are able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices (paragraph 20 of that notice).

114 In the first place, the applicants claim that local loop unbundling, the regional wholesale product and the national wholesale product belong to the same relevant product market. As regards the demand-side substitutability of those products, the applicants assert that the products enable alternative operators to offer the same retail broadband services. They maintain that the Commission acknowledged, moreover, at recitals 154 and 155 to the contested decision, that those products belong to the same relevant retail market.

115 First, the applicants claim that the Commission erred in considering that the substitution costs of the national and regional wholesale products by local loop unbundling were ‘extremely high’ and that such a substitution was a ‘long process’ and required a ‘minimum critical mass’. The applicants also assert that the alternative operators had been able to use the local loop since 2001 and that the local loop made considerable progress between 2004 and 2006.

116 It should be borne in mind that, in the contested decision, the Commission emphasised the considerable investments necessitated by the switch from the national wholesale product to the regional wholesale product (recital 185). The Commission also stated that the switch from the regional wholesale product to local loop unbundling was extremely costly, since it involved rolling out a network from the regional point of interconnection to the local exchanges of Telefónica; significant wholesale charges for switching imposed by Telefónica; and obtaining collocation and other related services in order to be able to provide retail broadband services. Furthermore, according to the Commission, such switching takes a great deal of time, it is not a viable option for the whole of Spanish territory and it requires a minimum critical size (recitals 173 to 177 to the contested decision). The Commission also observed, at recital 180 to the contested decision, that in a letter to the Commission dated 2 March 2005 Telefónica itself had referred to the fact that alternative operators must achieve a critical mass before beginning to invest in their own infrastructure that would enable them to use local loop unbundling.

117 First of all, the applicants have not disputed the findings in the contested decision that, for the purpose of using local loop unbundling, the alternative operators must be physically present and collocate their equipment with that of Telefónica – the only undertaking with a local access network over the whole Spanish territory – and that this required them to install their equipment in Telefónica’s 6836 main distribution frames and entailed very large upfront investments (recitals 80 and 81 to and Table 8 in the contested decision; see also recital 132 to the contested decision). Nor have they disputed, in their written pleadings or at the hearing, that Telefónica’s investments in that regard came to more than EUR 1 500 million, to which must be added the investments necessary for the purpose of connecting to the 109 indirect access points to the regional wholesale product, which represent EUR [confidential] million (recitals 164 and 185 to, Table 9 in and footnotes 73 and 74 to the contested decision). As the Commission correctly observes, those investments are considerable. Thus, the Commission stated, without being contradicted by the applicants, that even the investment of EUR 200 million, which, according to Telefónica, would have been necessary in order for an alternative operator to be able to roll out its local network, represented more than 130% of the revenues received by Jazztel on the retail market between 2001 and 2006.

118 Next, the Court must reject the applicants’ argument that, notwithstanding that Jazztel lacked the ‘critical network size’ (recital 177 to the contested decision) and had a market share of only less than 1% at the beginning of the period 2001 to 2006, it would none the less have been in a position to make an investment of EUR 200 million, which contradicts the assertion at recital 164 to the contested decision that it would take between EUR 580 million and 670 million to roll out a local loop network of between 550 and 575 exchanges.

119 The applicants’ argument is based exclusively on a communication from Jazztel to the Comisión Nacional del Mercado de Valores (Spanish National Securities Commission) of 27 July 2007, in which Jazztel stated that, ‘in the business years 2005 and 2006, the undertaking [had] invested more than EUR 200 million in rolling out the most extensive and most modern latest generation local loop network in Spain’ and that ‘the undertaking [had] the intention to reduce its investments significantly in 2007, when the network development work [would] be finished’. However, it is not apparent from that assertion that the total costs of rolling out Jazztel’s network came to ‘more than EUR 200 million’, but only that that sum was invested in rolling out the network in 2005 and 2006. As the Commission observes, without being contradicted in that regard by the applicants, the amount of the investments mentioned in that communication does not include the investments already made by Jazztel before 2005 for the purposes of rolling out its network, which include, in particular, the 2718 km of the local loop network rolled out by Jazztel at the end of 2004, or the investments which Jazztel will still have to make in order to finalise the roll-out of that network.

