Swisscom fined again for abusing market dominance

Swisscom says it took the costs of other providers into consideration when calculating offers for end customers Keystone

Switzerland’s largest telecommunications company, Swisscom, has been fined CHF7.9 million ($7.75 million) by the Competition Commission (COMCO) for violating the Federal Cartel Act. 

In a statement on Thursday the company, a former state monopoly which is still majority-owned by the government, denied these allegations and said it would contest the ruling and fine. 

In its investigation of the 2008 tender for a company network for Swiss Post, COMCO concluded that other providers had been unable to make a competitive bid to Swiss Post due to excessively high prices for intermediate inputs. 

“We believe that our conduct was correct,” said Swisscom CEO Urs Schaeppi. “We put a priority on compliance with the Federal Cartel Act.” 

Swisscom said it took the costs of other providers into consideration when calculating offers for end customers but argued it was not obliged to provide commercial intermediate inputs “at cost-based prices”. 

Swiss Post had put out a call for tender in 2008 to set up a broadband network between its sites. After a suitability test, it requested offers from Sunrise, Cablecom and Swisscom. In January 2009 it accepted Swisscom’s bid, which was 30% lower than those of the others. 

Sunrise responded by filing a complaint against Swisscom with COMCO. It claimed that the price it would have had to pay for the necessary intermediate inputs would have been higher than the offer Swisscom submitted to Swiss Post. Sunrise said excessively high prices for intermediate inputs were the reason it was unable to make a competitive offer to Swiss Post. 

According to the complaint, Swisscom had used a margin squeeze and thus violated the Federal Cartel Act. 

‘Incomprehensible’ 

Swisscom said that as early as summer 2009 it had demonstrated to COMCO that Sunrise would have been in a position to submit a competitive bid “if it had made prudent use of its own and intermediate inputs”. 

It said competitors without their own infrastructures – such as cable networks and optical fibres – who would have had to rely exclusively on commercial intermediate inputs for the Swiss Post order were not invited by Swiss Post to submit a tender. 

“As a result, Swisscom was unable to obstruct competitors of this type in the tender,” it said in the statement. 

“The allegation of misconduct to the disadvantage of Swiss Post is also incomprehensible: they struck a deal for large discounts during the negotiations. Swisscom had to give in to Swiss Post’s demands in the interest of keeping them as a key customer. Since Swisscom’s offer was lowest, it was in compliance with the market,” it said. 

“From Swisscom’s perspective, these allegations of misconduct are not justified. Swisscom will therefore contest the ruling and fine before the Federal Administrative Court.” 

Not the first fine 

This is not the first time Swisscom has fallen foul of COMCO. Swisscom’s profits for the first nine months of 2015 were dented by a fine of CHF186 million for “anti-competitive practices” in the broadband market. 

That fine, imposed in 2009, had originally been CHF219 million but it was reduced last month by the Federal Administrative Court. Swisscom has appealed to the Federal Supreme Court. 

In addition, in a draft decree issued in July, the COMCO secretariat requested the commission fine Swisscom CHF143 millionExternal link for “alleged prohibited marketing” of sports content via pay TV. The watchdog accused Swisscom of abusing a market-dominant position in offering Swiss football and hockey games. Swisscom has denied the allegations. 

Swisscom’s biggest fine to date was the CHF333 millionExternal link imposed by COMCO in 2007 for alleged abuse of the pricing of broadband services, anti-competitive behaviour and contravention of competition law. This was overturned by the Federal Supreme Court in 2011.