On 17 March 2020, the Dutch Trade and Industry Appeals Tribunal (“CBb”) set aside the Authority for Consumers and Markets’ (“ACM”) Wholesale Fixed Access decision (“WFA decision”) of September 2018.
In order to encourage competition on the telecommunications markets, European sector-specific regulation requires national regulatory authorities such as the ACM to analyse the competitiveness of certain electronic communications markets and their sub-segments. This is a corollary of the liberalisation of the telecommunications sector from national monopolies to a competitive internal market. In the Netherlands, the ACM may identify telecom companies with significant market power (“SMP”) on markets that are insufficiently competitive, and remedy their SMP by imposing specific obligations.
The ACM adopted the WFA decision following a market analysis in the wake of the joint venture between Liberty Global and Vodafone. The European Commission cleared this tie-up in 2016, which resulted in a second firm on the Dutch telecommunications market owning a fixed and mobile network. Previously, only KPN owned a fixed and mobile network.
One of the findings in the WFA decision was a risk that – due to an increase in symmetry between KPN and VodafoneZiggo – the two firms had joint SMP on the retail market for internet access (and bundles including internet access). To remedy this, the ACM examined the upstream market for wholesale fixed network access and imposed network access obligations on KPN and VodafoneZiggo. This allowed additional companies without a fixed network to request access to the networks of KPN and/or VodafoneZiggo, based on prices regulated by the ACM. These companies could then become active on the retail markets and compete with KPN and VodafoneZiggo.
Before the CBb, KPN and VodafoneZiggo contested, inter alia, the ACM’s finding of joint SMP. Whereas the ACM admitted that, in the absence of alternative wholesale fixed network access providers, KPN and VodafoneZiggo could compete with each other to attract as many customers as possible through competitive pricing, the ACM found it more likely that they would tacitly coordinate their efforts in order to charge supra competitive prices on the retail market, creating a joint SMP risk. To reach this conclusion, the ACM assessed several elements of the Airtours criteria for collective dominance: (i) market transparency, (ii) available retaliatory mechanism, and (iii) absence of external countervailing factors.
The CBb criticised the ACM for its limited response to the grievances of KPN and VodafoneZiggo. In particular, the CBb found it compelling that differences in the networks of KPN and VodafoneZiggo and their retail market shares indicated that the parties could not be assumed to be ‘symmetrical’ – an element that the ACM attached great importance to in its finding of joint SMP. Furthermore, price was unlikely to be the only competitive parameter between KPN and VodafoneZiggo. The CBb recognised that the firms were differentiating their services and leapfrogging each other through innovations.
As regards retaliation, the CBb was particularly critical of the ACM’s analysis. The ACM relied on a game theory assessment to predict likely future outcomes, and found that KPN and VodafoneZiggo each had a clear long-term interest in refusing to grant fixed network access at the wholesale level to maximise their profits on the downstream retail markets. According to the ACM, should one of them deviate from this coordinated outcome, the other party could retaliate by also providing access. The CBb disagreed, however, and pointed to economists’ reports submitted by the parties that showed that providing network access on a wholesale level would be more attractive for KPN than for VodafoneZiggo, a fact that the ACM had not taken into account. The CBb held that this undermined the ACM’s game theory analysis, since if KPN were to provide wholesale access to its networks, there would not be any expected retaliation at the wholesale access level by VodafoneZiggo. Coordination was also less likely to occur in the absence of proportionate disciplining possibilities: the only options are granting or refusing wholesale network access. Network access is granted for several years, meaning that a swift return to the optimal coordinated outcome – the refusal of network access by KPN and VodafoneZiggo – would not be possible.
According to the CBb, the ACM had insufficiently taken into account the competitive threat from these external factors. KPN and VodafoneZiggo identified external factors that could destabilise coordination between them, such as over-the-top service providers, the rollout of fiberglass networks, a small telecom provider growing its network by takeovers, and mobile providers that offer residential 4G internet.
Lastly, the CBb considered that at the moment – despite network access obligations incumbent on KPN – the market shares of providers other than KPN and VodafoneZiggo were still limited. This was an indication that network access obligations were not relevant in determining whether the retail market for internet access (and bundles including internet access) is competitive. The CBb is therefore not convinced that access obligations are necessary to make a difference in this regard.
The CBb concluded that the ACM failed to establish to a sufficient extent that there was a risk of tacit coordination by KPN and VodafoneZiggo on the market for (bundled) internet access. The CBb therefore set aside the ACM’s WFA decision in its entirety, releasing KPN and VodafoneZiggo from their obligations. The CBb’s judgment clearly demonstrates that the ACM must provide robust evidence for any finding of joint SMP, and that it is obliged to thoroughly consider, and if necessary rebut, the economic models and other evidence submitted by regulated companies.
