CBb reverses ACM’s finding of joint dominance by KPN and VodafoneZiggo

Oxera advises VodafoneZiggo, leading to a successful appeal of the 2018 decision by the ACM in the Dutch broadband market, which means that both KPN and VodafoneZiggo are no longer obliged by regulation to open up their networks to competitors. The CBb cited Oxera’s ‘game theory’ analysis in reaching its decision.

VodafoneZiggo is a Dutch company offering fixed, mobile and integrated communication and entertainment services to consumers and businesses. It is a joint venture of Liberty Global, the biggest international TV and broadband internet company, and Vodafone Group, one of the world’s biggest telecommunications companies. KPN is a Dutch landline and mobile telecommunications company that appealed the 2018 decision of the Dutch Authority for Consumers and Markets (ACM) alongside VodafoneZiggo.

The ACM’s 2018 decision found that both VodafoneZiggo and KPN held a position of joint dominance, and mandated wholesale broadband access for both firms. The Dutch Administrative High Court for Trade and Industry (CBb) has now published its long-awaited verdict on the appeal by VodafoneZiggo and KPN against the ACM’s decision.

The CBb concluded that the ACM had not sufficiently proven that absent regulation, both firms would enjoy joint dominance in the retail market for broadband internet or bundles including internet services. The ACM had argued that in the absence of regulatory obligations to offer wholesale access, both firms would tacitly coordinate with each other to refuse to open up their networks to third parties, in an effort to protect their position in the retail market.

However, citing Oxera’s ‘game theory’ analysis, the CBb concluded that in fact, a credible alternative scenario exists where, absent access regulation, it would be economically rational for KPN to continue to offer access to its network regardless of what VodafoneZiggo would choose to do. The CBb therefore agreed with Oxera that the market outcome would not be characterised by tacit coordination.

To our knowledge, this is the first time that economics ‘game theory’ models have played such a central role in a market review appeal decision in the electronic communications sector.

Oxera Partner Maurice de Valois Turk commented.

‘Regulators and telecommunications firms throughout the European Union can look to this outcome to inform decisions in their own markets. The CBb provides clarity on the standards and thresholds that need to be met during a market review in order to find joint dominance, and the role that incentives to supply wholesale access play in the analysis.’

Oxera had the pleasure of working alongside the teams from VodafoneZiggo (Stein Smeets, Bram Tijhof and Barbara Jongerden), Liberty Global (Robert Kolthek, Cerry Darbon and Michael Bryan-Brown) and Vodafone Group (Ben Wreschner), as well as Freshfields Bruckhaus Deringer (Winfred Knibbeler, Alvaro Pliego Selie, Bart Verheijen and Inez Lulof), and we congratulate them on the outcome.

Posted 18/03/2020