In a recently published judgment issued on 20 December 2018, the Higher Regional Court of Frankfurt finally rejected the claim of a major operator of broadband cable, Kabel Deutschland, that Telekom Deutschland was abusing its dominant position by charging excessive prices when renting cable conduits to Kabel Deutschland.
In 2003, Kabel Deutschland had acquired a subsidiary of Telekom Deutschland, including its broadband cable networks. The cable conduits, through which the broadband cable networks run, however, remained the property of Telekom Deutschland. Together with the company purchase agreement, the parties had entered into a rental contract for the cable conduits at an agreed rental fee. In 2010, the German Federal Network Agency fixed the rental fees for access to cable conduits at a significantly lower level than that agreed in the rental contract between the parties. As a result, Kabel Deutschland filed a complaint against Telekom Deutschland with the Regional Court of Frankfurt, alleging that Telekom Deutschland was abusing its dominant position in the market for access to cable conduits by refusing to reduce the rental fee agreed in the ongoing rental contract. Kabel Deutschland asked the Court to oblige Telekom Deutschland to reduce the rental fee agreed in the rental contract. The Regional Court of Frankfurt rejected the claim in 2013, and so did the Higher Regional Court of Frankfurt on appeal, based essentially on the reasoning that the rental contract, including the level of the rental fee, was closely linked to the agreement on the purchase of the Telekom Deutschland subsidiary, and that the agreed rental fee was part of the consideration that Kabel Deutschland agreed to pay for the entire transaction (see VBB on Competition Law, Volume 2015, No. 2, available at www.vbb.com).
The case was further appealed to the German Federal Court of Justice, which decided in January 2017 that the case should be referred back to the Higher Regional Court of Frankfurt (see VBB on Competition Law, Volume 2017, No. 3, available at www.vbb.com). The Higher Regional Court of Frankfurt has now finally dismissed Kabel Deutschland's claim that the rental fee of its ongoing rental contract with Telekom Deutschland should be reduced because it constituted an abuse of dominance through excessive pricing.
In its judgment, the Higher Regional Court of Frankfurt confirmed that the rental contract and the level of the rental fee agreed between the parties was closely connected to their company purchase agreement, in that the purchase price for the company was lower than the market price due to the simultaneous signature of the rental contract for the cable conduits. On that basis, the Court reiterated its previous view that the two agreements could not be seen in isolation from one another and that the relevant market on which to assess possible dominance was not the market for the provision of access to cable conduits, but rather the market for company takeovers, on which Telekom Deutschland was not dominant. The Court therefore held that the agreements, including the rental contract, had been negotiated and agreed on competitive terms.
Based on the principle of "pacta sunt servanda" (i.e., agreements must be kept) and its finding that Telekom Deutschland was not dominant at the time the agreements, including the rental contract, were entered into, the Court ruled that the interests of Telekom Deutschland in continuing the rental contract on the agreed terms prevailed and that the plaintiff was not entitled to demand that the rental fee agreed under the valid contract be reduced. Whilst the Court conceded that, in the meantime, Telekom Deutschland may well have become dominant on the market for access to cable conduits, it held that, in order to enforce its rights vis-à-vis a dominant company based on competition law, the plaintiff should have made use of its contractual termination right, which allowed it to terminate the rental contract annually. If Telekom Deutschland was dominant on the market for access to cable conduits, the plaintiff would then have been entitled to demand that Telekom Deutschland grant it access to its cable conduits for an appropriate fee, pursuant to the German rules on abuse of dominance (in particular, Section 19(2) Nr. 4 of the Act against Restraints of Competition). In view of the fact that the plaintiff had chosen not to terminate the contract which had been agreed on competitive terms, the Court concluded that Telekom Deutschland's interests in continuing the rental contract on the agreed terms prevailed over the plaintiff's interests in having the Court reduce the rental fee under the ongoing contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.