Ericsson Nikola Tesla: Initiative for abuse of dominance dismissed

The Croatian Competition Agency (CCA) dismissed the initiative for the initiation of the infringement proceedings for the establishment of abuse of a dominant position against the undertaking Ericsson Nikola Tesla (Ericsson NT) based on the lack of legal grounds for the initiation of an ex officio proceeding.

Namely, the CCA established that in this concrete case Ericsson NT does not hold a dominant position in the relevant market and therefore cannot commit abuse of a dominant position.

The complainant claimed in its initiative that Ericsson NT would not resell Mitel Networks Corporation telecommunications equipment, spare parts and telecommunication systems licenses to its customers, save for the final consumers, with the view to destroying the redistributors’ network and acquiring a dominant position in the market as well as imposing abusive prices to final consumers.

Preliminary market investigation

In order to check the allegations of the complainant the CCA carried out a thorough preliminary market investigation. It defined the relevant market as sale, installation, expansion and maintenance of telephone systems in Croatia. The relevant market covers all telephone systems, regardless of the technology or platforms used.

Therefore, in order to establish the market power of the competing undertakings in the same relevant market the CCA analysed several features of the market concerned: the nature and dynamics of the sales, installation, extension and maintenance of telephone systems, access to the market and the barriers to entry and the buyers’ bargaining power in the sense of their economic significance for the original supplier as well as the possibilities of switching to alternative suppliers – its competitors.

The analysis indicated a complex and dynamic relevant market involving besides Ericsson NT at least seven global producers that are in Croatia represented and/or distributed by a number of undertakings.

Replacement and extension of the telephone system

It has been established beyond any doubt that in the relevant market Ericsson NT has been exposed to strong competition and therefore cannot behave to an appreciable extent independently of its actual or potential competitors, customers, suppliers or consumers. This is reinforced by the fact that final consumers can replace or extend a telephone system of a particular producer by products, spare parts and components of other producers, where a telephone system of another producer is installed and connected with the existing system.

In other words, the existing telephone system, old or new, can be always replaced by some other telecommunication system by any company or producer.

In estimating the access to the market and the buyers’ power the CCA took into account that the biggest and the most significant buyers in the telephone systems market in Croatia are public authorities (state bodies and institutions) that are subject to public procurement rules. In the sense of competition rules, public procurement of goods and services ensures access to the market under equal conditions to all interested suppliers providing that the award criteria listed in the tender had been defined in an objective, transparent and non-discriminatory manner ensuring the ‘Best price/quality ratio’. At the same time, it has been undoubtedly established that the medium and big enterprises – buyers of Ericsson NT – have significant bargaining power and that they can easily switch to competitive suppliers.

Finally, the CCA concluded that in this particular case Ericsson NT does not hold a dominant position in the relevant markets concerned, and therefore, since it does not hold a dominant position, it could not be engaged in abusive practices. In other words, there have been insufficient indices for the initiation of an ex officio proceeding against Ericsson NT.

Appraisal exclusively in the sense of competition rules

The appraisal of the case concerned, it must be noted here, was carried out exclusively within the meaning of competition rules whereby any possible irregularities that might have occurred in the sense of infringement of public procurement rules fall under the competence of other authorities and institutions.