Brussels, 08/06/2010 (Agence Europe) - In its judgement in case C-58/2008 on Tuesday 8 June, the Court, in grand chamber, ruled that, with Regulation 717/2007, the Community had the right to impose a cap on the prices charged by mobile telephone operators for roaming calls and SMS messages received and sent by users outside their countries of origin. According to the Court, the legal basis of the regulation - Article 95 of the EC Treaty - is in line with the aim of the regulation itself, which is to improve the conditions for the functioning of the internal market. Furthermore, the Court, deciding that the move to cap retail prices, in addition to wholesale prices, for the period of validity of the regulation (until 30 June 2012) was legitimate, took the view that the regulation was proportionate with the objective of protecting users against excessively high charges and, therefore, did not infringe the principle of proportionality. Finally, the Court said that the principle of subsidiarity had been observed, taking the view that the Community legislature could legitimately take the view that a common approach at Community level was necessary to eliminate acknowledged and potential national disparities and ensure the smooth functioning of the internal market.
The ruling is important because, as the advocate general said in his opinion, in substance, it is about knowing whether the community can regulate on prices on the basis of Article 95 and, if it can, to what extent and in what conditions. Four major mobile telephone operators - Vodaphone, Telfónica O2, T-Mobile and Orange - wanted to deny the Community that right and, in the High Court of Justice of England and Wales, challenged the legal basis of the aforementioned regulation, Article 95 of the EC Treaty, which allows the Community to adopt legislative measures to bring the laws in member states closer together where there are differences, whether existing or potential, that could affect the establishment or working of the internal market. The four operators argued that this Article was not a sufficient basis to allow the Community to intervene in a competitive market by capping prices and, even if it was, the retail price controls imposed by the regulation infringed the principles of proportionality and subsidiarity. Vodaphone said that, to compensate losses resulting from caps on the prices of communications, operators might charge users for receiving calls - currently free in Europe.
The Court found against the four operators, largely abiding by the arguments set out by the advocate general in his opinion. Thus:
With regard to Article 95 being used as the legal basis for the regulation, the Court said that the objective of this Article was, indeed, to improve the conditions of the functioning of the internal market. When the regulation was adopted, in 2007, the level of retail international roaming prices was high and the relationship between costs and charges was not such as would prevail in fully competitive markets. That high level of retail charges had been regarded as a persistent problem by public authorities and consumer protection associations throughout the Community, but attempts to solve the problem using the existing legal framework had not had the effect of lowering charges. Furthermore, there was pressure on member states to take measures to address the problem. In those circumstances, adoption of divergent national measures to seek to lower retail charges, but without affecting wholesale charges, could have caused significant distortions of competition and disrupted the orderly functioning of the Community-wide roaming market. Adoption of a regulation based on Article 95 to protect the proper functioning of the internal market was, then, justified.
With regard to the proportionality of the regulation, insofar as it not only sets ceilings for wholesale charges but also retail charges, the Court pointed out that before the regulation was proposed, the Commission had studied alternatives and evaluated the economic impact of various types of regulation. According to these assessments, when the regulation was adopted, the average retail charge for a roaming call in the Community was more than five times higher than the actual cost of providing the wholesale service.
The reduction of wholesale prices would not necessarily have guaranteed a fall in retail prices and would not have had a direct and immediate effect on consumers. The tariff provided for in the regulation is set in relation to the ceilings for the corresponding wholesale charges, so that the retail charges reflect more accurately the costs incurred by providers. The regulation is therefore proportionate to the aim pursued.
Finally, the Court examined the regulation in the light of the principle of subsidarity, according to which the Community may not act unless member states are not in a position to achieve the same goal adequately. It concluded that the Community legislature could legitimately take the view that its action should also comprise intervention at the level of retail prices. Given the connection between wholesale and retail prices on this market, any (national) measure aimed solely at bringing retail prices down without having an effect on the level of the wholesale provision cost of Community roaming services would have been of a kind to upset the correct working of the Community roaming market. Thus, due to the impact of the common approach under Regulation No717/2007, the aim pursued to maintain the harmonious working of the internal market for these services could be better conducted at Community rather than national level.
The European Commission, which had been at the basis of this regulation adopted in 2007 and completed in 2009 to also include text communications (sms), was delighted with the ruling, saying that it would take it into account when revising the regulation, which should be during June of next year. (F.G./transl.rt/jl)