The Norwegian Competition Authority opens its first abuse case since 2007

Thursday, December 15, 2016
On 23 November 2016 the Norwegian Competition Authority (the “NCA”) issued a statement of objections against Telenor, one of the largest mobile network providers in Norway. The NCA proposes issuing an infringement decision pursuant to section 11 of the Norwegian Competition Act, (equivalent to Article 102 TFEU) for the abuse of dominant position in two markets for mobile network services to Norwegian consumers. The NCA has proposed a fine of NOK 906 million.

Authors: Partner Thomas Sando and Partner Aksel Hageler, Senior Lawyer Lennart Garnes and Associate Heidi Magnussen

The abusive behavior
As one of two nationwide mobile network providers in Norway, Telenor holds a dominant position in the Norwegian mobile network market.

In December 2012 the EFTA Surveillance Authority (“ESA”) and the Norwegian Competition Authority conducted a joint dawn raid at Telenor’s headquarters. The reason for the action and the two parallel investigations were complaints relating to Telenor’s market behavior from several smaller mobile operators that lease network access from the incumbent operator Telenor.

According to the NCA’s statement, Telenor has abused its dominant position in the Norwegian mobile market through two types of abusive behavior in the period 2010 to 2014. This behavior has allegedly had negative effects on the development of a new mobile network in Norway in the following manner:

  • From 2007 Network Norway together with Tele2 built a third mobile network in Norway. Telenor was obliged to give these operators access to Telenor’s own network in those geographical areas where the third network was not completed. Mobile operators without their own network are dependent on buying access to established mobile networks in order to provide services to its mobile customers. Evidence gathered by the NCA allegedly shows that the contractual terms imposed on Network Norway by Telenor in order to gain access to Telenor’s network, have reduced the profitability of the construction of the third network and thus impaired competition. 
  • The second type of abusive behavior alleged by the NCA is that Telenor entered into exclusivity agreements with four mobile operators, and thus limited the third mobile network’s prospects of acquiring customers.

The significance of the announcement – a renewed enforcement of abuse cases
Since the introduction of the prohibition against abuse of dominance in 2004 the NCA has made only three infringement decisions, the last one in 2007. However, there has not been any successful enforcement of the prohibition - all three cases have been reversed by the courts, annulled or settled. The last case was lost by the NCA in the Supreme Court in 2011.

Prior to the current announcement, the NCA had therefore for all practical purposes abandoned its enforcement of the prohibition against abuse of dominance – presumably because it failed on its first three attempts. The statement of objections against Telenor may therefore signal a shift in the NCA’s enforcement action in relation to the prohibition against abuse of dominance.

ESA on the other hand, has successfully enforced three cases regarding abuse of dominance in Norway during the same period (the Norway Post case and the Color Line case where fines were imposed, and a commitment case against Color Line and the Municipality of Sandefjord).

In the present case, the ESA is conducting its own and parallel investigation of Telenor for amongst other things margin squeeze in the Norwegian market, and on 1 February 2016 ESA issued its own statement of objections against the company. Although the two investigations and cases are formally independent of each other, there is bound to be significant practical cooperation taking place between the two enforcement agencies.

One may also ask whether the fact that ESA took the lead by issuing its objections in February 2016, has spurred the NCA into action and contributed to its renewed enforcement initiative in this area.  

Another relevant factor to note in this case, and which may give some indication as to future enforcement practices by the NCA is the level of fine proposed – NOK 906 million. This is an all-time high for Norwegian competition authorities.

Implications of an enforcement decision on the future of the Norwegian mobile network market
Telenor has just recently been involved in a highly contentious and widely publicised corruption review regarding its investments in the former Soviet Union (Vimpelcom in Uzbekistan), which led to the resignation of inter alia its chairman of the board and several top officials. The case was highly politicized and a Parliament committee held hearings in addition to the criminal investigations being conducted in Norway and in other jurisdictions.

Telenor is the former state telephone monopoly, which was privatised some time ago, but retained the network infrastructure in Norway under the implicit condition that it would not use its position to suppress competition in the market. The combination of the corruption case and the two competition cases unfolding, may lead the politicians to re-examine their decision to grant Telenor such a significant market position in Norway and perhaps lead the state to sell its remaining shares in the company and/or impose new regulations.

Steenstrup Stordrange is monitoring the developments in these cases closely, and our competition law team is ready to provide guidance on the possible consequences this may have for companies operating in this and other markets, as well as advising on the future scope of the NCA’s enforcement practices.

 

 


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