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Telecoms Regulation, Antitrust and Margin Squeeze: Widening the Already Wide Gap between US and EU Competition Policy?

Fernando Diez

Centro Universitario Villanueva

January 9, 2011

The price-squeeze doctrine, and the discussion of up to what extent can a dominant firm discipline its rivals by means of pricing policies has lead to a wide divergence of antitrust enforcement and consequent liability rules across the Atlantic, and even between US’ agencies – the Department of Justice and the Federal Trade Commission- themselves. In two high-profile decisions – the European Commission’s July 2007 imposition of a fine on Spanish telecom incumbent Telefonica, and the European Court of First Instance’s April 2008 decision affirming a similar fine imposed earlier on telecom provider Deutsche Telekom – European authorities have recognized price squeezes as an appropriate ground for finding an abuse of dominance under Article 102 of the Treaty of Functioning of the European Union.

The structure with which we are going to address these issues would follow a route which will lead us from the more general matters to the more specific questions at stake here. Consequently, after this introductory section, we will show – briefly – the main differences and similarities between US and EU enforcement policies regarding broad unilateral conduct. In the next section we turn to the specific behaviour of anticompetitive margin squeeze, as considered in both jurisdictions by jurisprudence and scholarship. This analytical framework is biased – more heavily in the EU than in the US – by the interaction between regulation and antitrust, and to such matter we devote the following section of this paper, with specific reference to the recent Telefonica and Deutsche Telekom cases. The next section in turn analyses the recent linkLine decision, from the different point of view of the Ninth Circuit, the DOJ and the FTC. Of course, after all those we pay close attention to the U.S. Supreme Court’s opinion. At this point we will ask ourselves if an integrative analytical framework (suitable for both the US and EU, and acceptable for both the DOJ and the FTC) is possible to be found. Before the concluding section, a comprehensive account of the rules governing unilateral conduct regarding margin squeeze claims is offered, to conclude – in the following section – than unfortunately the approach to margin squeeze in the three referred cases is quite diverging. Finally, some general conclusions are given in the last section of this paper.

Number of Pages in PDF File: 33

Keywords: margin squeeze, essential facilities, abuse of dominance, refusal to supply, regulation

JEL Classification: D42, D63, K23, K21, K42, L22, L43, L50

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Date posted: May 12, 2011  

Suggested Citation

Diez, Fernando, Telecoms Regulation, Antitrust and Margin Squeeze: Widening the Already Wide Gap between US and EU Competition Policy? (January 9, 2011). Available at SSRN: http://ssrn.com/abstract=1828723 or http://dx.doi.org/10.2139/ssrn.1828723

Contact Information

Fernando Diez (Contact Author)
Centro Universitario Villanueva ( email )
C/ Claudio Coello 11
Barrio de Salamanca
Madrid, 28001
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