120 Furthermore, even on the assumption that, as the applicants contend, on 28 February 2007 Jazztel did in fact succeed in being placed in 607 of Telefónica’s distribution frames, not only does that post-date the infringement period, but it does not necessarily mean that Jazztel had already made the necessary investments to roll out its network as far as those distribution frames. Thus, in March 2006 Jazztel had connected to its network 38 or 44% (according to the Commission) or 53% (according to the applicant) of the 470 ‘local exchanges’ which it had set up. In fact, the applicants’ argument, the accuracy of which is disputed by the Commission, that the connection of the distribution frames to Jazztel’s network is a service independent of unbundling, which the alternative operators can obtain from an operator other than Telefónica, does not call in question the fact that that investment is part of the investments necessary in order for an alternative operator to be able to benefit from the unbundled local loop service (recital 132 to the contested decision). Furthermore, since Telefónica has 6836 main distribution frames, the fact of being placed in 607 of Telefónica’s distribution frames covers, from a geographic viewpoint, fewer than 10% of Telefónica’s exchanges and according to Telefónica itself makes it possible to reach only around 60% of potential customers. Furthermore, that cover was not reached until late in 2006, or six years after the local loop was made available.

121 In that regard, the applicants’ argument that even if the investments required for the purposes of using another wholesale product were actually significant the Commission had still failed to calculate the profits resulting from the use of the local loop (higher revenues, diversity of final retail services and technological independence of Telefónica) must also be rejected. As the Commission correctly stated at recital 176 to the contested decision, an alternative operator wishing to switch from regional wholesale access to local loop unbundling will have to make the investments necessary to roll out its network, but will reap the benefits of that switch only after having achieved a sufficient customer base, which is neither certain nor immediate.

122 Last, the Court rejects the applicants’ argument that the considerable and rapid progress of the local loop between 2004 and 2006, resulting in a coverage of more than 60% of Telefónica’s installations, shows that the ‘time factor’ is not an obstacle to the substitution of local loop unbundling for national or regional wholesale products.

123 As is clear from, in particular, paragraphs 16, 20, 21 and 23 of the notice on the definition of the relevant market for the purposes of Community competition law referred to at paragraph 113 above, and as the Commission correctly observed at recital 172 to the contested decision, the necessary substitutability for the purposes of the definition of the relevant market must materialise in the short term, which, according to recitals 172 to 175 to the contested decision, is not the case here.

124 The argument whereby the applicants seek to invalidate that conclusion, namely that the alternative operators did not deem it appropriate to request access to the local loop before 2004, in a period when they had allegedly achieved coverage of more than 60% of Telefónica’s installations, must be rejected in that regard.

125 While TESAU has been under a regulatory obligation to rent the copper pair to alternative operators since December 2000 (recital 81 to the contested decision), actual use of the local loop began, to a limited extent, only in late 2004 and early 2005 (recital 96 to and Figure 2 in the contested decision). Owing to the necessary investments (see paragraphs 117 to 121 above), and as Telefónica itself has acknowledged (recital 180 to the contested decision), it was only in 2004 that the alternative operators achieved a critical mass in terms of connections and market experience which enabled them to invest in the network infrastructures and thus to begin to switch their wholesale indirect access connections to the local unbundled loop (see also recitals 177 to 180 to the contested decision and paragraph 129 above). Furthermore, as is apparent in particular from recital 143 to the contested decision, significant gaps were detected between the time when the alternative operators requested unbundled access to Telefónica’s local loops and the time when they were granted such access. It should be pointed out in that regard that, as is apparent from Table 60 in the contested decision, whose figures were not disputed by the applicants, the alleged coverage of more than 60% of Telefónica’s installations was achieved only in December 2006, that is to say, at the end of the infringement period.

