Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC Fines Telecommunications Companies for Agreement Not to Compete, (Jan 23, 2013)
Organizations Mentioned:Portugal Telecom SGPS S.A. | Telefonica S.A.
By Jeffrey May, J.D.
Telefonica S.A. of Spain and Portugal Telecom SGPS S.A. have been fined a total of € 79 million by the European Commission (EC) for agreeing not to compete with each other in Iberian telecommunications markets. The EC announced today that Spain's largest telecommunications company must pay €66,894,000 and Portugal's largest telecommunications operator must pay €12,290,000 for their breaches of EC competition law.
According to the EC, the companies entered into the agreement in 2010 in the context of Telefonica's acquisition of Portugal Telecom's stake in Brazilian mobile operator Vivo, which was then jointly owned by both firms. The firms terminated the non-compete agreement in early February 2011, after the EC opened antitrust proceedings.
Instead of competing with each other for offering clients the most advantageous conditions, Telefonica and Portugal Telecom deliberately agreed to stay out of each other's home markets, the EC contended. By preserving the status quo in Spain and Portugal, the agreement hindered the integration process of the EU telecoms sector. Non-compete agreements are one of the most serious violations of EU competition rules, as they potentially result in higher prices and less choice for consumers, according to the EC.
In a statement released today, Telefonica said that it will appeal the decision to the European Court of Justice. Telefonica contends that the firms never acted on the agreement. Telefonica went on to say that there was no secret pact or attempt to conceal the agreement, because the relevant authorities were informed of the agreement.
“Once the parties conducted their assessment on the legality of the clause, they concluded that the restriction foreseen therein could not be applied and therefore they decided to eliminate it,” Telefonica asserted.
Portugal Telecom also issued a statement in response to the EC decision, saying that the sanction was not justified. The company also said that it was considering taking the matter to the European Court of Justice.
Companies: Telefonica S.A.; Portugal Telecom SGPS S.A.
News: Antitrust