Achieving European Internal Market in Regulated Sectors by Misuse of Competition Law; The Margin Squeeze 'Disaster'

Abstract

The economic and social advantages of the European internal market good functioning are beyond doubt, and thus neither effort nor means implemented in achieving that goal are worthless. However, pursuing this aim cannot – or should not – be done at the cost of misuse – and abuse – of Competition Law, when other tools fail or simply their implementation is not as effective as the Council or the Commission intend. This seems to be the case in some regulated sectors – namely, telecommunications – where competition law is occasionally serving as a regulatory tool that comes as a complement to the traditional means such as the promulgation of Directives, or the role played by National Regulation Authorities themselves. Accordingly, we show in this paper that the prohibition of the abuse of dominant position – enhanced in article 102 of the Treaty of Functioning of the UE – is currently being used to develop and implement the Commission’s industrial policy agenda, and as mean to avoid market fragmentation. As such, it deviates from what should be its main objective, promoting efficiency and fostering innovation and competitive markets. In particular, given the unsatisfactory results of the regulatory framework and the painful inexistence of a single and efficient internal market in the provision of certain services, both the EC and the European courts are heavily relying on antitrust remedies to impose the economic operators duties that are regulatory in nature, at the expense of legal coherence, lacking the necessary tools and performing a task to which they are ill-suited. This is highlighted by recent high-profile cases, all of them regarding telecom operators – such as Deutsche Telekom, France Telekom, Telefonica, TeliaSonera – sanctioned with astronomic antitrust fines due a recently created form of dominant abuse: margin squeeze. As we shall see, the practical implementation of the prohibition, the contradictory results of application of regulatory and antitrust standards, and the level of legal uncertainty regarding the test of this anticompetitive conduct is far from being satisfactory, in terms of legal consistency and economic analysis. To avoid such pitfalls a simple remedy is proposed in this paper: the merger – as some countries, as Spain, have just recently done with the approval of its new CNMC (ComisiónNacional de los Mercados y la Competencia) – of the antitrust and the regulatory authorities, in order to ensure a coherent application of both legal bodies and provide markets – and economic operators – with a higher degree of legal certainty and economic predictability.

Keywords: internal market, regulated sectors, competition policy, legal coherence, margin squeeze

JEL Classification: K21; K23; K42; L41; L43