Yesterday, the Commission launched "fast track" infringement proceedings against Germany for "regulatory holidays" for Deutsche Telekom. After repeated warnings of the Commission, Germany surely must have seen that one coming. Germany now has (only) fifteen days to explain itself, and the Commission has already indicated that if it is not completely satisfied with the German response (i.e. withdrawal of the proposed legislation), it will immediately bring the matter before the ECJ. In a recent discussion we had at Tilec's ClubMed on this matter, our economists were not overly unreceptive towards trying out this idea of regulatory holidays. A comparison was made by them to patents, where one could argue a similar protection is given to the patent-holder, so as to encourage investment and innovation. In yet another discussion however at a WIP meeting, Hans-Theo Normann presented an empirical paper examining the exemption of a high-voltage power-cable cartel by the German antitrust authorities for eleven years. This paper not only showed that expected efficency gains did not materialize, but also that the cartel earned significantly higher profits, both during and after this 'regulatory holiday'.
From a legal perspective, we can of course argue that competition law is always there and will be likely to 'catch' this practice of regulatory holidays. However, we cannot deny that this practice squarely contradicts the main rationale underlying the current EC Communications Framework. In any event, what stands out is the timing of the Commission in this matter; is this a 'subtle way' of the Commission to influence the revision process of this Framework?