Competition Council decision in favour of Song Networks A/S

Attorneys Katja Høegh and Niels Christian Ellegaard of Plesner represented Song Networks A/S against TDC in complaint proceedings before the Competition Council. Following two years of very thorough considerations, countless detailed pleas, analyses and discussions with the Competition Authority, Song Networks A/S on 28 April 2004 succeeded in having the Competition Council, for the first time, establish abuse of a dominant position in the form of margin squeeze and discriminatory discounts and fidelity discounts in relation to TDC.

The case concerned TDC's pricing of integrated mobile telephony products and fixed network telephony products towards business customers.

The complaint comprised several individual points. However, the basic problems were:

  • That the dominant operator, TDC, by virtue of discounts discriminating between small and big operators on wholesale level, quoted higher prices to Song Networks than to itself for the mobile services purchased by Song Networks from TDC through a resales agreement, and

  • that - in relation to the business customers that TDC and Song Networks compete about as far as both fixed network telephony and mobile telephony are concerned - TDC underbid Song Networks in a manner that made it impossible for an effective fixed network based operator like Song Networks to obtain a profit in the market. In Song Networks' opinion this constituted unlawful adverse terms of trade or margin squeeze.

The Competition Council found that this was abuse in the form of both margin squeeze and use of discriminatory discounts that made allowances for TDC itself compared to a minor resales operator (in the mobile field) like Song Networks. The discounts were also found to be fidelity discounts.

The decision is important, both because the Competition Council in the decision develops and adjusts the test for margin squeeze, and because the Competition Council in previous decisions has shown considerable reluctance to go into such an intensive analysis of TDC's pricing. The decision must be expected to have decisive influence on both Song Networks and other operators that compete with TDC in the business market.

In relation to discounts, the decision affirms the Competition Council's fixed practice on dominant undertakings' use of discount and bonus arrangements.

The complaint also concerned the question whether the mobile termination prices (the price for calling up and "delivering" a call to a mobile number) charged by companies, which, like TDC, have their own mobile networks, are so high that it constitutes to abuse of a dominant position. The mobile termination rates, which are not exposed to any real price competition have thus - as opposed to several other tele prices - not historically been subject to any kind of price control from the telephone authorities. This has meant that the mobile termination rates have become high - and in Song Networks' opinion so high that it constitutes abuse according to Section 11 of the Danish Competition Act.

However, the Competition Council left the question about how to intervene in respect of the high mobile termination rates to the Danish Ministry of Science, Technology and Innovation, which is expected to make a decision in respect of these prices sometime during the autumn.

TDC has stated that the decision made by the Competition Council will be appealed.

Questions should be directed to attorneys Katja Høegh and Niels Christian Ellegaard.