126 In that regard, the applicants’ argument that the existence of barriers to access to the local loop was denied by the Comisión Nacional de la Competencia (Spanish National Competition Commission) in its decision of 22 October 2007 must also be rejected. Even on the assumption that it follows from that decision that in that case the body responsible for protecting competition did not at any time in the investigation ‘certify that the presumed delays were really delays’, that decision does not call in question the findings made at recitals 139 and 140 to the contested decision, which have not been disputed by Telefónica in its written pleadings, that, since 2002, 55 disputes concerning access to the local loop have been brought before the CMT, most of which resulted in a decision against Telefónica.

127 Second, the applicants maintain that there are wholesale products other than local loop unbundling that make it possible to present a ‘different’ offer, for example telephone services via the IP (Internet Protocol). However, the parties confirmed, in substance, at the hearing that there were functional differences between the national wholesale products, regional wholesale products and local loop unbundling, which, moreover, is apparent from recitals 66, 70, 82, 85, 87, 89, 165 and 171 and footnote 47 to the contested decision. While, admittedly, at the hearing the applicants maintained that the regional wholesale product allowed a ‘certain level of differentiation’, it must be considered, as the Commission makes clear at the abovementioned recitals, that an operator choosing Telefónica’s local loop unbundling can control a substantial part of the value chain and of numerous aspects of its retail service. As is apparent from recitals 82, 87, 89 and 171 to the contested decision, unlike the local loop unbundling, access to national and regional wholesale products does not allow alternative operators to differentiate their retail product significantly from Telefónica’s, which means that they must confine themselves to competing with Telefónica on prices. In that regard, the applicants themselves emphasise in their reply that investment in the local loop results in greater diversity of the final retail services. They refer in that regard to the examples of France Telecom, which was the first undertaking to offer in Spain a product including voice communications and the internet, and Jazztel, which was the first undertaking to market a retail product with a connection speed of up to 20 megabytes per second.

128 Third, the Court must reject the applicants’ argument that there is ‘sufficient substitutability’ between the regional wholesale product, the national wholesale product and local loop unbundling, owing to the fact that in each of Telefónica’s exchanges a sufficient number of alternative operators use a combination of different wholesale products that best meet their needs and that that substitutability ‘on the margin’ is sufficient in the present case for those products to be considered to belong to the same relevant product market.

129 First of all, it should be observed, as the Commission has observed, that the fact that certain operators have invested in order to roll out their own networks and may have increased the use of the local loop with effect from 2004 does not confirm the existence of effective substitutability between the national and regional wholesale products and local loop unbundling during the infringement period, but is the result of a process of progressive switching, described by the Commission, particularly at recitals 93 to 103 to the contested decision. Such switching requires considerable investments over several years, and, owing to the substantial sunk costs associated with that switching and progression on the ‘ladder of investments’ (see footnote 82 to the contested decision), it is unlikely that an alternative operator will substitute the national or regional wholesale products for local looping in the event of a small, but significant and permanent, increase in the price of local loop unbundling.

130 Next, the use by the alternative operators, during the infringement period, on each telephone exchange, of an optimal combination of wholesale products, which would include unbundling of the local loop, has not been established. Thus, it is clear from recitals 102 and 103 to the contested decision, which have not been disputed by the applicants in their written pleadings, that until 2002 France Telecom almost exclusively purchased Telefónica’s national wholesale product, which was replaced, in late 2002, by an alternative national wholesale offer based on Telefónica’s regional wholesale product. Only after February 2005 did the number of France Telecom’s unbundled local loops significantly increase, whereas there was a reduction in the number of alternative national wholesale lines based on Telefónica’s regional wholesale product. Furthermore, until the last quarter of 2004 Ya.com exclusively purchased Telefónica’s national wholesale product and began gradually to use local loop unbundling only from July 2005 onwards, with its acquisition of Albura.

131 Last, the applicants’ argument can apply only to Telefónica’s competitors with a network enabling them to unbundle the local loop, but not to potential competitors of Telefónica which have not yet made investments for the purposes of using the regional wholesale product or local loop unbundling.

