European Commission: Slovak Telekom Breached Anti-Trust Law

The European Commission looks set to charge Deutsche Telekom and its half-owned Slovak subsidiary Slovak Telekom for breaching the antitrust law, with an investigation set to get underway.

The ruling points to how Slovak Telekom apparently prevented competitors from entering the market and from fully accessing its networks, which it was to make accessible as the former monopoly telecommunications provider in the country. It is therefore being charged with abuse of market position. The company could fined up to 10% of its annual sales revenue for breaching EU competition legislation, although in practice the fines are often much smaller

In a statement from 8 May 2012, the European Commission announced that it had informed Slovak Telekom a.s. (ST) and its parent company, Deutsche Telekom AG, of its objections against their behaviour on several wholesale broadband markets in Slovakia. The Commission takes the view that Slovak Telekom may have refused to supply unbundled access to its local loops and wholesale services to competitors, and may have imposed a margin squeeze on alternative operators by charging unfair wholesale prices, in breach of EU antitrust rules. Deutsche Telekom may be liable for the conduct of its subsidiary. The companies now have three months to reply to the Statement of Objections (SO).

Access to ST’s wholesale broadband services is crucial for alternative operators wishing to provide retail services to end-users in Slovakia. However, alternative operators have experienced unreasonable and burdensome technical and commercial terms proposed by ST. ST also used delaying tactics and obstructed negotiations over these terms, in particular as regards unbundled access to local loops.

Moreover, ST set its wholesale prices at a level that made it impossible for alternative operators to profitably enter and operate in the retail broadband market in Slovakia (margin squeeze). This practice has recently been condemned by the General court in the Telefónica case (see Memo/12/233). This has hindered the development of the broadband retail market in Slovakia.

The Commission therefore reached the preliminary conclusion that ST has breached Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position.

The Commission also considers on a preliminary basis that Deutsche Telekom may be held liable for the conduct, because of the nature and degree of its links with its subsidiary ST, in which it owns a majority stake of 51%.