On 26 May 2009, the Belgian Competition Council imposed a fine of €66.3 million on mobile telephone operator Proximus for abusing its dominant position and excluding its rivals from the market for business customers. Mobile termination rates were at the heart of the Council's investigation, which found that Proximus adopted a "margin squeeze" strategy in 2004 and 2005. The probe was prompted by a complaint from rival operator BASE in 2005 and has resulted in the largest fine ever imposed by the Belgian regulator.
Background to the case
Proximus had offered extremely low rates to its business customers. These rates served to make competition impossible as they were below the costs that rival operators were required to pay Proximus for calls to Proximus customers. Proximus, who dominated the business market, forced all other operators to operate at a loss on the majority of potential business customers. As a result, its rivals - BASE, Mobistar and MVNOs (Mobile Virtual Network Operators) - were excluded from the business market.
Procedural steps
BASE submitted a complaint to the Belgian competition authorities in 2005 alleging that Proximus was engaging in a number of exclusionary practices, in particular on the market for business customers. The complaint made by BASE was subject to a thorough investigation by the Competition Department, which performed an extensive search at Proximus’s offices in January 2006.
On 23 April 2008, the Competition Department transmitted its final report to the Competition Board (the Belgian Competition Council). In this report it concluded that during 2004 and 2005 Proximus had abused its dominant position on the business market through a variety of different practices. The Council then heard submissions from Proximus, the prosecutor, BASE and Mobistar as well as the regulator responsible for the telecommunications sector in Belgium, I.B.P.T. (Institut belge des services postaux et des telecommunications).
Decision of the Belgian Competition Council (not yet publicly available)
The Council found that Proximus had a dominant position on the mobile telecommunications market in Belgium between 2002 and 2005 and also an important market position on the specific market segment of business customers. Proximus’ market share was substantially higher than the market shares of its main competitors and its position was further reinforced by additional factors including the possibility of it using the network of retail shops (“téléboutiques”) of its parent company, the Belgian incumbent fixed line operator Belgacom. The link with Belgacom was considered a relevant factor in evaluating the existence of a dominant position.
Moreover, the Council held that Proximus had abused its dominant position on the business market. The Council found that Proximus precluded BASE and other competitors from operating in this market between 2004 and 2005. In this regard, the Council analysed the commercial strategy for business customers and, more specifically, those with particular requirements, including large companies and public authorities. The Council found that the strategy adopted by Proximus was characterised by a so-called margin squeeze in 2004 and 2005. This margin squeeze was considered to be an abuse of a dominant position.
In particular, the Council compared the prices that were charged by Proximus for on-net communications (between two customers on its own network) and the termination rates (MTR) that competitors had to pay for terminating a call from their network on the network of Proximus. The MTR charges of Proximus were higher than the charges for its own on-net communications. Therefore, its competitors were unable to offer prices to their clients for communications to the Proximus network that were better or even similar to the prices that Proximus could offer to its own clients.
The Council also analysed the market regulation to which all operators were subject. It found that the sector market regulation, which results from the European framework for liberalisation of the telecoms markets, had an impact on the interconnection and MTR that operators charged to each other. Consequently, a fine of €66.3 million was imposed on Proximus. When calculating the fine, the Council took account of the nature of the infringement, the market share of Proximus, the economic impact of the infringement and the fact that it took place in a sector where liberalisation and more competition are a priority.
Margin squeeze
The decision was based on the fact that Proximus had operated an illegal margin squeeze. A margin squeeze occurs where there is a negative or insufficient margin between on the one hand prices charged by a dominant company to end users and, on the other hand, the wholesale prices it charges to competitors for similar services. There have been a number of cases before the European Commission, the European courts and several other national competition authorities, in particular in the UK telecommunications sector. A margin squeeze can harm competition and makes it difficult for new entrants in the market to offer competitive services at prices similar to those of the dominant company.
Follow-on actions?
Proximus has indicated its intention to appeal the fine to the Court of Appeal in Brussels, without indicating on what grounds it would do so.
The abuses for which Proximus has been fined lasted for several years and it seems likely that Proximus’ competitors will seek to claim damages for the harm caused by these abuses. Indeed BASE, which claims that it had to withdraw from the business market a number of years ago as a direct result of Proximus’ conduct, has already announced that it will seek compensation.
Equally, the Council’s decision may interest alternative landline operators, which have been (and continue to be) unable to offer competitive bundled Internet access/landline together with mobile telephony services to business customers.