132 Fourth, as regards the applicants’ argument that the Servicio de Defensa de la Competencia (Spanish Department for the Protection of Competition) accepted the existence of a single relevant wholesale market in the Telefónica/Iberbanda case (report of the department for the protection of competition N-06038, Telefónica/Iberbanda), it is sufficient to observe that the applicants do not dispute the Commission’s assertion in its written pleadings that in that case the assessment of the operation did not depend on a more or less narrow restriction of the markets, since Iberbanda’s market shares were very small, and that that authority, in its final decision, expressly referred to the distinction drawn by the CMT between local loop unbundling and indirect wholesale access.

133 Fifth, it should be borne in mind that the applicants themselves stated, in their initial response to France Telecom’s complaint, that local loop unbundling and indirect wholesale access were not substitutable (recital 170 to the contested decision). In addition, as the Commission stated at recital 182 to the contested decision, all the NRAs that analysed the wholesale broadband markets in their respective countries, including the CMT in the case of the Spanish market, considered, for similar reasons, that local loop unbundling and the indirect wholesale access products were separate markets. Such an approach is, as the Commission correctly observes, also consistent with Commission Recommendation 2003/311/EC of 11 February 2003 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communication networks and services (OJ 2003 L 114, p. 45), which distinguishes the market for wholesale unbundled access (including shared access) to metallic loops and sub-loops for the purpose of providing broadband and voice services (market 11) from the market for wholesale broadband access (market 12).

134 In the light of the foregoing, it must be considered that the Commission was correct to take the view, at recitals 163 to 182 to the contested decision, that local loop unbundling was not part of the relevant market in the present case.

135 In the second place, the applicants dispute the finding in the contested decision that the regional and national wholesale products do not belong to the same market. First, they claim that the Commission used examples that were theoretical and unconnected with the reality of the Spanish market.

136 In that regard, the Commission did indeed refer, at recital 185 to the contested decision, to the estimates of the French telecommunications regulatory authority (ART) of the costs involved in switching from national wholesale products to regional wholesale products, which would be between EUR 150 million and 300 million, even though it is estimated that in France national coverage could be achieved by interconnecting at 20 indirect access points.

137 However, the ART’s estimates, although relating to a different geographic market, are relevant for the purpose of illustrating the investments necessary in order to roll out such a network. As is clear from footnote 166 to the contested decision, the number of indirect access points is around five times greater in Spain than in France and it may therefore be considered that the costs associated with rolling out a network in Spain would clearly be higher than in France. In addition, as observed at recital 723 to the contested decision, the broadband market in France is characterised by a structure similar to that in Spain, in view of the existence of local, national and regional wholesale access.

138 Second, the applicants maintain that the Commission bases its definition of two distinct markets on the lack of economic justification for switching from the regional wholesale product to the national wholesale product, alleged by France Telecom (recital 187 to the contested decision), whereas France Telecom itself contradicted that assertion in certain documents placed in the file by asserting that an alternative operator might decide to switch from the regional wholesale product to the national wholesale product if the price of the national wholesale product should fall. In addition, Albura succeeded in reproducing Telefónica’s regional access network.

139 In that regard, it should be observed, first of all, that, as is clear from recital 187 to the contested decision, in view of the sunk costs, the alternative operators which have already made the investments necessary to connect with the 109 indirect access points will capitalise on their investments and choose the regional wholesale product rather than concentrate traffic at a unique national access point. Given the costs associated with switching from the national wholesale product to the regional wholesale product, even in the case of a small but significant non-transitory increase in the price of the regional wholesale product, it would be unlikely and irrational from an economic point of view that operators which have already invested in the roll-out of a network will bear the cost of not using that network and decide to use the national wholesale product, which would not give them the same possibilities in terms of control over the quality of service of the retail product as the regional wholesale product. In addition, when questioned in that respect at the hearing, France Telecom actually confirmed that it considered that there was no economic justification for switching from the regional wholesale product to the national wholesale product. While such a switch was made on one occasion, exceptionally, that was on account of a technical constraint linked with the need for France Telecom to obtain additional capacity at the regional wholesale product level. The applicants’ argument cannot therefore be upheld.

