competition law and electronic comunications l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Competition Law and Electronic Comunications PowerPoint Presentation
Download Presentation
Competition Law and Electronic Comunications

Loading in 2 Seconds...

play fullscreen
1 / 30

Competition Law and Electronic Comunications - PowerPoint PPT Presentation


  • 323 Views
  • Uploaded on

Competition Law and Electronic Comunications . Dominance and significant market power 12 January 2006 Brussels. Overview . 1) Dominance under the Regulatory Framework (“signficant market power”) background criteria practical difficulties 2) Dominance in antitrust cases

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Competition Law and Electronic Comunications' - Anita


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
competition law and electronic comunications
Competition Law and Electronic Comunications

Dominance and significant market power12 January 2006Brussels

overview
Overview
  • 1)Dominance under the Regulatory Framework (“signficant market power”)
    • background
    • criteria
    • practical difficulties
  • 2) Dominance in antitrust cases
    • comparison with SMP assessment
the regulatory framework background 1
The Regulatory Framework – background (1)
  • New symbiosis between regulation and competition law
  • Markets defined on the basis of competition law
  • Old 25% market share threshold  dominance
the regulatory framework procedure
The Regulatory Framework – procedure
  • Decentralisation: NRAs taking national circumstances into account
    • central check by European Commission (Article 7 Consultation Mechanism)
      • comments letter
      • no comments letter
      • veto decision
the regulatory framework checks and powers under article 7
The Regulatory Framework – checks and powers under Article 7
  • market definition
  • SMP assessment
    • single or collective dominance
  • regulatory remedies

Veto

Comments

the regulatory framework statistics
The Regulatory Framework - statistics
  • 334 notifications received so far
  • from 20 Member States
  • 112 comments letters
  • 6 second phase
  • 4 veto decisions
  • 71 no comments letters
the regulatory framework dominance test
The Regulatory Framework – dominance test
  • Article 14(2) FD:

« An undertaking shall be deemed to have significant market power if, either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers »

  • Recital 27 FD:

« An analysis of effective competition should include an analysis as to whether the market is prospectively competitive and thus whether any lack of effective competition is desirable »

the regulatory framework dominance test8
The Regulatory Framework – dominance test
  • Hence, NRAs should
    • conduct a forward looking, structural evaluation based on existing market conditions
    • take into account expected or foreseeable market developments over the course of a reasonable period
    • take into account past data when such data are relevant to the development in that market in the foreseeable future

[Guidelines, para. 20]

the regulatory framework market shares a first line indicator of smp
The Regulatory Framework – market shares a first line indicator of SMP
  • Market shares
    • < 25%: no single dominance
    • > 50%: presumption of single dominance
    • market share trends
    • volume/value
    • merchant sales/captive sales
the regulatory framework other criteria to be taken into account
The Regulatory Framework – other criteria to be taken into account
  • size of undertaking, economies of scale and scope
  • vertical integration and control over infrastructure that cannot easily be duplicated
  • technological advantages and financial resources
  • absence of law countervailing buying power
  • barriers to entry and expansion
  • absence of potential competition
the regulatory framework specific issues related to smp
The Regulatory Framework – specific issues related to SMP
  • Greenfield approach:
    • principle: taking existing regulation in the market under investigation into account may lead to circularity
    • example: international calls in Finland (Cases FI/2003/0024 and FI/2003/0027)
the regulatory framework international calls in finland
The Regulatory Framework – International Calls in Finland
  • Issue: must existing CS/CPS obligations be taken into account when analysing SMP on the international calls markets?
    • “Ficora should make clear in its notified draft measures whether a finding of lack of SMP in a defined retail market relies principally on existing regulatory obligations”.
    • “If this is the case, Ficora should make clear on which basis the existing regulatory obligations in the same or other closely related markets will continue to exist for the relevant period of forward-looking assessment”.
  • Follow-up: new notification in June 2005 (cases FI/2005/0201 and FI/2005/0202) providing further information on market shares and CS/CPS obligation – on this basis non SMP-finding was justified –

no comments letter

the regulatory framework specific issues related to smp13
The Regulatory Framework – specific issues related to SMP
  • Countervailing buyer power:
    • principle: even an operator with very high or monopolistic market share may not have significant market power because of the strength of its customer(s)
    • example: the position of smaller operators on the fixed and mobile termination markets
the regulatory framework fixed termination in germany 1
The Regulatory Framework – fixed termination in Germany (1)
  • Issue: does the buyer power of DT outweigh the market power of the alternative operators selling termination on their network?
  • Veto decision:
    • “The Commission acknowledges that the market definition – call termination on individual networks – does not automatically mean that every network operator has significant market power; this depends on the degree of any countervailing buyer power and other factors potentially limiting that market power. While small networks will normally face greater buyer power than large networks, the interconnection obligation will normally redress this imbalance of market power”.
the regulatory framework fixed termination in germany 2
The Regulatory Framework – fixed termination in Germany (2)
    • “It may still be easier for a large network than for a small network to initiate a price raise, but this risk is essentially removed if the large network operator’s termination rates are regulated”.
  • Follow-up: new notification in August 2005 – NRA changed SMP finding – No comments letter (case DE/2005/0239)
the regulatory framework specific issues related to smp16
The Regulatory Framework – specific issues related to SMP

Collective dominance:

  • Principles are set out in the Guidelines

(1) market characteristics

      • similar market shares
      • mature market
      • low elasticity of demand
      • homogeneous product
      • similar cost structure
      • no excess capacity
      • high barriers to entry

(2) is tacit co-ordination sustainable?

