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Archive for March 25th, 2010

Oligopolistic collective dominance: the BCA’s Telefonica decision

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Some weeks ago, the Basque Competition Authority (“BCA”) issued a decision which has gone largely unnoticed outside of Spain, but which is definitely worth commenting here. To my knowledge, this decision is the first ever to sanction an abuse of a purely oligopolistic collectively dominant position.

In essence, the decision concludes that Telefónica de España SAU (“TSAU”, a subsidiary of Telefónica SA) abused of its dominant position in retail fixed telephone market, and, more interestingly, that Telefónica Móviles (“TME”, another subsidiary of Telefónica SA) also abused of the collective dominant position it held together with Vodafone and Orange in the Spanish retail mobile telephone market.

The BCA considers that TME, Vodafone and Orange constituted a “tight oligopoly”, and pursuant to a thorough examination of market conditions at the moment where the investigated infringements took place, it concludes that the Airtours conditions for a finding of collective dominance are fulfilled. The BCA further refers to the existence of empiric evidence of parallelism of prices and other commercial conditions adopted by the members of the oligopoly. Moreover, citing the CFI’s Judgment in TACA, the decision rebuts the contention that a certain degree of internal competition (allegedly illustrated by the high degree of portability) is incompatible with a finding of collective dominance.

With regards to the abusive conduct, and also in a nutshell, the BCA asserts that both TSAU and TME charged discriminatory tariffs to calls destined to users of the Euskaltel mobile network. The decision concludes that such conduct breached Article 2 of the Spanish Competition Act, and imposes TESAU and TME fines of nearly 3 and 1 million euros respectively.

A few brief comments:

Firstly, it’s interesting to remark that the Comisión Nacional de la Competencia had attempted to affirm its jurisdiction to deal with this case, but the organism in charge of addressing jurisdictional disputes between the CNC and regional authorities ruled in favor of the Basque Authority in light of the strictly local effects of the conduct under analysis. My guess is that had the CNC investigated the case, its outcome would have certainly been quite different.

Secondly, collective dominance is one of the favorite topics of Nicolas and myself, but also of Javier Berasategi, the author of the Telefónica decision, see here (his first work on the subject while a student in Bruges) and here (English version of a recent and extensive report on tacit collusion in the daily distribution of consumer goods which relies heavily on Nicolas’ work). It seems as if this or a similar decision had been under gestation for quite some time.

Finally, independently of whether one believes or not on the necessity of having several regional competition authorities in one Member State, it seems fair to acknowledge that in the past few years, under the Presidency of Berasategi, the Basque Competition Authority has brought forward very interesting cases on which it has adopted brave and innovative but always technically sound decisions.

Only a few days after the Telefónica decision was issued, Berasategi stepped down from the Presidency of the Basque Authority to start a new project in private practice. Congratulations for the good work, and the best of luck in his new venture!

(Image possibly subject to copyrights: source here)

Written by Alfonso Lamadrid

25 March 2010 at 6:23 pm