Summary of EFTA Surveillance Authority Decision 070/20/COL of 29 June 2020 relating to proceedings pursuant to Article 54 of the EEA Agreement

(Case No 71480 – Telenor)

(2020/C 292/06)

On 29 June 2020, the EFTA Surveillance Authority (‘the Authority’) adopted a decision relating to proceedings pursuant to Article 54 of the EEA Agreement (‘EEA’). In accordance with Article 30 of Chapter II of Protocol 4 to the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (‘Surveillance and Court Agreement’), the Authority hereby publishes the names of the parties and the main content of the decision, including penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets.

1. INTRODUCTION

1. On 29 June 2020, the Authority adopted a decision under Article 7 of Chapter II of Protocol 4 to the Surveillance and Court Agreement (‘the Decision’), addressed to Telenor Norge AS (including its legal predecessor Telenor Mobil AS) and its parent company Telenor ASA (jointly ‘Telenor’), imposing a fine on Telenor for infringing Article 54 EEA. The Decision concerns anti-competitive conduct (margin squeeze practices), contrary to Article 54 EEA, by Telenor with respect to stand-alone mobile broadband (‘MBB’) services ( 1 ) provided to residential customers in Norway during the period 2008–2012 (‘the Period under Consideration’).

2. PROCEDURE

2. The Authority carried out inspections under Article 20(4) of Chapter II of Protocol 4 to the Surveillance and Court Agreement at Telenor’s premises in Fornebu, Norway, from 3 to 12 December 2012. The inspections continued at the Authority’s premises in Brussels from 12 to 14 March 2013.

3. On 26 March 2014, the Authority initiated proceedings under Article 2(1) of Chapter III of Protocol 4 to the Surveillance and Court Agreement, concerning possible infringements by Telenor of Articles 53 and/or 54 EEA.

4. On 1 February 2016, the Authority notified a Statement of Objections (‘SO’) to Telenor, outlining its preliminary views. Telenor submitted its reply to the SO on 25 April 2016 and an Oral Hearing took place on 3 and 4 October 2016.

5. On 24 June 2019, the Authority notified a Supplementary Statement of Objections (‘SSO’) to Telenor. Telenor submitted its reply to the SSO on 2 September 2019 and an Oral Hearing took place on 10 October 2019.

6. On 27 February 2020, the Authority sent a Letter of Facts to Telenor in order to provide it with the opportunity to comment on additional evidence. Telenor responded to the Letter of Facts on 23 March 2020.

7. On 3 June 2020, the Hearing Officer issued his Final Report.

8. On 10 June 2020, the Advisory Committee on Restrictive Practices and Dominant Positions was consulted and on 26 June 2020 it issued a favourable opinion on the Decision and on the fine imposed on Telenor.

3. FACTS

9. Telenor is the incumbent fixed and mobile communications provider in Norway and the owner of a nationwide mobile communications network. As a vertically-integrated operator, Telenor provided mobile communications services at both the wholesale and the retail level during the Period under Consideration.

10. Access to a public mobile telephone network is a precondition for operators wishing to offer mobile communications services, such as stand-alone MBB services, to end-users. While mobile network operators (‘MNOs’), such as Telenor, use their own network infrastructure (and are thus able to self-supply), non-MNOs depend on being able to buy network access at the wholesale level.

11. During the Period under Consideration, the spread between the prices charged upstream by Telenor to wholesale customers for the supply of wholesale access and origination services on its public mobile telephone network, and the prices charged by Telenor to its own retail customers at the downstream level for residential stand-alone MBB services in Norway, did not allow equally efficient competitors, relying on such wholesale services, to compete with Telenor in the downstream market without incurring a loss.

4. LEGAL ASSESSMENT

4.1. Relevant markets

12. The Decision defines the following relevant wholesale market: the market for access and origination services on public mobile telephone networks. This market includes, for the Period under Consideration, the following services provided across all forms of wholesale access, i.e. access for National Roaming Operators (‘NROs’), Mobile Virtual Network Operators (‘MVNOs’) and Service Providers (‘SPs’): access and origination services for voice calls, SMS (text messaging), MMS, and data services (including mobile telephony data services ( 2 ) and MBB), for residential and business customers, whether pre- or post-paid customers, on all public mobile networks (i.e. GSM networks and 3G (UMTS) and 4G (LTE) networks).

13. The Decision concludes that this wholesale market is national in scope.

14. The Decision defines the following relevant retail market: the market for the provision of stand-alone MBB services to residential customers. This market does not include: (a) fixed broadband services (including private and public Wi-Fi); (b) mobile telephony data services; and (c) MBB services provided to business customers.

15. The Decision concludes that this retail market is national in scope.

4.2. Dominance

16. In view of the market shares held by Telenor on the relevant wholesale market, the lack of material competitive constraints exerted by competing MNOs, the presence of barriers to entry and expansion and the lack of actual and potential competition, as well as a lack of countervailing buyer power, the Decision concludes that Telenor held a dominant position in the wholesale market for access and origination services on public mobile telephone networks in Norway during the Period under Consideration.

4.3. Abuse of a dominant position: margin squeeze

17. The Decision establishes that Telenor abused its dominant position, within the meaning of Article 54 EEA, by imposing margin squeezes between the wholesale prices charged upstream for the supply of wholesale access and origination services on its public mobile telephone network and the retail prices charged downstream for stand-alone MBB services to residential customers in Norway.

18. The Authority’s calculations show that equally efficient competitors using Telenor’s wholesale access and origination services on its mobile telephone network earned or would have earned negative gross margins ( 3 ) and could not replicate profitably Telenor’s residential stand-alone MBB portfolio at the retail level.

19. In particular, Telenor’s pricing practices resulted or would have resulted in negative gross margins for equally efficient competitors at each level of access to its network (NRO, MVNO and SP), on the basis of the: (a) wholesale NRO tariffs charged by Telenor to Network Norway AS, from 1 August 2008 to 31 August 2010 (inclusive); (b) wholesale MVNO tariffs charged by Telenor to Ventelo AS, from 1 January 2008 to 30 November 2010 (inclusive); and (c) wholesale SP tariffs charged by Telenor to SPs, from 1 January 2008 to 31 December 2012 (inclusive).

4.4. Effect on competition and consumers

20. According to case law of the European Courts, when gross margins are negative, as the Authority has found in the Decision, an effect which is at least potentially exclusionary is probable. The Decision thus concludes on this basis, as confirmed by other factors, that Telenor’s pricing practices were likely to hinder or were at least capable of hindering the ability of actual or potential competitors at least as efficient as Telenor itself to enter or trade on the retail market for the provision of stand-alone MBB services to residential customers in Norway.

21. Telenor did not put forward any objective justification or efficiency arguments for its conduct.

4.5. Liability of Telenor ASA

22. The Decision finds that Telenor ASA is jointly and severally liable for the infringements as a parent company and as a result of its decisive influence, during the Period under Consideration, over its wholly-owned subsidiaries, Telenor Mobile Holding AS and Telenor Networks Holding AS which, during that time, in turn owned Telenor Mobil AS and Telenor Norge AS.

4.6. Jurisdiction

23. Since Telenor’s dominance only covers the territory of Norway, the Decision concludes that the Authority is the competent surveillance authority, within the meaning of Article 56(2) EEA, for the application of Article 54 EEA in this case.

4.7. Effect on trade

24. The Decision concludes that Telenor’s conduct had an appreciable effect on trade between Contracting Parties within the meaning of Article 54 EEA.

4.8. Remedies and fines

25. At the time of the adoption of the Decision, Telenor’s abuse of its dominant position had ended with regard to all three margin squeeze infringements. Telenor is, however, required to refrain from adopting any practice or measure having an equivalent object or effect to those of the infringements described in the Decision.

26. The fines imposed on Telenor for the three infringements are calculated on the basis of the principles set out in the Authority’s 2006 Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Chapter II of Protocol 4 to the Surveillance and Court Agreement. The Decision concludes that the final amount of the fines to be imposed on Telenor Norge AS and Telenor ASA, as jointly and severally liable, should be EUR 32 562 000 for the infringement related to the wholesale NRO tariffs charged to Network Norway AS; EUR 27 783 000 for the infringement related to the wholesale MVNO tariffs charged to Ventelo AS; and EUR 51 606 000 for the infringement related to the wholesale tariffs charged to SPs, i.e. EUR 111 951 000 in total for the three infringements.

(1) MBB refers to the service which allows end-users to access the internet via a large-screen device (for example, a laptop, netbook or tablet) without being confined to a fixed location (i.e. ‘on the go’ or ‘on the move’) through external dedicated modules (for example, PC-cards, USB modems or dongles with SIM technology) or via internal (built-in) modules (for example, PCs, laptops or tablets with embedded connectivity). Stand-alone MBB services means MBB subscriptions (tariff plans) which were available for purchase separately from other mobile communications services, i.e. not included in a package or bundle.

(2) Mobile telephony data services are distinct from MBB and refer to services which allow end-users to access the internet, without being confined to a fixed location, via the same mobile telephony subscription/device as voice and SMS/MMS services.

(3) Gross margins are the margins between the wholesale input price and the downstream retail price applied by the dominant firm before taking downstream retail costs into account.