Nova workboard

a blog from young economists at Nova SBE

Abuse of dominant position by ZON and PT Groups

According to the Competition Authority of Portugal (AdC), abuse of dominant position “consists in the unlawful exploitation by one or more undertakings of their market power resulting in the exploitation of customers or the exclusion of competitors”, that is, the dominant firm may engage in anticompetitive business in order to maintain or increase its position in the market.

As we know, this kind of behavior is forbidden not only by the national authority (AdC) (article 11) but also by the European Union through the Treaty on the Functioning of the EU, if it affects trade between member states (TFEU) (article 102).

In 2009 in Portugal, a case of abuse of dominant position rose, when ZON Group and PT Group were accused of hurting their competitors by setting the prices of wholesale and retail services of  broadband access, in an artificial way and without fairness, since PT Group is the only provider of broadband services. Through these tariffs, they increased the wholesale price and reduced the retail price, which is very harmful not only for its competitors but also for the consumers. The latter, are always harmed in the long-run, because this practice induces the exit of the competitors, reducing the variety. Furthermore, the wholesale supply was assumed as unavoidable for all the alternative operators. In addition, AdC considered that this behavior harmed the competitors since they were forced to use the only wholesale network in the market, own by PT and so the profits of the others competitors decreased. These discriminatory practices imposed limits to production, distribution, technical development and also investment, harming consumers once more. By adopting these behaviors, the defendants exploited positions of dominance which PT Group held in the wholesale and retail markets for broadband access and therefore, they limited the competition not only in the both markets but also in other products that depend on these services.

As announced by the Portuguese Competition Authority, “any abuse by one or more undertakings of a dominant position in the domestic market or in a substantial part of it and “limiting production, markets or technical development to the detriment of consumers” is prohibited and so AdC sentenced the PT Group and ZON Group to pay a fine of 53.062 million euros. However, the two companies appealed, suspending the imposition of the fine and since the deadline for the process to be judged was exceeded, the prescription is inevitable and so they didn’t pay the fine.

Rita Cordeiro #672

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Author: studentnovasbe

Master student in Nova Sbe

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