140 Third, the applicants’ argument that the Commission in the past accepted ‘asymmetric substitution’ for the purpose of defining the relevant product market must be rejected, since there can be no question of such substitution in the present case, as switching from the national wholesale product to the regional wholesale product takes time and requires significant investment (see paragraph 129 above) and switching from the regional wholesale product to the national wholesale product is irrational from an economic point of view (see paragraph 139 above). Furthermore, it follows from this Court’s case-law that a large discrepancy in the rates of switching between two products does not lend credence to the argument that they are interchangeable in the eyes of consumers (France Télécom v Commission, paragraph 60 above, paragraphs 86 to 91).

141 Fourth, the applicants maintain that the Commission recognised in Recommendation 2003/311 that both the wholesale indirect access products belong to the same market. However, it must be borne in mind that in its statement of grounds Recommendation 2003/311 expressly excludes from its scope the wholesale broadband resale market, that is to say, national access products in a single point like the national wholesale product, in which the alternative operator’s traffic passes integrally through Telefónica’s network, and emphasises the existence of very significant barriers to entry with respect to the wholesale supply of broadband access, in so far as it is necessary to roll out a network in order to provide the service. Furthermore, Article 15 of Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) (OJ 2002 L 108, p. 33), to which the preamble to Recommendation 2003/311 makes express reference, and recital 18 to that recommendation provide that the markets identified for the purposes of regulatory intervention are identified without prejudice to markets that may be defined in specific cases under competition law.

142 Fifth, the applicants claim that the CMT, in its decision of 6 April 2006, ratified by its decision of 1 June 2006, also considered that the regional wholesale product and the national wholesale product are part of the same market. In that regard, unlike the contested decision, the decision of the CMT of 1 June 2006 falls within a framework of a prospective analysis. Furthermore, the Commission, in its observations on the proposal for a decision of the CMT, had also indicated that the current characteristics and the conditions of the Spanish broadband market could potentially justify the segmentation of the wholesale broadband access market into two relevant product markets. Last, the CMT, in its decision of 1 June 2006, itself excluded ADSL-IP Total from market 12. However, Telefónica does not deny that ADSL-IP and ADSL-IP Total are part of the same national wholesale access market (see, in that regard, recitals 88 to 95, 109 and 110 to the contested decision).

143 In the light of the foregoing, it must be concluded that the Commission was correct to consider, at recitals 183 to 195 to the contested decision, that the national and regional wholesale products did not belong to the same market.

144 Consequently, the second plea must be rejected.

(d) Third plea, alleging errors of fact and of law in the establishment of Telefónica’s alleged dominant position on the relevant markets

145 In the context of their third plea, the applicants claim that the Commission made errors of fact and of law in establishing Telefónica’s alleged dominant position on the relevant markets.

146 As a preliminary point, the Court must reject the applicants’ arguments that, in order to find an abuse of a dominant position by Telefónica in the form of a margin squeeze, the Commission ought to have established that Telefónica had a dominant position on both the wholesale market and the retail market. It follows from the case-law of the Court of Justice that the question whether a pricing practice introduced by a vertically integrated dominant undertaking in a wholesale market and resulting in the margin squeeze of competitors of that undertaking in the retail market does not depend on whether that undertaking is dominant in that retail market (Case C-52/09 TeliaSonera [2011] ECR I-527, paragraph 89). The applicants’ arguments concerning the establishment of Telefónica’s dominant position therefore need to be examined only in so far as they relate to the relevant wholesale markets.

