The European Commission has imposed a fine of 127 554 194 on telecoms operator Telekomunikacja Polska S.A. (TP) for abusing its dominant position in Poland in breach of EU antitrust rules (Article 102 of the Treaty on the Functioning of the EU). As a dominant company TP is under an obligation to allow remunerated access to its network and wholesale broadband services in order to allow the effective entry of alternative operators on downstream telecoms markets. But it consistently refused to do so or made it difficult for more than four years.
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What are the EU antitrust rules and what do they say?
Article 102 of the Treaty on the Functioning of the EU says that “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited”. This article has existed, unchanged, since the Treaty of Rome, signed in 1957. It is part of the ‘acquis’ endorsed by countries that become members of the EU. But similar provisions exist in competition laws in a vast majority of countries around the world, including Poland.
The Commission has the power to impose a fine to sanction antitrust infringements and ensure a deterrent effect. A Commission decision finding an infringement is a proof that the illegal behaviour took place and gives persons or firms affected directly by such anti-competitive behaviour the right to bring the matter before the national courts and seek damages.
Have these rules been applied to the telecoms sector before?
Yes, in a number of cases: against Wanadoo, a subsidiary of France Telecom, in a predatory pricing case; Deutsche Telekom for charging unfair prices to the provision of local access to its fixed network and; Telefonica also for unfair prices in the Spanish broadband market.
This is, however, the first Article 102 decision addressed to a company from a country that joined the EU in 2004. There are open proceedings regarding Slovak Telecom.
What did exactly Telekomunikacja Polska S.A. (TP) do to infringe competition rules?
TP is the owner of the only nation-wide telecom access network and is the only supplier of LLU (Local loop unbundling) and BSA (Bitstream access) in Poland. As a dominant company it is under the obligation to allow remunerated access to its network and broadband services to allow the effective competition on the downstream markets.
The abusive pattern of TP’s behaviour, as described in today’s decision, includes the following elements:
proposing unreasonable conditions governing access to the wholesale broadband products; i.e. exclusion or modification of contractual clauses and extension of deadlines to the detriment of alternative operators;
delaying the negotiation process: for example, in 70% of the negotiations Telekomunikacja Polska did not meet a 90-day regulatory deadline for concluding negotiations;
limiting access to its network by inter alia rejecting alternative operators’ orders on unreasonable grounds;
limiting access to subscriber lines by inter alia rejecting alternative operator s’ orders to activate subscriber lines on unreasonable grounds;
refusing to provide reliable and complete General Information on TP’s network this information was indispensable to allow alternative operators to take business decisions.
How will this decision help to improve the Polish telecommunications market?
TP limited consumer choice and impeded effective access to broadband products and therefore to the Internet, which is a key element for the development of the digital economy. After the Commission opened proceedings against TP in April 2009 the market situation started to improve. By sanctioning TP, the Commission believes that the entry and expansion of new alternative operators in the retail markets will in the future be easier. This should allow Polish consumers to have better access to the Internet and benefit from genuine and effective competition, including better quality (higher broadband connection speeds) and lower prices.
Why is the Commission acting in the market where access is being mandated by national regulation?
The existence of national sector specific regulation does not preclude the application of EU competition rules. In the case at hand, despite the regulatory mechanisms put in place by the Polish National Regulatory Authority (UKE) obliging TP to give access to its network, competition was restricted due to TP’s abusive behaviour. The Commission’s intervention does not in any case relate to the specific infringements of regulations but to TP’s pattern of abusive behaviour over more than four years, which constitutes a breach of Art.102 TFEU.
Did the Commission co-operate with the Polish National Regulatory Authority (UKE) on this case?
Yes, the Commission and UKE have regularly exchanged information essential for the case. These exchanges were held in a co-operative atmosphere. The Commission notes also UKE’s efforts to remedy the situation on the market, in particular via an Agreement concluded between the Regulator and TP in October 2009.
How does the Commission calculate fines in antitrust breaches?
The calculation is based on 2006 Guidelines on the method for setting fines (see IP/06/857). The Commission takes into account, inter alia, the company’s value of sales to which the infringement relates and the gravity and the duration of the infringement. Mitigating or aggravating circumstances are also assessed on a case by case basis. Under EU law, a fine cannot exceed 10% of the total turnover of the company concerned in the preceding business year.
Can TP appeal the Commission decision?
All Commission decisions, be they in the area of antitrust, merger or State aid control, can be appealed before the European Union’s General Court.
Does TP have to pay the fine immediately?
The fine must be paid within three months of the date of notification of the Decision. In case of an appeal, it is normal practice that the fine is paid into a blocked bank account pending the final outcome of the appeal process. Any fine that is provisionally paid will produce interest based on the interest rate applied by the European Central Bank to its main refinancing operations.
Where does the money go?
Once a final judgment has been delivered in any appeal before the EU courts, the money goes into the EU’s general budget, thus reducing the contributions that Member States pay to the EU.
What percentage of TP’s turnover does the fine represent?
The fine represents 3.24% of TP’s turnover in 2010. This is less than half the allowable maximum, which is 10% of a company’s annual turnover.
When is the Decision going to be published?
The 269-page Decision in Polish (the official language version of the Decision) will be made available on the DG Competition website once relevant business secrets have been taken out. English, French and German translations will also be made available on DG Competition’s website in due course. A summary of the Decision will be published in the EU’s Official Journal L series in all languages, once the translations are available.
Source: European Commission