On 17 March 2020, the Dutch Trade and Industry Appeals Tribunal (“CBb”) set aside the Authority for Consumers and Markets’ (“ACM”) Wholesale Fixed Access decision (“WFA decision”) of September 2018.
In order to encourage competition on the telecommunications markets, European sector-specific regulation requires national regulatory authorities such as the ACM to analyse the competitiveness of certain electronic communications markets and their sub-segments. This is a corollary of the liberalisation of the telecommunications sector from national monopolies to a competitive internal market. In the Netherlands, the ACM may identify telecom companies with significant market power (“SMP”) on markets that are insufficiently competitive, and remedy their SMP by imposing specific obligations.
The ACM adopted the WFA decision following a market analysis in the wake of the joint venture between Liberty Global and Vodafone. The European Commission cleared this tie-up in 2016, which resulted in a second firm on the Dutch telecommunications market owning a fixed and mobile network. Previously, only KPN owned a fixed and mobile network.
One of the findings in the WFA decision was a risk that – due to an increase in symmetry between KPN and VodafoneZiggo – the two firms had joint SMP on the retail market for internet access (and bundles including internet access). To remedy this, the ACM examined the upstream market for wholesale fixed network access and imposed network access obligations on KPN and VodafoneZiggo. This allowed additional companies without a fixed network to request access to the networks of KPN and/or VodafoneZiggo, based on prices regulated by the ACM. These companies could then become active on the retail markets and compete with KPN and VodafoneZiggo.
Before the CBb, KPN and VodafoneZiggo contested, inter alia, the ACM’s finding of joint SMP. Whereas the ACM admitted that, in the absence of alternative wholesale fixed network access providers, KPN and VodafoneZiggo could compete with each other to attract as many customers as possible through competitive pricing, the ACM found it more likely that they would tacitly coordinate their efforts in order to charge supra competitive prices on the retail market, creating a joint SMP risk. To reach this conclusion, the ACM assessed several elements of the Airtours criteria for collective dominance: (i) market transparency, (ii) available retaliatory mechanism, and (iii) absence of external countervailing factors.
The CBb criticised the ACM for its limited response to the grievances of KPN and VodafoneZiggo. In particular, the CBb found it compelling that differences in the networks of KPN and VodafoneZiggo and their retail market shares indicated that the parties could not be assumed to be ‘symmetrical’ – an element that the ACM attached great importance to in its finding of joint SMP. Furthermore, price was unlikely to be the only competitive parameter between KPN and VodafoneZiggo. The CBb recognised that the firms were differentiating their services and leapfrogging each other through innovations.
As regards retaliation, the CBb was particularly critical of the ACM’s analysis. The ACM relied on a game theory assessment to predict likely future outcomes, and found that KPN and VodafoneZiggo each had a clear long-term interest in refusing to grant fixed network access at the wholesale level to maximise their profits on the downstream retail markets. According to the ACM, should one of them deviate from this coordinated outcome, the other party could retaliate by also providing access. The CBb disagreed, however, and pointed to economists’ reports submitted by the parties that showed that providing network access on a wholesale level would be more attractive for KPN than for VodafoneZiggo, a fact that the ACM had not taken into account. The CBb held that this undermined the ACM’s game theory analysis, since if KPN were to provide wholesale access to its networks, there would not be any expected retaliation at the wholesale access level by VodafoneZiggo. Coordination was also less likely to occur in the absence of proportionate disciplining possibilities: the only options are granting or refusing wholesale network access. Network access is granted for several years, meaning that a swift return to the optimal coordinated outcome – the refusal of network access by KPN and VodafoneZiggo – would not be possible.
According to the CBb, the ACM had insufficiently taken into account the competitive threat from these external factors. KPN and VodafoneZiggo identified external factors that could destabilise coordination between them, such as over-the-top service providers, the rollout of fiberglass networks, a small telecom provider growing its network by takeovers, and mobile providers that offer residential 4G internet.
Lastly, the CBb considered that at the moment – despite network access obligations incumbent on KPN – the market shares of providers other than KPN and VodafoneZiggo were still limited. This was an indication that network access obligations were not relevant in determining whether the retail market for internet access (and bundles including internet access) is competitive. The CBb is therefore not convinced that access obligations are necessary to make a difference in this regard.
The CBb concluded that the ACM failed to establish to a sufficient extent that there was a risk of tacit coordination by KPN and VodafoneZiggo on the market for (bundled) internet access. The CBb therefore set aside the ACM’s WFA decision in its entirety, releasing KPN and VodafoneZiggo from their obligations. The CBb’s judgment clearly demonstrates that the ACM must provide robust evidence for any finding of joint SMP, and that it is obliged to thoroughly consider, and if necessary rebut, the economic models and other evidence submitted by regulated companies.