147 According to consistent case-law, a dominant position may be defined as a position of economic strength held by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, of its customers and ultimately of consumers (United Brands and United Brands Continentaal v Commission, paragraph 72 above, paragraph 65; Case C-250/92 DLG [1994] ECR I-5641, paragraph 47; Case T-139/98 AAMS v Commission [2001] ECR II-3413, paragraph 51; Case T-65/98 Van den Bergh Foods v Commission [2003] ECR II-4653, paragraph 154; and France Télécom v Commission, paragraph 60 above, paragraph 99).

148 The existence of a dominant position derives in general from a combination of several factors which, taken separately, would not necessarily be determinative (United Brands and United Brands Continentaal v Commission, paragraph 72 above, paragraph 66, and DLG, paragraph 147 above, paragraph 47). Among those factors, the existence of large market shares is highly significant (Case T-30/89 Hilti v Commission [1991] ECR II-1439, paragraph 90, and Case T-66/01 Imperial Chemical Industries v Commission [2010] ECR II-2631 paragraphs 255 and 256).

149 Thus, it is settled case-law that very large market shares are in themselves, save in exceptional circumstances, evidence of the existence of a dominant position. An undertaking which has a very large market share and holds it for some time, by means of the volume of production and the sale of the supply which it stands for — without holders of much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has largest market share — is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which, because of this alone, secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position (Hoffmann-La Roche v Commission, paragraph 76 above, paragraph 41; Van den Bergh Foods v Commission, paragraph 147 above, paragraph 154; and Imperial Chemical Industries v Commission, paragraph 148 above, paragraph 256; see also France Télécom v Commission, paragraph 60 above, paragraph 100).

150 According to the case-law, a market share of 50% constitutes in itself, save in exceptional circumstances, a dominant position (Case C-62/86 AKZO v Commission [1991] ECR I-3359, paragraph 60, and Imperial Chemical Industries v Commission, paragraph 148 above, paragraph 256). Likewise, a market share of 70 to 80% is, in itself, a clear indication of the existence of a dominant position (Hilti v Commission, paragraph 148 above, paragraph 92; Joined Cases T-191/98, T-212/98 to T-214/98 Atlantic Container Line and Others v Commission [2003] ECR II-3275, paragraph 907; and Imperial Chemical Industries v Commission, paragraph 148 above, paragraph 257).

151 In the present case, the applicants maintain that Telefónica does not have a dominant position on the broadband ‘wholesale market’.

152 As regards the broadband internet access wholesale markets, it should be borne in mind that, as is apparent from recitals 162 to 208 to the contested decision and from paragraphs 110 to 143 above, the regional wholesale product and the national wholesale product do not belong to the same product market, so that the possibility that Telefónica has a dominant position on each of those markets must be evaluated separately.

153 In the first place, the Commission considered, at recital 232 to the contested decision, that Telefónica was dominant on the regional wholesale market. In order to reach that conclusion, it relied on Telefónica’s 100% market share and its de facto monopoly on that market (recital 223 to the contested decision). The Commission also referred to considerable barriers to entry on that market, in particular to the fact that alternative operators must build a new alternative local access network or unbundle Telefónica’s local loops.

154 Thus, at recitals 224 to 226 to the contested decision, the Commission emphasised the significant sunk costs for new operators seeking to provide regional wholesale broadband access services through Telefónica’s local loop and also the economies of scale and scope from which Telefónica benefited. At recital 227 to the contested decision, moreover, the Commission stated that there were considerable obstacles and delays in securing access to local loop unbundling during the infringement period, so that even an operator that had already rolled out its own network would not have been able to compete with Telefónica. At recital 228 to the contested decision, the Commission observed that the need to secure a sufficient number of broadband customers represented a further market entry barrier for operators which invested in local loop unbundling, so that they were likely to have higher unit costs than Telefónica while rolling out their local networks. The Commission concluded that alternative operators currently investing in local loop unbundling will not have a significant impact on competition on the regional wholesale access market even in the medium term and that such impact will never be national (recitals 229 and 230 to the contested decision).

155 First, it should be observed that the applicants do not deny that Telefónica had been the only operator to supply the regional wholesale product in Spain since 1999 (recital 223 to the contested decision), thus having a de facto monopoly on that market.

