In this issue:
The CFI’s Judgment in Deutsche Telekom
The Deutsche Telekom case is notable insofar as it finally brings legal certainty to a complex area of practice where law and economics collide, and which is a strategically important precedent for the European Commission given the liberalization of ex-utility sectors that will no doubt give rise to many more margin squeeze cases in practice. That legal certainty has been won, however, at the expense of some much-needed analytical sophistication being developed on how to deal with complex pricing policies in the wake of disruptive technological change. It is, in short, a very blunt legal precedent.
The CFI ruling in Deutsche Telekom provides some clarity on the issues of (i) price squeeze as a stand-alone ground for abuse and (ii) the relevance of the two tests (hypothetical competitor and reasonably efficient competitor) proposed by the Commission in support of a price squeeze allegation. Our comments will focus on these two points. However, we submit that this judgment raises a number of new questions.
In broad terms, Deutsche Telekom shows that the EC courts do n