An extract from The Dominance and Monopolies Review - 7th edition

Abuse

The NMCC has also adopted the definition of 'abuse' developed by the EU courts in numerous decisions, such as in Retevisión/Telefónica. Furthermore, the Supreme Court (TS) has explicitly established that Article 2 of the LDC must be interpreted in light of the EU case law concerning Article 102 of the TFEU. It has also been confirmed that Article 2 of the LDC and Article 102 of the TFEU do not prohibit dominance in itself, but only the use of such a position to impose commercial conditions and to obtain advantages that the undertaking would not be able to obtain under normal competitive conditions.

In line with Michelin I and subsequent abuse of a dominant position EU case law, the NMCC and the courts have held that dominant undertakings have a special responsibility not to allow their conduct to impair genuine undistorted competition. As to the list of activities contained in Article 2 of the LDC, it is well established that it must be interpreted as being open-ended.

Abuse of a dominant position has generally been described by the NMCC as constituting an objective concept: thus, a priori, intent should be irrelevant in determining whether conduct is abusive. However, traditionally intent has played a significant role in distinguishing between abusive conduct and competition on the merits. In fact, it has even been held on some occasions that intent is a necessary element that must be taken into account when assessing the lawfulness of allegedly anticompetitive behaviour. It is also noteworthy that the NMCC's early decisional practice did not consider it necessary to prove actual anticompetitive effects to establish that conduct was abusive.

In an attempt to clarify the conditions of the notion of 'abuse', in 2006, the TS established that the decisive element in identifying an abuse is not the intention of the dominant undertaking, but rather the objectively illegal nature of its conduct. It was stated, for instance, that the willingness to prevent an operator from entering the market may not be objectionable in itself if implemented through legitimate means. However, although such a statement places the emphasis on objective considerations, it does not definitively rule out the need to take intent into account.

In this context, it has been noted that even if this test does not formally require the proof of anticompetitive effects, in practice, it is very similar to an effects-based approach. It has been argued that today, Article 2 of the LDC leaves no room for per se abuses and, therefore, a given conduct may only be deemed contrary to such a provision if it is liable to give rise to anticompetitive effects, even if these effects do not actually materialise in a specific case. Recent NMCC decisions confirm this shift towards an effects-based approach. This said, the relevance of effects and intent in the assessment of potentially abusive conduct must logically be analysed by reference to the specific forms of abuse.

Finally, although the NMCC has often been criticised for not being sufficiently rigorous in its economic assessment of exclusionary practices, decisions such as Transporte Televisión suggest that the NMCC is increasingly willing to base its decisions on solid economic grounds and analysis.

i Exclusionary abuses

In its Altadis judgment on predatory pricing, drawing on the criteria set out in Akzo and Tetra Pak, the TS held that when prices are set below average variable costs, they are presumed to be abusive, while if they are set at a level above average variable costs but below average total costs, they are only deemed abusive if they constitute part of a strategy to exclude competitors. The TS concluded that the decisive element defining predation was the intention to eliminate a competitor. While in the former case such intention would be presumed, in the latter case it must be proven.

In Transporte Televisión, the NMCC fined Abertis Telecom for having abusively squeezed the margin between the wholesale prices at which access was granted to digital terrestrial television (DTT) transmission centres and the retail prices for DTT signal transport services. The NMCC held that Abertis had control over essential inputs and, after applying the 'as-efficient competitor test', concluded that such conduct constituted abuse of a dominant position, insofar as it hindered the entry of competitors in the DTT signal transport and distribution market. The NMCC noted that entry in the retail market was both technically viable and economically possible, and thus the lack of effective competitors could only be the result of the pricing policy adopted by Abertis.

The NMCC's decisions in Llamadas Móviles, Correos 2 and Telefónica confirmed that the key test to determine whether a margin squeeze has taken place is the 'as-efficient competitor test'. In Llamadas Móviles, the NMCC established that proving the existence of exclusionary anticompetitive effects is essential to conclude that a margin squeeze constitutes a violation of Article 2 of the LDC and Article 102 of the TFEU.,

In its most recent margin squeeze case, Nokia, the NMCC fined Nokia for having abusively squeezed the margin between the wholesale prices for its support services for Global System for Mobile Communications-Railway (GSM-R) Nokia equipment and the retail prices for GSM-R network maintenance services. The NMCC held that Nokia's support services were necessary to provide GSM-R network maintenance services downstream. The NMCC concluded that Nokia had abused its dominant position because the margins of an 'as-efficient competitor' would be negative and it was 'likely' that Nokia's conduct had hindered competition.

The NMCC decision in Iberia constitutes a key precedent on loyalty rebates. This case concerned a target rebate scheme whereby travel agencies benefited from rebates only if their purchases had increased in comparison with their purchases in the previous year. These rebates were analysed in light of the criteria set out in Hoffmann La Roche and Michelin and were deemed to be abusive insofar as they gave rise to harm to consumers and competitors.

