Creating information asymmetry to the detriment of competitors in the context of an invitation for bids can constitute an abuse of dominant position

Practices implemented by Télédiffusion de France (TDF) in the sector of terrestrial broadcasting services in the overseas territories were referred to the French Competition Authority by Outremer Telecom (OMT).

OMT complained that TDF had published its technical and pricing bid for overseas hosting late and incompletely. This late publication was made further to an invitation for bids issued by France Télévisions for the award of digital terrestrial television (TNT) broadcasting contracts in the overseas territories.

TDF is an incumbent terrestrial broadcasting operator and owns the majority of the infrastructures necessary for hosting on its sites. This hosting is in fact indispensable for alternative operators such as OMT, first alternative overseas telecommunications operator. The ARCEP (French electronic communications and postal regulatory authority) had even imposed on TDF an obligation to publish reference bids specifying the technical and pricing hosting conditions and the broadcasting infrastructure access conditions. These conditions are indeed necessary for TDF’s competitors to respond to the invitations for bids.

First examining TDF’s position on the market of access services to the infrastructures necessary for digital broadcasting in the overseas territories, the Authority found that TDF holds a dominant position on this market. TDF owns infrastructures which could not be duplicated by the new entrants under reasonable economic conditions and within sufficiently short periods of time to respond to the TNT invitations for bids. Moreover, equivalent hosting services could not be offered by any other telecommunications operator.

When it then analyzed TDF’s contested practices, the Authority indicated that it was not a question of penalizing a breach by TDF of its obligation imposed by the ARCEP to publish a reference bid, but of penalizing an independent practice on the market. The Authority focused on the question of TDF’s liability in using its dominant position to delay without cause the publication of a reference bid which did not include certain key elements. In other words, it was a question of checking whether, according to the Authority, TDF had distorted competition in the France Télévisions invitations for bids by creating information asymmetry between itself and its competitors.

In its decision of February 5, 2015, the Authority concluded that this late and incomplete publication of its reference bid constituted in this case an abuse of dominant position. Contrary to the arguments presented by TDF, the Authority considered that there was no technical or regulatory reason justifying the delay and partial nature of this publication. TDF was aware that this late publication was likely to prevent its competitors for taking part in the invitations for bids issued by France Télévisions under normal competitive conditions, whereas as dominant operator, it had a special responsibility not to distort competition. The Authority found that this practice had not only had potential restrictive effects against the new entrants, but also actual restrictive effects since the practice in issue had allowed TDF to keep its broadcasting monopoly during five years on the market.

Consequently, the Authority imposed a fine of €4.2 million on TDF, penalty increased on the ground that TDF was a repeat offender. It thus recalled the care which must be shown by economic operators when answering invitations for bids to guard against practices characterized as abuses of dominant position, or as illustrated by other cases, concerted practices.

State aids: the General Court of the European Union clarifies the qualification and quantification of the advantage enjoyed in the case of differentiated tax rates

In a judgment of February 5, 2015, the General Court of the European Union challenged the Commission’s quantification of the aid obtained due to differentiated tax rates. In this case, Ireland had adopted an air travel tax (ATT) paid directly to airlines by each passenger leaving an airport situated in Ireland. The ATT was paid on the basis of the distance between the departure airport and the arrival airport at the rate of €2 for a destination no more than 300 km from Dublin airport and €10 in all other cases.

A competitor of the airlines benefiting from a reduced tax rate filed a complaint with the European Commission on the grounds of State aids, denouncing the fact that the lower tax rate largely benefitted domestic airlines, the majority of their flights being to nearby destinations.

The Commission pursued this line of reasoning by upholding that the application of a lower national rate constitutes a State aid as it unlawfully promotes national flights rather than international flights. According to the Commission, this aid, in the form of a reduced tax rate, must be recovered, and the amount corresponding to the difference between the reduced ATT rate and the standard rate of €10, i.e. €8, must be collected for each passenger.

The Court did not call into question the existence of a State aid but condemned the method used to quantify the aid. As the ATT was designed to be reflected in the ticket price, the benefit effectively enjoyed by the airlines does not necessarily lie in the difference between the two rates, but in the possibility of offering customers more attractive prices and therefore increasing turnover. According to the Court, the Commission could not therefore presume that the benefit actually enjoyed and maintained by the airlines was, in every case, equal to €8 per passenger. The recovery of the aid from the beneficiaries, at an amount of €8 per passenger, was therefore annulled by the Court.

The calculation of the amount of the aid in the case of differentiated tax rates is therefore much more complex than the simple difference between the high rate and the low rate. The Commission will have to better explain the competitive advantage secured by the beneficiaries of reduced rates.

Abrupt termination can be settled!

By decision of December 16, 2014, the Supreme Court confirmed that parties can compromise on notice of termination of business relations which could have qualified as insufficient, pursuant to Article L. 442-6 I 5° of the Commercial Code.

In the case at hand, a furniture manufacturer and Ikea had been involved in a business relationship since 1993. In 2009, in the context of the economic crisis and a drop in sales, the parties entered into a settlement agreement fixing an indemnity in favor of the manufacturer.

At the same time, the manufacturer responded to an Ikea call for tenders for provisional volumes and a turnover lower than those in their usual agreements. The distributor agreed to continue their relations under the same pricing and volume conditions until 2010, in consideration for the manufacturer entering into an agreement fixing the terms of the end of their collaboration, intended for December 31, 2012. The agreement reached between the parties provided for a progressive decrease in supply undertakings.

At the end of their business relation, the manufacturer summoned Ikea to pay damages for sudden termination. The Court of Appeal granted the manufacturer’s request, asserting that Article L. 442-6 I 5° of the Commercial Code is an economic public policy provision which cannot be the subject of any derogation by agreement.

The Supreme Court condemned this decision and asserted that, while the parties cannot waive in advance their liability in relation to sudden termination, nothing prevents the parties from fixing the terms and conditions of the end of relations and reaching a compromise on the indemnification of the harm caused.

The contents of the agreement ending the contract or settlement agreement should, however, be balanced. Nothing prevents the public prosecutor or the Minister of the Economy from challenging the lawfulness of the agreement on the grounds of a significant imbalance or other abusive commercial practices.