Telenor, a Norwegian telecom, abused its dominant position. This was the ruling pronounced by the EFTA Surveillance Authority under the rules in force in the European Economic Area. The case is worth examining, as the powers of this body also cover the European Union and may apply to the activities of Polish companies.
Many competition authorities operate in the European Economic Area, the free trade area and common market comprising the European Union and the European Free Trade Association member states (with the exception of Switzerland). In addition to the EU (including the European Commission) and national authorities, these include EFTA authorities, including the EFTA Surveillance Authority (ESA). Among other things, ESA is the competent body for competition cases within the EEA as specified in the Agreement on the European Economic Area. ESA’s decision in the Norwegian telecom case offers a reminder that there is a risk of intervention by supranational competition authorities also outside of the EU.
ESA’s decision in Telenor
Telenor is a Norwegian telecom group which until 1998 was a monopolist on the telecommunications services markets in Norway. In December 2012, ESA conducted a search at the offices of Telenor Norge AS and its parent company, Telenor ASA, in Norway. The materials obtained allowed ESA to initiate proceedings in March 2014 to determine whether there was an infringement of EEA competition law. In February 2016, ESA issued written objections, stating that according to the body’s preliminary findings, Telenor was abusing its dominant position through a margin squeeze (a practice where a dominant undertaking charges prices in an upstream market for a product or service which, compared to those charged in the downstream market, do not allow the competitors of the dominant undertaking to operate profitably in the downstream market on a lasting basis). In essence, Telenor’s pricing practice resulted in elimination of competitors from the standalone mobile broadband market for private users in Norway by applying prices preventing them from competing effectively with Telenor. After another three years of proceedings, ESA completed the charges in June 2019 and finally rendered a decision on 29 June 2020.
ESA found that Telenor held a dominant position on the market for wholesale mobile access and call origination, constituting an upstream market for mobile telecommunications services in Norway. The prices for wholesale access to the mobile network applied by Telenor exceeded the operator’s own prices for standalone mobile broadband services for individual customers. This practice of margin squeeze meant that Telenor’s competitors in the standalone mobile broadband market were not able to offer users competitive prices for mobile internet access or promotions, for example regarding the amount of data to be used, based on the wholesale access prices dictated by Telenor. In its decision, ESA found that Telenor abused its dominant position in a manner prohibited by Art. 54 of the EEA Agreement, and imposed a fine of EUR 111,951,000, taking into account the duration and gravity of the infringement. The fine was calculated on the basis of Telenor’s revenue in the markets affected by the infringement.
By the way, it is worth noting that in a similar case in 2011, the European Commission imposed a fine of EUR 127.5 million on what was then Telekomunikacja Polska (Case COMP/39.525).
Competition law in the EEA
The ESA decision was based on provisions of the EEA Agreement constituting competition rules applicable in the EEA, analogous to EU law (Art. 101 and 102 of the Treaty on the Functioning of the European Union). They prohibit:
- Anti-competitive coordination between companies, i.e. agreements and concerted practices which may affect trade between the parties to the EEA Agreement and have as their object or effect the prevention, restriction or distortion of competition within this territory (Art. 53 of the EEA Agreement), such as price agreements, market share restrictions, and market sharing
- Abuse of a dominant position by companies through practices excluding other companies from the market or imposing unfair prices or other commercial terms making it possible to exploit that position to the detriment of consumers (Art. 54).
The EEA Agreement also sets out the rules for control of concentrations that may impede effective competition in the EEA.
Additional EEA Agreement protocols regulate the general rules for implementing these provisions. ESA has also issued guidelines and clarifications on interpretation of the rules and application of the agreement and the procedures for antitrust proceedings within the EEA.
Thus Art. 54 of the EEA Agreement prohibits a company or group of companies from abusing its dominant position on the market within the territory of the EEA. An additional condition for ESA’s intervention is the effect of the practice on trade within the EEA. The substance of this ban is almost identical with the TFEU provisions in this respect.
Under Art. 54 of the EEA Agreement, abuse of a dominant position may consist in particular in:
- Imposing unfair purchase or selling prices or other unfair trading conditions
- Limiting production, markets or technical development
- Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage
- Other activities excluding competitors from the market to the detriment of consumers.
Among examples of abuse of its position by a dominant undertaking, ESA explicitly mentions the practice of margin squeeze against wholesale customers who are also competitors of the dominant undertaking.
ESA may impose fines for infringements of Art. 53 and 54 of the EEA Agreement.
Competence of the European Commission and ESA
Due to the almost identical substantive scope and largely overlapping territorial powers of ESA and the European Commission in the area of practices restricting competition, it was necessary to establish rules for the intervention of either of these bodies. The division of powers is governed by Art. 56 of the EEA Agreement on practices restricting competition and Art. 57 with regard to control of concentrations. They adopt a one-stop–shop principle: in any case, one of the authorities has exclusive powers; either ESA or the Commission is competent, but never both. According to this principle, in cases involving infringements of Art. 53 or 54 of the EEA Agreement, ESA is competent for cases where trade is only affected between EFTA member states belonging to the EEA. Similarly, ESA is competent for cases where the company holds a dominant position only in EFTA states. That was the case with Telenor.
On the other hand, the Commission is competent for infringement of prohibitions of practices restricting competition under the EEA Agreement if they also constitute an infringement of EU competition rules (i.e. they simultaneously affect trade between EU member states). The Commission then applies the provisions of the EEA Agreement alongside the TFEU.
In mixed cases, i.e. for practices affecting trade between EFTA member states and EU member states, powers are determined on the basis of the proportion of the undertakings’ turnover in each country. ESA is competent for cases where the companies’ turnover in EFTA states is at least 33% of their EEA turnover.
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An awareness of the ESA rules and jurisdiction is essential for compliance with competition law in Europe, both within and outside the EU, in EEA countries. On one hand, a Polish entity aggrieved by an agreement restricting competition operating in an EFTA member state not belonging to the EU, but belonging to the EEA, or abuse of a dominant position there, may use ESA’s powers to fight such infringement. On the other hand, companies operating in these EFTA member states should bear in mind that any practice restricting competition under EU law (Art. 101 and 102 TFEU) is also prohibited in the wider EEA territory, and the risk of intervention of competition authorities should be reckoned with also outside the EU.
ESA’s power to control concentrations should also be borne in mind, but this is a topic for a separate article.
Dr Marcin Kulesza, Competition & Consumer Protection practice, Wardyński & Partners