On 12 November 2003, the judge for provisional measures of the district court in The Hague issued an injunction against Dutch telecommunications provider KPN in order to prevent the abuse of KPN's dominant position on the Dutch broadband internet market.
This is the first time that a court in The Netherlands has issued injunctive relief for this reason in preliminary relief proceedings. Until now, courts required a provisional examination of the facts in preliminary relief proceedings to establish whether or not a dominant position existed. 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’s example.
Summary of the facts
KPN lost out in a tender by the Ministry of Education for the provision of broadband internet access services to educational institutions in The Netherlands. Subsequently, KPN made a public offer to all schools in The Netherlands to provide them with free broadband internet access (xDSL). KPN claimed this to be a form of sponsorship. KPN submitted that the sponsorship was possible because the marketing budget was no longer being used to sponsor football league. Both the Ministry of Education and the Dutch Competition Authority had previously informed KPN that they had no objection. The Dutch Competition Authority approved the sponsorship because it considered that KPN did not hold a dominant position in the Dutch broadband internet market. The Dutch Competition Authority had reached its position on information supplied by KPN itself. The claimant in the case - the winner of the tender and an independent Internet Service Provider - sued KPN and its 100% affiliated ISP XS4 on the basis that its behaviour constituted abuse of a dominant market position.
Notwithstanding the preliminary opinion of the Dutch Competition Authority, the court of The Hague ruled that KPN does have a dominant position on the broadband internet market. The basis for the court’s ruling was that KPN has a rapidly increasing market share (at present 41%) and control over an infrastructure that is not easily duplicated. As a result, KPN has the power to determine prices independently and so the offering of free services to schools is unlawful. Further, the court considered that KPN's behaviour amounted to predatory pricing and imposing a price squeeze. The court was not impressed by KPN’s sponsorship argument.
The court order
The court issued an injunction prohibiting both KPN and XS4 to make the offer in question or make any reference to it and ordering them to use the same channels through which the offer was announced to announce that the offer had been suspended and to reveal the terms of the injunction. The injunction also prohibits KPN from making any offer to educational institutions in The Netherlands below the cost price of the wholesale services necessary to offer the services. Each aspect of the order carries a penalty of € 200,000 per infringement per day to a maximum of € 30 million.
Written by Camilo Schutte and Elies Steyger.
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.