On 12 November 2003, the judge for provisional measures of the district court in The Hague issued an injunction against KPN for abuse of its dominant position on the Dutch broadband internet market. KPN’s offer to all Dutch schools to provide them with free broadband internet access (xDSL) was contested by competitors.

This is the first time that a court in TheNetherlands has issued an injunction for this reason in preliminary relief proceedings. Until now, courts used to observe that the provisional examination of the facts in preliminary relief proceedings (kort geding) leaves no room to establish whether or not a dominant position exists. The question of whether there is any abuse is not even normally considered. This judgment could therefore well be a turning point in Dutch caselaw, although it is too early yet to know for sure whether other judges will follow Judge Punt of the court inThe Hague.

Summary of the facts

After having lost a tender from the Ministry of Education for the provision of broadband internet access services to educational institutions for the next three years, KPN made a public offer to all schools to provide them with broadband internet access (xDSL) for free. KPN claimed this to be a form of sponsorship. KPN submitted that the sponsorship was possible because their marketing budget is no longer used for sponsoring the national football league. Both the Ministry of Education and the Dutch competition authority, the NMa had informed KPN that they saw no objections in the offer. The NMa approved because it considered that KPN does not have a dominant position on the broadband internet market (which in its view comprises both xDSL services and cable internet). The NMa based that position mainly on information provided by KPN itself.

However, the plaintiffs in the case at hand, the winner of the tender and an independent ISP of cable broadband services, sued KPN and its subsidiary ISP XS4all claiming that their behaviour constituted abuse of a dominant position.

The decision

Despite the preliminary opinion of the competition authority, the president of The Hague court ruled that KPN actually does have a dominant position on the broadband internet market. It based its ruling on a combination of facts: KPN has a rapidly increasing market share (at present 41%) and the additional circumstance that KPN has the control over an infrastructure that is not easily duplicated. As a result KPN has the power to determine prices independently. Consequently, the offering of the services to schools for free during three years is in itself unlawful already. Additionally, KPN's behaviour may also be regarded as predatory pricing and imposing a price squeeze. The argument KPN submitted that it was a case of sponsorship, did not impress the court.

The court order

The court has issued an injunction (1) prohibiting both KPN and XS4all, to make the offer concerned and to make any reference to the offer, (2) ordering use of the same channels in which the offer was announced and to announce the suspension of the offer and the contents of the injunction, and (3) prohibiting KPN to make any offer to educational institutions in The Netherlands below the cost price of the wholesale services necessary to offer the (retail) services. Each such order has been separately issued under a penalty of € 200,000 per infringement per day with a maximum of € 30 million.


Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.

Authors

Kuipers-Pauline

Pauline Kuipers

Managing Partner
Netherlands

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