Brussels Court of Appeal Commissions Expert Report to Determine Whether Belgacom Abused Dominant Position in Mobile Telephony…

On 26 February 2015, the Brussels Court of Appeal handed down an interlocutory judgment ordering experts to assist the Court in determining whether the mobile termination rates ("MTRs") applied by mobile operator Belgacom from 1999 to 2005 were abusive.

MTRs are fees charged by mobile telephone operators to other carriers to terminate calls on their networks. In 2003 and 2004, competing mobile network operators Base and Mobistar accused Belgacom of charging MTRs for calls originating on their networks and terminating on Belgacom's network ("off-net calls") that were abusively high compared to the MTRs Belgacom applied to calls both originating and terminating on its network ("on-net calls") and sought damages before the Brussels Commercial Court. On 29 May 2007, the Commercial Court handed down a judgment commissioning an expert report on the existence of an abuse. Belgacom decided to appeal this judgment.

The Brussels Court of Appeal sided with the Commercial Court's view that an expert report is required before making a final decision on the existence of an abuse.

The Court of Appeal first upheld the Commercial Court's definition of the relevant market as the market for mobile retail services, regardless of the technology (2G or 3G), the tariff scheme (prepaid or postpaid) or the type of customers (business or residential).

The Court of Appeal also agreed with the Commercial Court that Belgacom was dominant. The Court of Appeal made it clear from the outset that "it is undisputed that Belgacom is dominant on the wholesale market for the termination of calls on its own network". The Court then proceeded to discuss Belgacom's market shares on the mobile telephony market (which the Court found to exceed 50% in value between 1999 and 2005), as well as additional factors showing Belgacom's dominance, such as the existence of barriers to entry, Belgacom's ability to benefit from economies of scale, the benefits that Belgacom derives from its corporate group, Belgacom's financial strength, its status of first mobile operator to have entered the Belgian market and the high concentration of the market. The Court concluded that "Belgacom was dominant on the overall telecommunications market from 1999 to 2005".

However, the Court of Appeal could not make a final decision on the existence of the abuse, notably because of Belgacom's refusal to share its costs and pricing information. The Court therefore commissioned an expert report in order to analyse Belgacom's data from 1999 to 2005. The Court found that, contrary to Belgacom's allegations, this data was too old to be confidential and should be disclosed to the other parties.

The expert report should cover four different types of pricing abuse.

First, the experts will assist the Court in finding whether Belgacom granted abusive rebates, although the Court already considered this abuse to be "likely" since: (i) Belgacom's "on-net" tariffs were lower than its "off-net" tariffs; (ii) Belgacom coupled rebates schemes in order to grant a discount on "on-net" calls to its biggest customers; and (iii) Belgacom offered to certain customers rebates unrelated to any reasonable economic justification.

Second, the experts will help determine whether Belgacom incurred losses on its "on-net" calls, which would amount to predatory pricing.

Third, the Court asked the experts to verify whether there is a negative margin between Belgacom's "on-net" revenue and its MTRs, which is the key feature of a margin squeeze.

Finally, the Court stated that "the fact that the difference between "on-net" and "off-net" tariffs has not yet been found illegal by the European Courts does not mean that this could not constitute an abuse of dominant position". This price difference could amount to the imposition of unfair price or conditions if it is not based on economic grounds, which the experts will determine. The Court noted that this practice tends to strengthen the network effects that come into play in the telecommunications sector in favour of Belgacom.

The expert report should enable the Court of Appeal to rule on existence of an abuse. Should the Court find an abuse, Mobistar and Base will then be in a position to seek damages. However, this procedure might take a few additional years, since the Court already anticipated that the assessment of the harm allegedly suffered by Base and Mobistar may require a second expert report.