      • incentive to collude – focal point
      • incentive to deviate and possibility to detect cheating and retaliate
      • fringe competitors
the regulatory framework broadcasting transmission services in the uk case uk 2004 0111
The Regulatory Framework – Broadcasting transmission services in the UK(Case UK/2004/0111):
  • first case of collective dominance
  • market concerned: terrestrial broadcasting transmission services (submarket of market 18)
    • upstream market(s) : access to masts and sites
    • downstream market: managed transmission services (MTS)
case uk 2004 0111 smp assessment
Case UK/2004/0111: SMP assessment
  • 2 players: Crown Castle and ntl
  • access to masts and sites:
    • 2 separate product markets
    • single dominance on each market
    • Commission had no comments
  • MTS
    • one market
    • Collective dominance Crown Castle and ntl
    • Commission indicated preliminary concerns
case uk 2004 0111 commission concerns
Case UK/2004/0111: Commission concerns
  • incentive to co-ordinate (check list)
  • lack of convincing evidence on sustainability of co-ordinated behaviour (no clear retaliation mechanism)
  • lack of analysis of past bidding processes/outcome
case uk 2004 0111 the outcome
Case UK/2004/0111: the outcome
  • Ofcom’s withdrawal of notification as far as MTS were concerned
the regulatory framework mobile access and call origination in ireland case ie 2004 121
The Regulatory Framework – Mobile Access and Call Origination in IrelandCase IE/2004/121
  • ComReg defined a wholesale market for access and call origination
  • Critical for access of so called mobile virtual network operators (MVNO)
  • Retail: high and stable market shares of Vodafone (54%) and O2 (40%)
  • Fringe Competitor Meteor - 6% share of subscribers, 3% revenue
  • Currently no MVNOs or service providers
  • High Concentration – 4,550
  • High entry barriers (infrastructure investment)
  • High ROCE – Over 35% for Vf and O2 and rising (well above EU average)
  • High ARPU - €47 per month (EU Average €31) and rising
  • Pricing – Stable Minimum Monthly Bills (particularly post-paid)
  • Pricing – well above EU average
the focal point
The Focal Point
  • The focal point is two-dimensional and transparent:
    • High and parallel retail prices
    • Denial of access of wholesale airtime to Independent Service Providers
    • Due to absolute size neither O2 or Vodafone has an incentive to grant access or lower prices to capture market share
credible punishment
Credible Punishment
  • Deviation: granting of wholesale airtime access to Independent Service Provider
  • Punishment: the deterrent that exists is an identical action by the other – through time this would lower retail prices to the competitive level
actual potential competition
Actual/Potential Competition
  • Meteor – third operator
    • Entered February 2001 and until September 2004 lacked complete geographic coverage
  • 3 – 3G operator owned by Hutchison
    • Not yet launched
commission comments
Commission comments
  • Fringe competitors:
    • If competitors prove capable of gaining retail market share rapidly and at the expense of Vodafone and O2, one of the criteria which currently imply collusive behaviour by these two operators may no longer be met
    • evidence that companies act as credible access provider (at wholesale level) alternative to Vodafone and O2 would cast doubt on the sustainability of the collectively dominant position
the regulatory framework conclusions on smp concept
The Regulatory Framework – conclusions on SMP concept
  • Advantages of competition law based approach:
    • more economic, less administrative approach towards regulation
    • better targeted regulation tackling specifically enduring bottlenecks
    • facilitates phasing out of regulation and transition to fully liberalised markets
    • consistent approach throughout the EU
ex post application of competition law in electronic communications
Ex post application of competition law in electronic communications
  • Competition: law and sector-specific regulation are applied in parallel

(e.g. LLU regulation and price squeeze cases – Deutsche Telecom)

  • Sector-specific regulation is/should be gradually phased out

(upcoming review of the Recommendation).

competition law concept of dominance
Competition law concept of dominance
  • In principle SMP = dominance
  • But:
    • forward looking ↔ retrospective assessment
    • Permanent re-evaluation ↔ “one shot” assessment
  • In electronic communciations, the most difficult part is generally to show the abuse (e.g. price squeeze, excessive pricing, predatory pricing, see next session)
  • Article 81 does not require dominance
conclusions
Conclusions
  • SMP/dominance assessment is a challenging exercise
  • Case law and thinking around SMP/dominance is evolving:
    • more economic, less mechanical approach
    • more emphasis on enduring bottlenecks
  • as regards regulation, is dominance the appropriate standard?
slide30
Thank you

For more information

  • http://europa.eu.int/comm/competition/index_en/html
  • http://europa.eu.int/information_society/policy/ecomm/article_7/index en.htm
  • inge.bernaerts@cec.eu.int