The Romanian Competition Council (RCC) recently published its Guidelines setting forth the specific conditions in which co-investment agreements for the joint utilisation of mobile electronic networks may be concluded.
The RCC Guidelines arise from a first-time competitive assessment of cooperation agreements in the telecommunication sector. Their issuance shows the RCC’s increased interest in scrutinizing the telecommunication sector, especially as regards mobile telecommunications.
THE TRIGGERING FACTOR FOR THE ISSUANCE OF THE RCC GUIDELINES
In 2013, Orange and Vodafone, the two most important players on the mobile telecommunications market in Romania, announced the conclusion of an agreement for the joint utilisation of their network infrastructure which would allow both companies to continue their investments in the development of technologies at the national level.
The RCC decided to publish its Guidelines in order to allow companies active in the telecommunications market to gain a general knowledge of the RCC’s approach regarding such cooperation agreements.
GENERAL FRAMEWORK OF THE ASSESSMENT
The RCC Guidelines note that horizontal agreements regarding the joint utilisation of mobile electronic networks (“Networks Agreements”) may have the following objects:
- The joint utilisation of passive infrastructure (such as utilities and buildings) which, in the RCC’s view is unlikely to raise competition concerns given the operators’ large degree of independence
- The joint utilisation of active infrastructure, respectively: (i) joint utilisation of radio access network (including joint utilisation of the spectrum); (ii) profound joint utilisation (i.e. joint utilisation of a transportation network); (iii) national roaming
In RCC’s view, these Networks Agreements may facilitate collusion and raise competition concerns, given the significant degree of cost commonalities and network sharing between the parties.
The RCC Guidelines indicate that Networks Agreements do not fall under the scope of art. 5 (1) of the Romanian Competition Law (respectively of art. 101 (1) of the Treaty on the Functioning of the European Union), provided that such agreements cumulatively meet the criteria set forth by art. 5 (2) of the Romanian Competition Law(art. 101 (3) TFEU), as follows:
- Efficiency gains: Networks Agreements should lead to (i) avoidance of certain costs, (ii) reduction of entry barriers for limited resources companies; limitation of the environment impact or (iv) creation of new technologies (e,g, LTE – 4G technology).
- Indispensability: Networks Agreements may generate restrictions regarding the (i) management and utilisation of the shared networks’ capacity; (ii) refusal to renew collocation agreements or artificial limitation of the interconnection links’ capacity.
- Pass-on to consumers: the RCC will analyse the degree and nature of competition between the parties (the efficiencies will not be presumed only because the agreement does not lead to the elimination of competition on the relevant market); (ii) the nature and degree of efficiency gains; (iii) the elasticity of demand; and (iv) the creation of new or improved goods/services. The RCC mentioned that the arguments regarding non-price efficiency gains (i.e. the increase of network coverage) should be cumulative with the arguments regarding quantitative (price) efficiency gains.
- No elimination of competition: the RCC will assess the creation of the competition at infrastructure level.
The RCC highlighted the fact that the Networks Agreement may raise competition concerns only if the parties intend to change the structure of the market through such agreements (i.e. the agreement is, in fact, a disguised economic concentration).
POTENTIAL ANTICOMPETITIVE CONCERNS RAISED BY THE NETWORKS AGREEMENTS
The RCC Guidelines identify the following anticompetitive concerns regarding the Networks Agreements:
- A significant decrease of competition between the parties as a result of (i) the reduction of competition between the networks triggered by the existence of the same coverage and quality of the service, as well as by the joint utilisation of hardware and software; (ii) the increased costs communalities and the limited level of differentiation between services; and (iii) the potential exchange of confidential information
- Refusal of access to physical infrastructure or unlawful refusal to supply call origination/termination services
- Exchange of confidential information
In RCC’s view, the exchange of information regarding the functioning of shared network elements does not raise concerns, given the technical nature and purpose of such information. However, one of the most problematic risks is that related to a potential exchange of information regarding the future capacity of the networks, because this allows the parties to align their services offerings. The RCC indicates that it is necessary to establish measures to restrict the exchange of information between the parties only to the information necessary for the functioning or the management of the shared networks; the measures should be even more efficient as the usage of the shared networks increases.
The RCC will also take into consideration the following factors: (i) the characteristics and competitive structure of the relevant markets and (ii) the parties’ ability to differentiate the supplied services; (iii) the economic context; and (iv) the nature of the agreement.
IMPLICATIONS FOR THE TELECOMMUNICATIONS MARKET
Following the issuance of the RCC Guidelines, it is expected that future cooperation agreements on the telecommunications market will be subject to a closer inspection by the RCC.
Moreover, companies intending to conclude a cooperation agreement in the telecommunication market should ensure that their agreement is in harmony with the conditions set forth by the RCC.