Malta Law Firm > Insights > Court of Appeal: Enemalta Abused ‘Dominant Position’ via ‘Margin Squeeze’ at MIA

Court of Appeal: Enemalta Abused ‘Dominant Position’ via ‘Margin Squeeze’ at MIA

3.7.25

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3 MINS

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Introduction

On the 23 June 2025, the Maltese Court of Appeal delivered its long awaited judgment in the case in the names Uffiċċju għall-Kompetizzjoni v. Korporazzjoni Enemalta (Rikors numru 1/2011/1 MCH), whereby it confirmed the decision of the Civil Court (Commercial Section) which held that Enemalta had abused of its dominant position, in breach of article 9(2)(d) of the Competition Act, Chapter 379 of the Laws of Malta and Article 102 TFEU.

Factual Background

Up until 2004, Enemalta owned and controlled the only pipeline infrastructure transporting aviation fuel from the port of Birżebbuġa to the Malta International Airport (‘MIA’). Subsequently, Attard Services Limited (‘ASL’), in partnership with Shell Aviation, was awarded a concession to operate as the second aviation fuel supplier at MIA. In order to be able to operate, ASL required access to Enemalta’s pipeline infrastructure. In principle, Enemalta agreed to grant ASL with the required access, however, it demanded an access fee so high that it rendered ASL’s business model economically unfeasible which the Court of First instance found to constitute a ‘constructive refusal’.

ASL alleged this constituted a refusal of access and a margin squeeze, whereby Enemalta’s upstream pricing charged by Enemalta to ASL (i.e. the pipeline access fees) and its own downstream pricing (i.e. the fuel sales) in the retail market, were set to exclude competitors from the market.

The Office for Competition (‘OfC’) investigated this conduct and in 2011 found Enemalta to be abusing of its dominant position in breach of Article 9(2)(d) of Malta’s Competition Act and Article 102 TFEU. Subsequently, Enemalta contested the decision of the OfC before the Civil Court (Commercial Section) and subsequently appealed the decision of the Court before the Court of Appeal (Superior Jurisdiction).

Key findings by the Court

1) Dominance and the Essential Facilities Doctrine

The Court reaffirmed that Enemalta held a monopoly and by consequence, held a dominant position in the relevant upstream market (i.e. the provision of storage and throughput facilities for Jet A1 aviation fuel) due to its exclusive control over the pipeline and storage facilities. The infrastructure was deemed an essential facility, as there was no viable alternative and it was impossible or economically impractical for competitors to replicate given the capital intensity and concession terms.

The Court emphasized that dominance in such a bottleneck facility imposes a special responsibility on the dominant firm to grant access on fair, reasonable, and non-discriminatory (FRAND) terms. Denying or impeding access through excessive pricing constitutes an abuse.

2) Margin Squeeze as an Independent Abuse

The judgment carefully analysed the concept of margin squeeze as an autonomous form of abuse under Article 102 TFEU, consistent with EU case law such as Deutsche Telekom v. Commission (C-280/08P) and TeliaSonera (C-52/09). Essentially, a margin squeeze occurs when a vertically integrated dominant firm sets high upstream wholesale prices and low downstream retail prices in such a way that competitors who rely on the upstream input cannot compete profitably downstream.

The Court found that Enemalta’s access fee was set above the retail price at which ASL could sell fuel, effectively squeezing ASL’s margin to zero or below. The Court further held that this pricing strategy was not a mere commercial decision but an exclusionary tactic aimed at foreclosing competition.

The Court rejected Enemalta’s argument that ASL could have pursued alternative infrastructure or negotiated different terms. The lack of feasible alternatives and the indispensability of Enemalta’s pipeline meant the squeeze was effective and abusive.

3) Refusal to Supply and Constructive Refusal

The Court also treated the margin squeeze as a form of constructive refusal to supply. Although Enemalta did not explicitly deny access, the prohibitive pricing amounted to a refusal in practice, violating the obligation of dominant firms to deal under fair and equitable conditions.

This aligns with EU enforcement practice, where an abuse of dominance on the basis of margin squeeze can be pursued either as an independent abuse or as a refusal to supply when pricing effectively denies access.

Procedural Matters

Enemalta challenged the OfC’s investigation, alleging procedural unfairness and arguing that margin squeeze was not explicitly pleaded in ASL’s original complaint. The Court dismissed these objections, noting the following:

The Office’s investigation into margin squeeze was a natural extension of the refusal to supply complaint.
Enemalta was given ample opportunity to respond and present evidence.
No procedural irregularities or discrimination were found.

The judgment follows recent academic and regulatory developments in the analysis of margin squeeze abuses. Economic literature increasingly supports evaluating margin squeeze under an adjusted predatory pricing framework, which considers opportunity costs and the exclusionary intent behind pricing strategies in vertically integrated markets. This approach helps distinguish between harmful margin squeezes that exclude competitors and benign pricing strategies that merely reduce competitors’ profits without harming competition.

Conclusion

This ruling sets a clear precedent in Malta for tackling margin squeeze abuses, particularly in essential infrastructure sectors such as energy and fuel supply. Key takeaways include:

Dominant firms controlling essential facilities must grant access on fair and economically viable terms.
Margin squeeze is an autonomous abuse and can be prosecuted even where no explicit refusal to supply is made.
Economic viability of downstream competitors is a critical test for abuse.
Procedural fairness does not preclude the Ofc from investigating related abuses beyond the exact wording of a complaint.
The judgment aligns Maltese law with EU competition principles, reinforcing Malta’s commitment to effective competition enforcement.

It is important to note that ASL had declared their intention not to proceed any further in view of an agreement reached with Enemalta. However, the OfC had requested the case to continue in view of the public order nature of competition law infringements. Thus, the case was merely declaratory and no fine was imposed.

The Enemalta margin squeeze judgment is a welcome decision that clarifies some key aspects of abuse of dominance in Malta, particularly the treatment of margin squeeze as a standalone infringement under Article 9 of the Competition Act and Article 102 TFEU. The decision underscores the responsibility of dominant firms, especially state-owned entities with legacy monopolies, to ensure access to essential infrastructure on reasonable terms and signals robust enforcement against exclusionary pricing strategies that undermine competition and consumer welfare.

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