Brussels, 15 October 2014
Antitrust: Commission fines Slovak Telekom and its parent, Deutsche Telekom, for abusive conduct in Slovak broadband market
See also: MEMO/14/590
Statement by Commission Vice-President Joaquín Almunia: EbS
After an in-depth investigation the European Commission has imposed a fine of € 38 838 000 on Slovak Telekom a.s. and its parent company, Deutsche Telekom AG, for having pursued during more than five years an abusive strategy to shut out competitors from the Slovak market for broadband services, in breach of EU antitrust rules. In particular, the Commission concluded that Slovak Telekom refused to supply unbundled access to its local loops to competitors, and imposed a margin squeeze on alternative operators. Deutsche Telekom as parent company with decisive influence is also responsible for the conduct of its subsidiary; it is therefore jointly and severally liable for Slovak Telekom's fine. Deutsche Telekom also received an additional fine of € 31 070 000 to ensure sufficient deterrence as well as to sanction its repeated abusive behaviour (recidivism) as it had already been fined in 2003 for a margin squeeze in broadband markets in Germany (see IP/03/717).
Commission Vice-President Joaquín Almunia, in charge of competition policy, said: "Slovak Telekom's strategy has distorted competition in the broadband market in Slovakia during more than 5 years, to the detriment of competition and consumers. Slovak Telekom did not only refuse to give access to its unbundled local loops under fair conditions. It also pursued a margin squeeze policy which made it impossible for alternative operators to use its legacy telephone network infrastructure without incurring a loss. As the parent company with decisive influence on its subsidiary Deutsche Telekom has also been held responsible for the abusive conduct."
Slovak Telekom, the incumbent telecom operator in Slovakia, offers, among other things, fixed broadband services over its legacy metallic telephone networks and over fibre networks. In June 2005, the Slovak telecommunications regulator (TUSR) obliged Slovak Telekom to give access to the local loops within its legacy telephone network.
In August 2005, Slovak Telekom published conditions under which it would allow alternative operators to access its unbundled local loops (ULL). These conditions were such as to render the access unacceptable. In particular, Slovak Telekom unjustifiably withheld network information necessary for the unbundling of the local loops, unilaterally reduced the scope of its regulatory obligation to unbundle and set other unfair terms and conditions in relation to each of the steps needed to obtain access (e.g. collocation, qualification, forecasting, repairs and bank guarantees). This delayed or prevented the entry of alternative operators into the retail broadband services market in Slovakia and amounts to a refusal to grant access.
Furthermore, Slovak Telekom set the prices for access to its local loops and its retail prices at levels which would force competitors to incur losses if they wanted to sell broadband services to retail customers at retail prices matching those offered by Slovak Telekom (a so-called "margin squeeze"). Under such conditions alternative operators could not viably enter the Slovak market. Where alternative operators decided to roll out their own networks, market entry only occurred in geographically limited areas and was also delayed.
Both types of behaviour constitute abuses of Slovak Telekom's dominant position, prohibited by Article 102 of the Treaty on the Functioning of the European Union (TFEU).
Deutsche Telekom is a majority shareholder of Slovak Telekom, holding 51% of its shares, and has a number of special rights such as the right to nominate the majority of the Board of Directors and to be informed about all management matters within Slovak Telekom, allowing it to exercise decisive influence over the company. The Commission's investigation revealed that Deutsche Telekom did indeed exercise decisive influence notably through overlaps in senior management personnel and by influencing the decision-making process at Slovak Telekom. Under EU antitrust rules, parent companies exercising such decisive influence are liable for infringements committed by their subsidiaries. Therefore Deutsche Telekom shares liability for the infringement with Slovak Telekom.
The Commission based its fines on its 2006 Guidelines on fines (see IP/06/857 and MEMO/06/256). In setting the level of the fines the Commission took into account the duration of the infringement (from 12 August 2005 to at least 31 December 2010) and its gravity.
Furthermore, Deutsche Telekom had already been fined by the Commission in 2003 for having engaged in a margin squeeze in the market for access to its unbundled local loop in Germany (see IP/03/717). In view of this repeated abusive behaviour (recidivism) the fine to be paid by Deutsche Telekom has been increased by 50%. A further increase of 20% was applied in view the size of Deutsche Telekom which had a worldwide turnover of more than € 60 billion in 2013, to ensure that the fine has a sufficiently deterrent effect.
The total fine for which Deutsche Telekom is held liable is €69 908 000 (including € 38 838 000 for which it is held jointly and severally liable with Slovak Telekom).
The Commission opened an in-depth investigation in April 2009 into Slovak Telekom (see MEMO/09/203) and in December 2010 into Deutsche Telekom (see IP/10/1741) and adopted a statement of objections in May 2012 (see IP/12/462). For further information on the present case, please refer to MEMO/14/590.
Article 102 TFEU prohibits the abuse of a dominant market position which may affect trade between Member States. The implementation of this provision is defined in the Antitrust Regulation (Council Regulation (EC) No 1/2003), which can be applied by the Commission and by the national competition authorities of EU Member States.
Action for damages
Any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. For example, the Commission is aware of damages actions in the United Kingdom concerning Servier's practices in the market for perindopril (see IP/14/799).
The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal. Even though the Commission has fined the companies concerned, damages may be awarded without these being reduced on account of the Commission fine.
In June 2014, the European Parliament approved a proposal for a Directive that aims to make it easier for victims of anti-competitive practices to obtain damages for such infringements (see IP/14/455 and MEMO/14/310). The Directive is based on a proposal by the Commission of June 2013 (see IP/13/525 and MEMO/13/531). The proposal is now with the EU Council of Ministers for final approval. The text of the proposal and more information on antitrust damages actions is available at: