Vodafone Unit Gets Retrial in Deutsche Telekom Fees Case

Updated on
  • German top court overturns two lower tribunal rulings
  • Suit will be sent back to Frankfurt judges to rehear dispute

Vodafone Group Plc’s Kabel Deutschland unit won a ruling at Germany’s top court granting it a retrial in a case seeking 350 million euros ($375.5 million) from Deutsche Telekom AG over claims the country’s former phone monopoly is overcharging for the use of ducts that carry its cables.

The Federal Court of Justice, Germany’s highest civil tribunal, on Tuesday backed Kabel Deutschland’s attack on two lower court rulings that had dismissed the suit. The case will now be reheard by a panel of judges in Frankfurt. Vodafone is also seeking a ruling to cut its annual fees of 100 million euros by up to two-thirds. The court disclosed the reasons for its ruling early Wednesday morning in a statement on its website.

"With its high fees for the use of cable ducts, Deutsche Telekom abuses its dominant market position," Vodafone said in an e-mailed statement. "We welcome that the court followed our legal arguments.”

Deutsche Telekom fell as much as 0.83 percent in early Frankfurt trading, countering the overall trend of the country’s DAX index of blue chips, which rose 1.16 percent at 9:54 a.m. local time.

Kabel Deutschland bought Deutsche Telekom’s cable network business in 2003, with the fees for duct-use part of the deal. After Germany’s telecommunications regulator ruled in 2010 that Deutsche Telekom must reduce its charges for the use of the “last mile” of its network by about two-thirds, Kabel Deutschland filed the suit and said the reduction should also apply to the lease agreement closed seven years earlier.

"If the purchase of a long-term investment good leads to a specific need that only a certain company can satisfy, the payment for the services is generally subject to antitrust control," the court wrote. "If fees are excessive, charging them isn’t justified simply because the lease agreements were closed in connection” with an asset purchase "and lease payments influenced the purchase price."

The top court judges said the lower court must re-examine the case to see whether other justification for the fees may exists. For that, the terms of the agreement and later developments need to be reviewed, they wrote.

Deutsche Telekom spokesman Philipp Blank on Tuesday called the ruling a surprise.

The company told the court that the fees were part of the sales price of a properly negotiated deal, and thus shouldn’t be subject to antitrust rules. All contracts carry a risk that market prices may rise or fall, Deutsche Telekom said, and parties shouldn’t be able to go to court to overturn the terms.

At the hearing in the case on Tuesday, Joerg Nothdurft, the head of litigation at the Federal Cartel Office, Germany’s antitrust regulator, told the court that his agency favors cutting back the fees under antitrust rules. While the amount was negotiated as part of a purchase, it’s still a lease contract to which antitrust rules must be applied. The regulator can share its views in top-court civil cases involving antitrust rules.

The case is BGH, KZR 2/15.

(Updates with court release in sixth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE