German Federal Court of Justice rules on rental fees for broad band cables conduits

• 15/02/2017
• Articles

In a judgment of 24 January 2017, the German Federal Court of Justice (“the Court”) ruled on whether Telekom Deutschland had abused its dominant position on the market for access to cable conduits by way of excessive pricing.

The claimant in this case, a major operator of a broadband cable network, acquired a subsidiary of Telekom Deutschland, the defendant. This included the assets of the subsidiary consisting mainly of broadband cable networks. The cable conduits, which enclose the broadband cables, remained the property of the defendant. The defendant agreed to rent out the cable conduits to the claimant according to a rental agreement that the parties negotiated in connection with the transaction. The claimant then argued that the rental fee for the cable conduits was too high and constituted an abuse of the defendant’s dominant position in the market for access to cable conduits for broad band cables. The claimant sought the repayment of part of the rental fees paid in the past as well as a declaration that the claimant was not obliged to pay more than a certain amount for the rental of the conduits.

The Higher Regional Court of Frankfurt, at previous instance, found that the defendant’s pricing practices did not amount to an abuse of dominance, since the rental agreement was part of the claimant’s acquisition of Telekom Deutschland’s subsidiary. According to the Higher Regional Court of Frankfurt, the acquisition could not be split into a sales and a rental part.  Instead, the rental fee was to seen as part of the consideration that the claimant had to provide for the entire transaction (see VBB on Competition Law, Volume 2015, No. 2).

In its recent judgment, the Federal Court of Justice ruled that the Higher Regional Court Frankfurt was correct in finding that there was a link between the sales price of the subsidiary and the rental fee for the cable conduits in the contractual agreements of the parties. It also agreed that this link justified the assumption that the claimant was bound by the conditions of the contracts that were negotiated under competitive conditions. However, the Court held that, contrary to what was found by the court at previous instance, the claimant was not permanently prevented from demanding to have the contractually agreed upon rental fees adapted on the basis that the rental fee was higher than the fee that the defendant would be able to charge as a result of effective competition. According to the Court, from the point in time when the claimant was contractually authorised to demand amendments to the contracts and had actually done so, it was no longer sufficient to point to the fact that the amount of the rental fee was initially contractually agreed upon in order to exclude a claim for damages due to an abuse of the defendant’s dominant position.

The Court therefore referred the matter back to the Higher Regional Court of Frankfurt, which will have to assess whether the defendant holds a dominant position in the respective regional markets for the access to cable conduits for broad band cables and whether the defendant charged excessively high prices, taking as a reference point the point in time when the claimant first had the right to ask for a decrease of the rental fee.