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European Commission Investigation Agreement Between Portugal Telecom and Telefonica

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The European Commission has sent a statement of objections to Telef nica and Portugal Telecom regarding their agreement not to compete on the Iberian telecommunications markets.

The Commission said that it is of the preliminary view that this agreement hinders competition in breach of EU antitrust rules that prohibit restrictive business practices.

In January 2011 the Commission started an investigation into the agreement concluded in July 2010 whereby Telefónica and Portugal Telecom agreed not to compete with each other in the Iberian market. The agreement was concluded as part of Telefónica's 2010 acquisition of sole control over the Brazilian mobile operator Vivo, previously jointly owned by both parties. At this stage of the investigation, the Commission believes that the object of the agreement was to partition markets, resulting in potentially higher prices and less choice for consumers.

Telefónica and Portugal Telecom repealed the non-compete agreement in February 2011, after the Commission opened antitrust proceedings, however this does not erase the fact that the agreement existed in first place.

If, after the parties have exercised their rights of defense, the Commission concludes that there is sufficient evidence of an infringement, it can theoretically impose a fine of up to 10% of a company's annual worldwide turnover.

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Tags: european commission  telefonica  portugal telecom  Portugal  Spain