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Russian Digital Competition History: CenterTelecom and Sovintel

19.12.2019
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Decision number or official publication reference: № 1 10/10-09
Date of the decision and order: 2009-03-19.
Link to the decision and order (official website):
https://fas.gov.ru/documents/-c7b36364-72fd-4dd4-98d3-0a2035c76f4e


The case involves telecommunication companies CenterTelecom OJSC (hereinafter – CenterTelecom) and Sovintel LLC (hereinafter – Sovintel). CenterTelecom is a provider of local fixed and mobile telephone services and has significant market power in the public (shared) communication network markets in the territory of all the above-mentioned cities and regions in Russia. The Federal Service for Supervision of Communications, Information Technology and Mass Media (Roskomnadzor) included CenterTelecom in the list of the operators occupying a significant position in the public communication network. Sovintel has licenses to provide local fixed telephone services in the Tver Region, Smolensk Region, and the Ivanovo Region, as well as to provide fixed intercity and international telephone services and mobile telephone services in the Central Federal District of the Russian Federation. 


In 2006 Sovintel did not have its own intercity telecommunication networks and entered into an agreement to interconnect and transmit traffic via CenterTelecom’s networks (hereinafter – the ‘Agreement’). In 2008, however, Sovintel offered CenterTelecom to change clause 2.2.9. of the Agreement, under which Sovintel payed intercity tariffs for the use of intercity and local CenterTelecom’s networks. As Sovintel had developed its own intercity networks, the company wanted to pay CenterTelecom only local tariffs for the use of the local networks.
CenterTelecom refused to change this clause. Sovintel claimed that the refusal of CenterTelecom constituted abuse of its dominant position, which resulted in Sovintel paying high intercity tariffs for the use of CenterTelecom’s local networks only. According to Sovintel, this increased the costs of Sovintel and prevented it from offering competitive tariffs for connection services and traffic transmission services to other telecom operators, which lead to restriction of competition in the connection and traffic transmission services markets. 


CenterTelecom, however, stated that it could not amend the clause 2.2.9 of the Agreement, since the Agreement is a public agreement meaning that according to law CenterTelecom must provide equal rights to all counterparties to agreements on connection to CenterTelecom’s network. 


The Federal Antimonopoly Service of the Russian Federation (hereinafter – ‘FAS of Russia’) found that CenterTelecom had a dominant position in all the above mentioned markets. FAS of Russia agreed with CenterTelecom that the Agreement was a public agreement and that the dominant company should provide equal terms under agreements to any counterparty. However, FAS of Russia decided that the ‘public agreement’ concept did not mean that provisions of the public agreements must be similar for all counterparties. According to FAS of Russia, the ‘public agreement’ concept means that these agreements should provide equality and non-discrimination for all counterparties on the case-by-case basis. FAS of Russia concluded that in case at hand CenterTelecom was not prohibited by law to change the disputed clause 2.2.9 of the Agreement with Sovintel, and that the clause 2.2.9 of the Agreement restricted competition, as Sovintel could not offer competitive tariffs due to the high tariffs Sovintel paid CenterTelecom for the use of CenetrTelecom local networks.

FAS of Russia concluded that CenterTelecom abused its dominant position by imposing for Sovintel economically unprofitable contractual terms.

Remedies: FAS of Russia required CenterTelecom to exclude the clause 2.2.9 from the Agreement.

Judicial review: CenterTelecom has challenged the decision in the Moscow Commercial Court. The Moscow Commercial Court overturned FAS of Russia decision and order. According to the court, FAS of Russia did not prove that CenterTelecom abused its dominant position, because it failed to demonstrate that CenterTelecom acted unreasonably by imposing economically unprofitable terms on Sovintel. Moreover, the Moscow Commercial Court stated that the exclusion of clause 2.2.9 from the Agreement would favor Sovintel and discriminate other telecom companies having similar contracts with CenterTelecom. The Court of Appeal and Cassation Court upheld the decision of the Moscow Commercial Court. The Supreme Commercial Court upheld the decisions of lower courts that FAS of Russia did not prove that CenterTelecom abused its dominant position. Specifically, the materials of the case did not provide evidence that CenterTelecom created discriminatory conditions for connection of Sovintel to telecommunication networks or for traffic transmission, compared to other CenterTelecom’s counterparties.