The Italian Competition Authority (“ICA”) recently imposed a Euro 103.7 million fine on Telecom Italia S.p.A. (“Telecom”), the Italian telecoms incumbent operator, for abuse of dominance.

In particular, at the end of the investigation, which took almost two years, ICA found that Telecom:

  • Engaged in a selective anticompetitive discounts policy (margin squeeze) in the market for retail access to the public telephone network;
  • Denied access to Telecom’s network and wholesale broadband service to the other licensed operators (“OLOs”).

In relation to the first infringement, ICA held that Telecom -- by charging high prices to OLOs to give them access to the wholesale network -- could apply selective and aggressive discounts to large business clients at the retail level, so that preventing OLOs from operating in a profitable manner by squeezing their possible margins.

ICA reaffirmed margin squeeze as one of the anti-competitive exclusionary conducts consisting of a price reduction in the downstream market (retail level) combined with a high price policy in the upstream market (wholesale level), so to impede competitors from offering the same price in the downstream market because of the insufficient margin to cover the costs that a dominant undertaking can charge in the upstream market.

As to the second infringement, according to ICA, Telecom engaged in an unlawful refusal to supply practice, by discriminating between OLOs and its internal divisions.

Likewise the first infringement, an undertaking which enjoys a dominant position in the upstream market (wholesale level), cannot foreclose competition in the downstream market (retail market), by dealing in a discriminatory way with its commercial partners as long as there is no alternative to the product, services or infrastructure offered by the dominant undertaking. ICA found that Telecom was in a dominant position in the wholesale market, so that it was under an obligation to provide access to its network on terms and conditions that, according to EU competition law, must be fair, reasonable and non-discriminatory (so-called “FRAND terms”).

The ICA’s decision and the high fine imposed on Telecom points out an increasing attention to the telecommunications market, in particular where a former State-owned company is in a dominant position. Moreover, ICA’s decision showed that dominant undertakings should operate more responsibly and mind the possible detrimental effects of their conduct on viable competition.