Margin Squeeze in Regulated Industries: The CFI Judgment in the Deutsche Telekom Case

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Pierre-André Buigues, Robert Klotz, Jul 10, 2008

n its long-awaited ruling of April 10, 2008, the Court of First Instance upheld the decision of the European Commission imposing on the German incumbent operator Deutsche Telekom a fine of EUR 12.6 million for abuse of a dominant position on the market for local access to its fixed network. The Commission found that the German incumbent operator had charged, between 1998 and 2003, a higher price to its competitors for the provision of wholesale access to subscriber lines than what it had claimed from its own retail customers for the subscription to the fixed telephony network. Deutsche Telekom’s market behavior was thus tantamount to an abusive margin squeeze. The judgment is noteworthy in three points:

  • first, it constitutes the first clear legal confirmation that the margin squeeze represents a stand-alone type of abuse;
  • second, it defines the scope of application of the competition rules in sectors subject to ex-ante regulation; and
  • third, the judgment sheds some light on the extent to which an effects-based analysis is required in order to establish that a certain practice is contrary to Article 82 EC.

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