CCA terminates the proceeding against Hrvatski telekom

The CCA opened the proceeding against HT on its own initiative following the circumstantial evidence that HT has been abusing its dominant position in the pay-tv market in the territory of the Republic of Croatia by offering expanded TV packages (Prošireni TV, MAX Arena, MAX Sport Plus and HBO Premium packages) under discount prices for term contract committments, offering the highest discount for the 24-month contract. This discount for TV deals was in effect from 14 April 2017 until the present – the duration that was taken relevant in the CCA analysis.

It should be noted first that any distortion of competition by abuse of dominance must fulfil two cumulative conditions: the undertaking must actually hold the dominant position in the relevant market in the sense of Article 12 of the Competition Act, and second, it must be shown that it abuses its dominant position in the sense of Article 13 of the Competition Act and Article 102 TFEU.

In the course of the proceeding, it has been found that HT indisputably holds a dominant position in the pay tv market in Croatia in the relevant period.

Taking into account the EU law and practice, the CCA investigated whether predatory pricing has been applied by the undertaking concerned, specifically, the CCA used the long run average incremental cost (LRAIC) as a cost measure in gaining a more realistic estimation of the long run cost necessary for the undertaking to enter the market and stay on it. The analysis particularly involved the fact that in the network industries, such as the provision of electronic communication services, fixed costs are high, so as not to undervalue the costs of the undertaking holding a dominant position.

By comparison of the long run average incremental costs for the provision of MAXtv base TV pack and that of add-ons (expanded TV packages) with the prices of these TV packages, the CCA found that the prices of the TV packages concerned covered the long run average incremental costs for the provision of these services in the time period form 2017 – 2019.

In addition, given the fact that the marginal cost in the analysis of HBO Premium and MAX Sport Plus packages were slightly below the comparable relevant values, the CCA adequately applied the criteria arising from the application of competition rules in the EU. Namely, to prove the predatory pricing of the services below the LRAIC there must be evidence of a strategy to exclude “as-efficient or more efficient-competitor”. In this concrete case the CCA did not find evidence of such a plan to engage in certain conduct in order to exclude a competitor by HT.

Furthermore, the CCA found that HT has offered add-ons under the price available to all users, new and existing whose contracts lapsed. Not only does the prices offered for add-ons apply to all users, but it has been in effect for a longer time period – from April 2017 until today.

As mentioned above, and as substantiated by the EU law and practice, it is less likely that an undertaking holding a dominant position would be engaged in predatory pricing where a lower price applies to all users and for a longer period of time.

Therefore, the CCA found that further steps in the proceeding concerned would not be compliant with the principle of procedural efficiency and closed the proceeding concerned.