In Landmark Ruling CJEU Closes Loophole in EU Net Neutrality Regulation

On 15 September 2020 the Court of Justice of the European Union (“CJEU”) issued a landmark ruling (decision in joined cases C-807/18 and C-39/19) in a net neutrality case, closing the zero-tariff loophole in the EU net neutrality Regulation (2015/2120, “Net Neutrality Regulation”). This decision is the CJEU´s first ruling on the Net Neutrality Regulation, and it used the opportunity to take a strong pro-net neutrality position that signals an ever stricter position on defending the rights of consumers and companies with respect to equal treatment in internet access within the EU.

Background of CJEU Referral

The CJEU decision stemmed from an appeal concerning regulatory proceedings by the Hungarian telecom regulator against Telenor Hungary, a major national internet service provider. Telenor Hungary had been offering zero tariff packages to its customers in the form of a MyMusic and MyChat service bundle. The bundles provided favorable treatment for certain applications such as Spotify and Apple Music, allowing unlimited access to these services without applying the normal data cap to data relating to the services in question. In contract, access to service providers not included in the zero-tariff category would be severely restricted once the data cap of the user’s service bundle was reached.

The Hungarian regulator considered zero tariff practices to be harmful and discriminatory since they allowed service providers with access to the zero-tariff category an advantage in making their services more attractive to consumers.

Telenor Hungary’s zero tariff policies seemed on the face of it to be a breach of the Net Neutrality Regulation, which prohibit favorable treatment of certain services or service providers under Article 3(3) of the Net Neutrality Regulation. Telenor Hungary, however, argued that Article 3(3) of the Regulation should not be applied to these kinds of service bundles for several reasons. For example, such service bundles were individually negotiated with end users under a different provision of the Regulation, namely Article 3(2), which applies to contracts negotiated between an internet service provider and end users. Under such agreements the end user could choose whether it wanted such a bundle. In addition, it was possible in theory for any service provider to seek access to favorable zero tariff treatment enjoyed by MyMusic and MyChat bundles. Thus, Telenor Hungary maintained that the practices could not be deemed discriminatory. Indeed, taking this same approach, zero tariff policies were, and to some degree still are, a common practice among internet service providers in certain EU Member States.

CJEU Decision

The positions taken by Telenor Hungary, and more widely by industry operators, with respect to the Net Neutrality Regulation were subtle and rather legalistic. In short, they took the position that (1) the rules concerning contracts negotiated with end users, and (2) the general prohibition on discriminatory internet traffic control were mutually exclusive; in other words, one should apply either the general ban on discriminatory traffic control under Article 3(3), or the more discretionary provision relating to the content of agreements between internet service providers and end users under Article 3(2), but not both.

In its decision, the CJEU wielded a sharp sword to the gordian knot woven by Telenor Hungary, noting that discriminatory traffic practices in the form of zero-tariff policies were incompatible with both Articles 3(2) and 3(3) of the Net Neutrality Regulation. Indeed, the two provisions were not mutually exclusive, but could be applied together to the services Telenor Hungary offered. In other words, such zero-tariff practices were likely to negatively affect the exercise of end users’ rights in breach of Article 3(2) and were deemed to be in breach of Article 3(3) due to discriminatory internet traffic measures undertaken solely for commercial reasons, rather than being based on technical or other purposes that might otherwise have been acceptable under the Net Neutrality Regulation.

The CJEU’s reasoning culminated in an important and strongly worded guideline, which concluded that offering zero-tariff policies is essentially prohibited under the Net Neutrality Regulation where the policies are based on commercial considerations.

Why is this CJEU decision so important?

The CJEU judgment is important because it appears to prohibit zero-tariff policies in the EU like those used by Telenor Hungary. As noted above, such policies have been very common in certain parts of the EU and are based largely on commercial considerations. The CJEU decision will force internet service providers to consider certain changes to their practices within the EU market.

The zero-tariff issue has been a vexing problem ever since the Net Neutrality Regulation was implemented, and net neutrality advocates have long sought stricter controls or prohibitions on such policies, which had not been expressly prohibited by the Regulation or by net neutrality regulators. As such, the zero-tariff loophole has now been closed.

As a knock-on effect, national EU regulators (e.g., BEREC, the Body of European Regulators for Electronic Communications) are likely to take a stricter stance on zero-tariff policies by changing their present, somewhat ambiguous, guidance on zero-tariff policies which appears to allow such practices provided certain conditions are met.

Conclusion

On a broader level the CJEU decision is a strong signal to internet service providers and end users alike that the EU is taking an aggressive, pro net neutrality stance in an ongoing effort to allow equal access to the internet. Importantly, the CJEU could have issued a judgment that would have been strictly limited to the specific facts of the case or the points of law discussed, which therefore would have been less widely applicable to market practices. Instead, the CJEU issued what appears to be a general prohibition on zero-tariff policies, written in plain English with little room for contrary interpretations.

In essence, the CJEU has chosen to draw a line in the sand when it comes to net neutrality in the EU. This decision may be a sign of things to come in future judgments and interpretations of the Net Neutrality Regulation, and internet service providers would do well to take note of it.

A link to the CJEU´s decision can be found here.