## Facts

- Deutsche Telekom AG (DT) was the incumbent German fixed-line operator and held a dominant position in wholesale access to the fixed network, including the local loop.
- Competitors needed wholesale access to DT’s local loop to provide retail access services to end users.
- German sector regulation required DT to provide wholesale access and subjected DT’s wholesale and retail access tariffs to prior approval by the national regulatory authority (RegTP), including price ceilings.
- The European Commission found that DT’s pricing created an insufficient spread between wholesale access charges and DT’s retail access prices, such that an operator as efficient as DT could not cover downstream costs and compete profitably.
- The Commission treated the practice as a margin squeeze: rivals would have to charge higher retail prices than DT or operate at a loss.
- RegTP approved DT’s wholesale and retail tariffs but did not set or require the specific margin between them.
- The Commission found an abuse of dominance under Article 82 EC (now Article 102 TFEU) and imposed a fine; the General Court largely upheld the decision; DT appealed to the Court of Justice.

## Issues

1. Whether a margin squeeze is attributable to a dominant undertaking when the relevant wholesale and retail tariffs were approved under national sector regulation.
2. Whether margin squeeze is a stand-alone abuse under Article 82 EC, or instead requires proof that the wholesale price is excessive or the retail price is predatory when viewed separately.
3. Whether it was proper to assess margin squeeze using an as-efficient-competitor (AEC) test based on the dominant undertaking’s own costs.
4. Whether a finding of margin squeeze requires additional proof of actual or likely foreclosure effects beyond the established inadequacy of the margin.
5. Whether regulatory approval negates fault (intent or negligence) or otherwise affects liability and the fine.

## Decision

- The Court of Justice dismissed DT’s appeal and upheld the General Court’s judgment and the Commission’s finding of abuse and fine (as previously adjusted by the General Court).
- The Court held that regulatory approval of tariffs does not immunize a dominant undertaking from Article 82 EC liability unless national law requires the anticompetitive conduct or eliminates any possibility of competitive conduct.
- The Court concluded the margin squeeze was attributable to DT because the regulatory framework left DT leeway and did not mandate the abusive spread.
- The Court confirmed that margin squeeze can constitute an autonomous abuse based on the spread between wholesale and retail prices, even if neither price is independently abusive.
- The Court approved the Commission’s use of an AEC analysis using DT’s own costs as the benchmark.
- The Court held that, given the nature of the practice and the demonstrated inability of an as-efficient competitor to compete, additional evidence of actual market foreclosure was not required.
- The Court rejected DT’s fault arguments, finding DT could be held at least negligent despite tariff approvals.

## Legal Principles

- A dominant undertaking commits an Article 102 margin squeeze when the spread between its wholesale input price and its retail price is insufficient for an as-efficient competitor to compete profitably downstream.
- Margin squeeze is a distinct form of exclusionary abuse; liability does not depend on showing predatory retail pricing or excessive wholesale pricing in isolation.
- Sector regulation and tariff approval do not exclude Article 102 enforcement unless the national legal framework compels the anticompetitive conduct or removes all scope for competitive behavior by the undertaking.
- The AEC test may properly use the dominant undertaking’s own costs to assess whether an equally efficient competitor could operate profitably given the relevant wholesale and retail prices.
- For this form of abuse, establishing the inadequate margin and its exclusionary capability can suffice without separate proof of actual foreclosure; regulatory approval does not, by itself, negate intent or negligence for purposes of imposing fines.

## Conclusion

The Court of Justice affirmed that a regulated dominant telecom operator can be liable under Article 102 for a margin squeeze when it retains pricing discretion, and it endorsed an AEC framework using the dominant firm’s own costs to show that the wholesale-retail spread would exclude an equally efficient rival.


Deutsche Telekom AG v. Commission, Case C-280/08 P (C.J. Oct. 14, 2010)