On 6 February 2014, the Bosnian Competition Council issued a decision finding that Bosnian telecom operator (BH Telecom) abused its dominant position on the market of interconnection to fixed telephone network in the Federation of Bosnia and Herzegovina. The abuse consisted of illegal tying. Namely, the competition authority found that BH Telecom conditioned the agreement on interconnection to fixed telephone network with Akt.online by requiring this entity to terminate its business cooperation with one particular client to whom Akt.online was providing outgoing international telephone services.
The Competition Council also investigated whether BH Telecom price discriminated between foreign and domestic alternative operators but found that BH Telecom did not commit any abuse in this respect.
Previous disputes between Akt.online and BH Telecom
The case dates back to 2009 when the company Akt.online filed a request for initiation of proceedings against BH Telecom for abuse of dominant position. The specific allegations of Akt.online made at that time are not publicly revealed, however the Competition Council issued a decision in 2010 finding there was no abuse of dominant position by BH Telekom. The reasons behind this decision were of procedural nature. Namely, according to the Bosnian Law on Competition, if the Competition Council does not establish abuse of dominance within seven months from the initiation of the proceedings, it shall be deemed that no abuse of dominant position took place and, upon the request of the party to the proceedings, it has to render a decision finding no infringement.
In 2013, the Court of Bosnia and Herzegovina, acting in judicial review proceedings initiated by Act.online, annulled the Council’s 2010 decision and referred the case back to the Council. The court decision is not publicly available.
In addition, in 2011, Akt.online filed another request for initiation of proceedings against BH Telecom. This request was rejected by the Council as premature since the Court of Bosnia and Herzegovina was at that time still seized with the claim filed against the Council’s 2010 decision. The 2011 conclusion of the Council rejecting the Akt.online’s request for initiation of proceedings as premature was also annulled by the Court of Bosnia and Herzegovina in 2013 and the matter was referred back to the Council.
Consequently, in 2013 there were two parallel proceedings pending against BH Telecom for abuse of dominance before the Council. The Council consolidated these proceedings into one.
Factual and legal background
Akt.online is a subsidiary of Slovenian company AKTON which provides services of direct international telephone calls and termination of calls to fixed and mobile networks in several countries in the Balkan region, including Bosnia and Herzegovina. In order for Akt.online to provide fixed telephone services it must have access to infrastructure of BH Telecom, a national network incumbent.
According to the Bosnian legislation, BH Telecom and two other national operators (Telekomunikacije RS and HT Mostar) are under the obligation to allow access to their infrastructure to other telecom operators.
The procedure for establishment of interconnection with the fixed network of BH Telecom is governed by the Reference Interconnection Offer for connection to fixed telephone network, enacted by BH Telecom and approved by the Bosnian Communications Regulatory Agency (“CRA”). The Reference Interconnection Offer provides that BH Telecom and the relevant operator have 90 days to complete negotiations on interconnection following the commencement of such negotiations. In case the negotiations are not concluded within this period of time, either party has the right to request the assistance of CRA in negotiations.
Against this background, Akt.online turned to BH Telecom on 7 February 2007 with a request for interconnection. The negotiations commenced on 26 February 2007, but the agreement on interconnection was concluded only on 1 February 2008. Akt.online alleged that during this time BH Telekom was obstructing the negotiation process by conditioning the conclusion of the interconnection agreement by requesting Akt.online to terminate its agreement with one company on transition of outgoing international calls from telephone numbers from BH Telecom’s range.
Furthermore, Akt.online submitted that BH Telecom offered better prices to foreign operators for termination of calls to BH Telekom’s fixed and mobile network than to alternative domestic operators. According to Akt.online, the price discrimination had the effect of excluding them from the market.
BH Telecom refuted all allegations. Regarding the alleged conditioning of the conclusion of the interconnection agreement, BH Telecom submitted that Akt.online had illegally concluded the agreement with another company on transition of outgoing international traffic from telephone numbers belonging to a number range assigned to BH Telecom because it did not have an interconnection agreement with BH Telecom (stipulating inter alia the carrier selection service) and was therefore not authorized to provide the said service. BH Telecom relied on the fact that even the CRA had established that Akt.online infringed the Bosnian Law on Communications. BH Telecom maintained that it would be unreasonable to expect it to conclude any agreement with a business partner which intentionally acts contrary to principle of good faith and, by its illegal behavior, jeopardizes safety and integrity of telephone network.
Regarding alleged price discrimination, BH Telecom submitted that prices for termination of international calls to its fixed and mobile network are not regulated and BH Telecom is therefore free to negotiate them with foreign operators.
The Council first established that there are two relevant product markets: (i) market for interconnection to the fixed telephone network of BH Telecom and (ii) market for termination of international calls to the fixed network of BH Telecom and of transit of international calls over the fixed network of BH Telecom into the mobile network of BH Telecom. The relevant geographic market was defined as the territory of the Federation of Bosnia and Herzegovina, since all interconnection points of BH Telecom are located in this territory.
The Council further noted that CRA had established that BH Telecom, Hrvatske Telekomunikacije and Telekomunikacije Srpske are operators with significant market power in Bosnia and Herzegovina, which lead to the Council’s conclusion that BH Telecom enjoys a dominant position on the relevant market.
The Council found that BH Telecom’s requirement that Akt.online terminate its business relationship with another company, as a condition to the conclusion of the interconnection agreement with BH Telecom, amounted to abuse of dominant position in the form of illegal tying. The Council emphasized that BH Telecom as a dominant undertaking has “special responsibilities” to enable interconnection to its network. Despite Akt.online having infringed the Law on Communications by engaging in an activity reserved for BH Telecom, it was not for BH Telecom to decide on such infringements and demand termination of the contract. Therefore, according to the Council, BH Telecom was obliged to conclude the interconnection agreement regardless of Akt.online’s illegal behaviour. BH Telekom was fined in the amount of BAM 150,000.00 (approximately EUR 76,000).
Regarding the alleged price discrimination, the Council found no abuse. It noted that prices for termination of international calls to fixed and mobile network of BH Telecom are not regulated but are subject to direct negotiations between BH Telecom and international operators on a commercial basis. The Council compared the average price offered to international operators with the prices offered to Akt.online and concluded that Akt.online’s allegations that BH Telecom was offering better conditions to international operators were without merit.