156 Second, the applicants maintain that, in spite of its market share, Telefónica was under constant competitive pressure from its competitors, which consistently and gradually increased their presence on the ‘wholesale market’. In that regard, as observed at paragraph 152 above, the Commission was correct to take the view that the national and regional wholesale products did not belong to the same market. Accordingly, the examples given by the applicants in their reply, relating to Arsys, which launched a retail broadband product using exclusively the wholesale offer of Uni2, to Tele2, to Tiscali and to Auna, which used Albura’s wholesale services, must be rejected, as they related to the national wholesale offer.

157 Third, the applicants’ argument that the ‘wholesale market’ is a ‘contestable market’, on which Telefónica’s customers and competitors could reproduce its network, and were thus in a position to exert effective competitive pressure irrespective of their market share, must be rejected, given the investments necessary to build a new alternative local access network or to unbundle Telefónica’s local loops, which is essential in order for an alternative operator to be able to offer a regional wholesale access product competing with Telefónica’s regional wholesale product (see, in particular, paragraph 129 above).

158 It follows that the applicants have adduced no evidence capable of calling in question the Commission’s conclusion that Telefónica was in a dominant position on the regional wholesale market during the infringement period.

159 In the second place, the Commission considered that Telefónica had a dominant position on the national wholesale access market. Thus, it asserts, at recital 234 to the contested decision, that until the last quarter of 2002 there was no effective alternative to Telefónica’s national wholesale product. Furthermore, since 2002, and throughout the entire infringement period, Telefónica’s market share remained constantly above 84% (recital 235 to the contested decision). At recitals 236 to 241 to the contested decision, the Commission also referred (i) to the significant gap between Telefónica’s market share and those of its main competitors, Telefónica’s market share being more than 11 times greater than its main competitor (recital 236 to the contested decision); (ii) to the economies of scale and of scope and the vertical integration from which Telefónica benefited, which enabled it to recover its costs through the high volumes of traffic generated by its large subscriber base (recital 237 to the contested decision); (iii) to its control of the local loop, which enabled it to influence significantly the availability of competing wholesale products (recital 240 to the contested decision); and (iv) to its network inherited from a former monopoly, which was not easily replicable (recital 241 to the contested decision).

160 For the purposes of showing that Telefónica did not have a dominant position on the national wholesale market, the applicants put forward a number of arguments. First, they maintain that Telefónica’s network is capable of being replicated.

161 Thus, they assert that Telefónica’s network has been fully replicated by several alternative operators. However, as the Commission correctly stated at recital 239 to the contested decision, those examples do not show that Telefónica did not have a dominant position on the national wholesale market.

162 The possible existence of competition on the market is indeed a relevant factor for the purposes of determining the existence of a dominant position. However, even the existence of lively competition on a particular market does not rule out the possibility that there is a dominant position on that market, since the predominant feature of such a position is the ability of the undertaking concerned to act without having to take account of this competition in its market strategy and without for that reason suffering detrimental effects from such behaviour (see Case T-210/01 General Electric v Commission [2005] ECR II-5575, paragraph 117 and the case-law cited, and France Télécom v Commission, paragraph 60 above, paragraph 101).

163 In the present case, the examples given by the applicants do not call in question the matters referred to by the Commission at recitals 235 to 241 to the contested decision, relating in particular to the fact that Telefónica had a market share of over 84% throughout the entire infringement period, the fact that since 2001 that market share had been 11 times greater than its main competitor, or the fact that obstacles prevented Telefónica’s competitors from offering, on a profitable basis, a national wholesale product competing with its own product.

164 Second, the applicants assert that the Commission adopts an ‘essentially dogmatic position’, which in their submission is inconsistent with the position which it adopted in its communications with other European regulatory authorities. In those communications, the Commission considered that competition exercised at retail market level by vertically integrated undertakings may exercise indirect competitive pressure on the wholesale market. Accordingly, the Commiss