National Competition Law Report - Q4 2009

Author:Mr Silvio Venturi and Pascal Favre
Profession:Tavernier Tschanz


Competition Commission fines Swisscom Sfr220 million for abusive margin squeeze

On November 5, 2009, the Swiss competition commission (FCC) fined Swisscom AG Sfr219.9 million for abusive margin squeeze in relation to broadband internet services provided until the end of 2007. Swisscom, which is Switzerland's largest phone company, was found to have charged competitors (e.g., TDC A/S's Sunrise, VTX Services SA and AG) excessive prices for broadband connectivity services, compared with the prices charged to end users. According to the FCC, such high prices prevented Swisscom's competitors from trading profitably in the fast internet access business.

On October 20, 2005, the FCC launched an investigation regarding a possible margin squeeze through the implementation of an unfair price system by Swisscom in the market for asymmetric digital subscriber line (ADSL). According to the FCC, there were indications that Swisscom might dominate the market for ADSL services. Swisscom argued, in substance, that there was competition from cable, mobile and optic-fibre networks.

On November 12, 2008, the secretariat – the FCC's investigation body – issued a draft decision against Swisscom, alleging abuse of a dominant position in the area of ADSL services. The draft envisaged penalties in the amount of approximately Sfr237 million as a result of allegedly overpriced ADSL set-up services. According to the secretariat, the investigation revealed that Swisscom had abused its dominant position for broadband internet network capacity by means of a price or margin squeeze. The allegation was that the prices which Swisscom charged to internet service providers (ISPs) for access to the network were so high that it was not possible for ISPs to remain in the market in competition with Swisscom.

The FCC's findings confirmed the secretariat's view that Swisscom charged its competitors so high prices in the upstream market (i.e. wholesale market for ADSL connection to the internet) that the competitors could not compete profitably with Swisscom in the downstream market (i.e. retail market for ADSL services). The FCC decided that Swisscom's price system amounted to an abuse of a dominant position within the meaning of Article 7 of the Competition Act. The FCC fixed the fines after considering the type, duration and gravity of the infringement. The fact that Swisscom had continued its practice over many years in a high-growth market constituted an...

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