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The DCA recommends competition on equal terms without state subsidies on maps and spatial data

21. juni 2006

4/0120-0100-0065/FI/MKJ The Council Meeting 21. June 2006

On 21 June 2006 the Danish Competition Council sent recommendations to the Danish Ministry of the Environment and the Ministry of Economic and Business Affairs concerning the price fixing of the National Survey and Cadastre (in Danish “Kort- og Matrikelstyrelsen” – hereafter “KMS”).

Public regulation provides that KMS is to sell a number of different products – for example topographic maps and orthophotos – with 25 % state subsidies. Two other suppliers of spatial data and resulting products (KortCenter.dk and COWI – hereaf-ter the “complainants”) have complained that the existing price fixing leads to a distortion of competition, also as a consequence of the bundling discounts KMS is allowed to use.

The complainants explain that they and other rival competitors have competed in parts of KMS’ sphere for a number of years. Furthermore fixed costs have de-creased recently due to the technological development and the globalisation. Fi-nally the market undergoes a continuous product development and several competi-tors have entered the market. Viewed in the light of these facts the complainants are convinced, that there is no risk of an inadequate supply at market price.

Contrary KMS has stated that a unique infrastructure is necessary to secure the overall and concrete cooperation on data, access to data, modelling etc. in order to secure coherence between spatial data across subject areas and administrative lev-els. Therefore a few companies (among them KortCenter.dk and COWI) must ac-cept that activities that have been carried out on the market as a consequence of the development will become a part of a public infrastructure. On the other hand the infrastructure will form the basis of which the complainants and their competitors can develop applications to end-users.

As a principal rule the Danish Competition Council recommends that KMS must calculate the prices at full costs – including depreciations and so on. These changes shall be implemented immediately for new products while a phased adjustment for existing products may be necessary. Furthermore the Council recommends that KMS must stop using bundling discounts on combined sales of monopolistic prod-ucts and products subject to competition.

During the investigation the Danish Competition Authority has analyzed a solution in which KMS only sells “infrastructure” and not “applications/end products”. However this particular case concerns products in which it is not possible to de-limit products with infrastructural characteristics and with no competing products. A request of pricing covering full costs is therefore necessary to avoid distortion of competition in relation to rival competitors in the future.

However there may be particular products in which state subsidies can be well-founded; for example sea maps and maps of the Faroe Islands and Greenland. It is important that the selection of these products takes place on the basis of a thorough analysis, which is made public and which also includes competitive considerations.

The recommendations (in Danish) can be found on the webpage of the Danish Competition Authority – www.ks.dk/