Serbian Commission announces market test of Telekom Serbia’s commitments proposal

The Serbian Commission for Protection of Competition has announced that it is conducting a market test concerning a commitments proposal made by Telekom Serbia. The proposal was made as part of the Commission’s pending investigation into Telekom’s alleged abuse of dominance on the markets of ADSL internet services and direct internet access. Market test was introduced by the 2013 amendments to the Competition Act and is applied for the first time in the Telekom Serbia probe. Interested parties are invited to comment on the Telekom Serbia’s proposal until 29 September.

Telekom Serbia is a vertically integrated undertaking providing, inter alia, ADSL internet services at both wholesale and retail levels. Following a complaint by certain competitors that this telecom incumbent abused its dominant position on the market of internet services, the Commission launched a probe in October 2011. The competitors alleged that the margin between Telekom’s wholesale and retail prices of ADSL services was so small that the operators purchasing ADSL internet services from Telekom at the wholesale level could not effectively compete with Telekom on the retail market. The other allegation was that, in relation to agreements for direct internet access, Telekom was imposing unfair trading conditions on internet operators (unfairness was alleged with respect to the price of the service, the duration of the contracts, and automatic renewal clause).

So far, the authority has focused on establishing Telekom’s dominance on two relevant product markets on the national geographic market: (i) wholesale of the service of ADSL broadband internet access via copper pairs and (ii) wholesale of the service of direct internet access for international connection.

Allegations of abuse of dominance include: (i) margin squeeze (Telekom’s wholesale prices of ADSL internet charged to retail operators were same or higher than the prices Telekom was charging to end-users); (ii) price discrimination (Telekom was charging different prices to different groups of customers); (iii) tying (Telekom was granting discount for the provision of the service of ADSL internet access on wholesale level to the operators who also purchased the service of direct internet access); and (iv) imposition of unfair contract terms (the agreements for the service of direct internet access for international connection contained contentious clauses concerning the duration of the contracts and automatic contract renewal for additional three years).

On 7 August 2014, Telekom submitted a commitments proposal addressing all four groups of alleged infringements. Specifically, Telekom offered to the Commission the following undertakings: (i) Telekom’s wholesale and retail prices of ADSL internet services will be set in accordance with the “equally efficient operator” test; (ii) the relation between unit prices of direct internet access and leased flow which Telekom applies when charging internet operators will also apply to the calculation of Telekom’s retail prices; (iii) Telekom will not condition discount for the wholesale of ADSL internet services with the purchase of the service of direct internet access; (iv) Telekom will offer to direct internet access users definite-period contracts in the duration of one, two, or three years (based on the user’s preference), with the automatic renewal period shorter than three years.

Telekom offered one-year commitment period concerning price discrimination and tying and two-year commitment period with respect to margin squeeze and imposition of unfair contract terms. The company further offered to deliver to the Commission regular periodical reports on the implementation of the commitments and on current market conditions of relevance for its compliance with the commitments.

If, following the receipt of comments from interested parties, the Commission finds Telekom’s commitments acceptable, it will suspend the proceedings and issue a decision imposing behavioral measures from the proposal. The authority would be able to resume the investigation, during the period of three years following the suspension decision, only if the circumstances underlying the commitment decision significantly change, Telekom fails to fulfill any of its commitment obligations or fails to deliver adequate proof of their fulfillment, or if the Commission establishes that the commitment decision was adopted based on incorrect, untrue, incomplete or misleading information submitted by Telekom.