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Telefonica and Portugal Telecom Fined for Non-Competition Agreement

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The European Commission has imposed fines of EUR66.9 million on Telef nica and EUR12.3 million on Portugal Telecom for agreeing not to compete with each other on the Iberian telecommunications markets.

In July 2010, in the context of the acquisition by Telefónica of the Brazilian mobile operator Vivo, which was until then jointly owned by both parties, the parties inserted a clause in the contract indicating they would not compete with each other in Spain and Portugal as from the end of September 2010. The parties terminated the non-compete agreement in early February 2011, after the Commission opened antitrust proceedings.

In setting the level of fines, the Commission took into account the duration of the infringement (4 months) and its gravity, including the fact that the agreement was not kept secret by the parties. The early termination of the agreement was also taken into account by the Commission as a mitigating circumstance.

Telefónica responded, saying that it completely disagrees with the ruling and said that it has not, at any time, breached the law and announces its firm intention to immediately appeal before the European Court of Justice.

Although the non-competition clause was inserted into the Vivo transaction, the companies say that it was never activated and scrapped when legal opinion said it should be.

Telefónica reiterated its opinion that  these agreements had no effect on consumers at any stage and did not alter in any way the development of the market.

For its part, Portugal Telecom said that it  believes that the fine is unjustified and inappropriate to any possible unworthiness of its conduct. It said it would consider an appeal, once it has seen the full verdict.

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Tags: telefonica  portugal telecom  Portugal  Spain