The ECJ confirmed on 10 July 2014 the method established by the EC in a July 2007 decision for analyzing margin squeeze. Margin squeeze can arise when the price charged for an upstream input by a dominant company that is also active downstream using that input does not allow its downstream competitors sufficient scope to run a profitable business.
The case concerned Spanish incumbent telecoms operator Telefónica. The court confirmed that the EC had correctly demonstrated the existence of a margin squeeze with potential anticompetitive effects. In particular, the conduct of Telefónica was likely to reinforce the barriers for entry or expansion of competitors in the retail broadband market in Spain, which was downstream of certain markets in which the company was dominant. The court also confirmed the position that national legislation concerning telecommunications does not release dominant firms from their obligation to respect EU competition law.
The case is important for dominant companies that supply competitors downstream and for these competitors when dealing with such dominant companies, whatever the sector.