In Unión Española de Explosivos, the TS assessed exclusivity clauses in light of Article 2 of the LDC. The TS held that such clauses constituted part of a foreclosure strategy engaged in to prevent potential competition. It has been argued that while exclusivity clauses had been traditionally considered as per se abuses by the NMCC, this approach changed in Airtel/Telefónica, where the NMCC applied an effects-based approach to exclusivity, and as a result of the de minimis rule contained in Article 5 of the LDC.

As regards leveraging practices, in BT/Telefónica, the NMCC considered that Telefónica had unlawfully tied the renting of international circuits to that of national circuits, where competition was less intense, which had the effect of restricting potential competition. In recent years, the NMCC has imposed severe fines on several energy companies for having engaged in leveraging practices. For instance, in Endesa Instalación, this company was deemed to have taken advantage of its position in the distribution market to increase its market power on the neighbouring market for electrical installation work (i.e., by making use of information to which it had privileged access because of its status as a distributor, offering to carry out installation work for large customers).

Regarding refusal to deal, it has been noted that the NMCC has generally been more willing to consider such conduct abusive when the company requesting supply was already a client or competitor of the dominant undertaking and when such refusal constituted an absolute refusal to deal. In McLane/Tabacalera, the NMCC concluded that by refusing to supply certain products, Tabacalera abused its dominant position since the products in question were indispensable to compete in the wholesale distribution market. Tabacalera was deemed to have attempted to foreclose potential competition to protect its position in the market, which had recently been liberalised. In an older case, Iasist/3M, a refusal to license case, the NMCC considered such conduct abusive despite the lack of indispensability, given the 'excessive influence' that this conduct could have on the competitive conditions of the market in which the complainant operated.

In Correos, a more recent refusal-to-deal case, the NMCC fined Correos, the Spanish public postal services operator and owner of the public postal network, for ceasing to supply competitors with wholesale access services, and in particular, those related to the delivery of administrative notifications. The NMCC found that this conduct was abusive because access to the Correos network was necessary to effectively compete in the downstream market for the delivery of administrative notifications, this network could not be replicated and such conduct was not objectively justified.

ii Discrimination

According to Article 2(2)(d) of the LDC, discriminatory pricing may be abusive if it unjustifiably places certain competitors at a disadvantage. In recent years, there has been a considerable amount of abuse of a dominant position enforcement in this field. For instance, in Mediapro, the NMCC considered that by engaging in unjustified discrimination in licensing the use of broadcasting rights, Mediapro had hindered competition in the market for the resale of audiovisual broadcast rights of football matches and in the downstream television markets (especially pay TV). In Renfe Operadora, the NMCC fined Renfe, the state-owned railway company in Spain, for imposing discriminatory commercial conditions on certain purchasers of its railway traction services for the transport of goods (e.g., only some purchasers were subject to cancellation penalties).

The NMCC has also focused on discrimination in several cases concerning collecting societies. For instance, in AGEDI/AIE Radio, the NMCC concluded that the remuneration system created by two collecting societies for the use of music by radio stations was in breach of Article 2 of the LDC and Article 102 of the TFEU, as it unjustifiably placed certain radio stations that were subject to higher fees at a competitive disadvantage.

iii Exploitative abuses

Exploitative abuses are at the forefront of the NMCC's enforcement priorities. This lies in stark contrast to the Commission's quasi-exclusive focus on exclusionary abuses. By far the largest fine in recent years was levied on three telecommunications companies for excessive pricing.

In the past, a number of benchmarks have been used to determine whether prices are excessive (e.g., historical price data, production costs and costs in other competitive geographic markets). In recent cases, the NMCC has relied on a variety of benchmarks, such as, among others, those contained in regulatory prescriptions, price levels in other EU Member States and prices charged by the same undertaking to operators in other sectors.

In Mensajes Cortos, the NMCC concluded that three mobile network operators had priced termination services at an excessively high level, leading to higher retail prices for short message service (SMS) and multimedia messaging service (MMS) users. In reaching these conclusions, it was noted, inter alia, that prices of termination services had been high and stable over the relevant period, despite considerable traffic increase and cost reductions; and wholesale termination services prices for short messages in Spain were among the highest in Europe.

In Endesa Instalación, the NMCC laid out a non-exhaustive list of the structural market conditions under which excessive pricing is likely, and of the benchmarks that may be used to determine whether prices are excessive. As regards the former, the NMCC concluded that excessive pricing is likely when prices are set by a company that is in a monopoly or quasi-monopoly situation, and in markets characterised by the existence of high barriers to entry and relatively inelastic demand. As regards the latter, the NMCC concluded that prices may be deemed excessive by reference to the costs of the product or service, or to the prices of the product or service in a competitive situation, in other geographical markets or in a different time period.

In SGAE-Conciertos, the NMCC established that the fees charged by the SGAE, a collecting society, as consideration for the right to publicly play musical content subject to copyright in concerts in Spain, were excessive and thus in breach of Articles 2 of the LDC and 102 of the TFEU. The NMCC carried out an in-depth analysis of the rates charged by collecting societies in other EU Member States, and observed that the fees charged by the SGAE were significantly higher than the rates paid in 73 per cent of the EU Member States and in the United States. The NMCC concluded that such fees had an exploitative effect on concert promoters and could indirectly prejudice consumers by leading to higher ticket prices.