Deutsche Telekom Faces Risk of Kabel Deutschland Case Reversal

A German appeals court said a ruling dismissing a 400 million-euro ($548 million) lawsuit filed by Kabel Deutschland Holding AG against Deutsche Telekom AG may have been wrong on a crucial issue.

The lower tribunal’s ruling may have misinterpreted the relevant market in the antitrust lawsuit over the fees for the use of cable ducts, Wolfgang Weber, a presiding judge of the Frankfurt appeals court, said at a hearing today. He and his two colleagues must go through a host of issues before making a final ruling.

The duct-lease fee was part of a 2003 agreement selling Deutsche Telekom’s cable network to Kabel Deutschland. Kabel Deutschland, which is majority owned by Vodafone Group Plc, said Germany’s former phone monopoly was abusing its market position by continuing to charge that price.

The lower court had rejected that argument, saying Deutsche Telekom didn’t have a dominant market position. The market to look at was acquisitions and not that for renting cable ducts.

“We have certain problems with defining the relevant market in this way,” Weber told the parties today. “It doesn’t really convince us, but we also haven’t finally made up our minds yet.”

Even if the relevant market should be limited to cable ducts, Kabel Deutschland may still not be able to overturn the dismissal of the lawsuit because it voluntarily agreed to the arrangement in 2003, Weber said. The court would have to decide whether a contract that violates antitrust rules is still enforceable, he said.

Other Hand

“On the other hand, could Kabel Deutschland simply terminate the agreement and look for another provider?” said the judge. “It would be difficult to find one. That’s where antitrust rules may have to come in.”

Kabel Deutschland argues the annual fee of about 100 million euros needs to be cut by two thirds. Some of the claims may be barred by time limitations, the court said today.

Ludger Roeckrath, a lawyer for Deutsche Telekom, argued the judges should uphold the lower court ruling. He rejected the court’s query about whether the parties may settle, saying the court needs to decide the case because of its “enormous significance” to Deutsche Telekom.

The court scheduled a ruling for July 29, which will most likely specify whether further deliberations are needed and seek specific submissions from the companies.

The case is OLG Frankfurt am Main, 11 U 95/13 Kart.

Before it's here, it's on the Bloomberg Terminal.