Slovak Telekom: ECJ on essentials of the ‘essential facilities’ doctrine

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NL Law
EU Law
Expertise
EU and Competition Law

Only dominant companies with a “genuinely tight grip” on the market can be forced to grant rivals access to their infrastructure. According to the ECJ’s rulings in Slovak Telekom and Deutsche Telekom, it is only in this scenario that the question of indispensability of the access for rivals comes into play. In the assessment of practices other than access refusal, indispensability may be indicative of a potential abuse of a dominant position, but is not a required condition.

The rulings confirm the high bar set for the Commission when forcing dominant companies into a duty to deal, whilst clarifying that for less intrusive interventions, the indispensability requirement is not part of the legal test. It will be interesting to see how this ruling fits into ongoing investigations in the digital sector and the proposed Digital Markets Act.

Background

In 2014, the European Commission imposed a fine on both Deutsche Telekom (DT) and its Slovak subsidiary Slovak Telekom (ST) for abuse of a dominant position. The Commission found that ST, the incumbent telecommunications operator in Slovakia, refused to provide alternative operators with fair access to its local loop network and engaged in margin squeeze, which had the effect of delaying or preventing the entry of new competitors. On appeal, the General Court dismissed ST's argument that the Commission erred in failing to demonstrate that ST's local loop network was indispensable for rivals to compete (see our January 2019 newsletter).

ECJ rulings

On 25 March 2021, the European Court of Justice (ECJ) dismissed the appeals by DT and ST against the General Court’s rulings. The ECJ found the General Court had rightly rejected the argument that the Commission was required to establish that access to ST’s local loop network was indispensable before concluding on the potential abuse. In this context, the ECJ distinguished between two potential abuse scenarios for rivals regarding a dominant company’s infrastructure: (a) no access and (b) unfair access.

a. No access

In regard of refusals of access, the ECJ reiterates settled case law which states that for a dominant undertaking to be forced to give access to its infrastructure, the following three cumulative conditions need to be fulfilled:

i. the refusal is likely to eliminate all competition on the part of the rival requesting access;

ii. the refusal cannot be objectively justified, and

iii. access to the infrastructure is indispensable for the rival to carry on its business, in that there is no actual or  potential substitute for the infrastructure.

According to the ECJ, the reason for this particularly high standard of indispensability in regard of refusals to grant access is twofold. First, a duty to deal encroaches deeply on dominant companies’ freedom of contract and right to property. Secondly, forcing dominant companies to provide access too easily may have a negative impact on competition in the long term with rivals being less motivated to develop competing facilities, and dominant companies having less incentive to invest.

b. Unfair access

For practices falling short of a refusal to grant access (such as unfair access conditions), the intervenient measures necessary to remedy the situation will be less detrimental to the dominant company’s freedom of contract and right to property. As a result, the indispensability condition does not apply to those practices. It can however still play a role in the assessment, as the likelihood of these unfair practices constituting an abuse increases where access to the infrastructure is indispensable.

The ECJ considered that ST, under the EU telecommunications regulatory framework, was required to give rival companies access to its local loop and therefore could not and did not actually refuse to provide access. As a result, the General Court did not err in law when it considered that the Commission was not required to demonstrate ‘indispensability’ for it to qualify ST’s practices as an abuse of a dominant position.

Conclusion

These rulings show that the Commission will need to meet the high standard of indispensability before forcing dominant companies to grant access to infrastructures they have developed for their own needs. At the same time, practices other than a refusal of access may qualify as an abuse without having to demonstrate that the relevant infrastructure, service or input is indispensable.

The question how this will impact ongoing investigations in the digital sector may soon be answered in the pending appeal in Google Shopping; whereas the interplay between the ‘essential facilities doctrine’ and the upcoming Digital Markets Act is part of ongoing debate (see, for instance, here, here and here).

This article was published in the Competition Newsletter of April 2021. Other articles in this newsletter:

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