EU Court OK’s $18M Fine Against Deutsche Telekom

     (CN) – Europe’s highest court upheld a nearly $18 million fine against Deutsche Telekom, the formerly nationalized German telecommunications company, for overcharging competitors who needed to access its network.

     After the German telecommunications market was liberalized in 1996, Deutsche Telekom lost its ability to legally operate a monopoly on landline telephone services.
     But since 1998, it had been charging competitors more for access to its network than it charged end-users, the European Commission found in 2003. The commission fined the company what today amounts to about $17.8 million.
     When the telecom challenged this, the General Court, formerly called the Court of First Instance, upheld the fine in 2008.
     The Court of Justice, which acts as the European Union’s supreme legal authority, affirmed the lower court’s ruling.
     Deutsche Telekom’s practice of charging higher prices for wholesale network access than for end users induced a “margin squeeze” that caused competitors to pass on the higher costs to consumers or face bankruptcy, the court said.
     By squeezing its competitors’ margins, Deutsche Telekom strengthened its position, the court said. This affected competitors’ market penetration, since network access is an indispensible requirement for any phone business.
     A test used by the lower court that subjected the monopolizing telecom to its own wholesale pricing scheme was legitimate, the Luxembourg-based court ruled. The court also said the possibility that regulatory authorities had set exorbitant prices for wholesale network access didn’t affect the telecom’s ability to change lower end-user prices, which would have resolved the squeeze.
     The high court dismissed Deutsche Telekom’s challenge to the $18 million fine.

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