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EU Commission sends statement of objection to Telefonica

Mon 14th Nov 2011

The European Commission has sent a statement of objections to Telefónica and Portugal Telecom, respectively the Spanish and Portuguese incumbent telecoms operators, regarding their agreement not to compete on the Iberian telecommunications markets. The Commission is of the preliminary view that this agreement hinders competition in breach of EU antitrust rules that prohibit restrictive business practices. The sending of a statement of objections does not prejudge the final outcome of the investigation.

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Telefónica and Portugal Telecom repealed the non-compete agreement in February 2011, after the Commission opened antitrust proceedings, however this does not erase the fact that the agreement existed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

Non-compete clauses are one of the most serious violations of fair and healthy competition. Article 101 of the Treaty on the Functioning of the EU lists amongst the agreements that are prohibited those that "directly or indirectly fix purchase or selling prices" and "share markets or sources of supply".

The statement of objections (SO) only covers the cooperation between the two companies after the Vivo transaction.

The sending of an SO is a key, but not the final step, in antitrust proceedings. The companies have two months to reply and they have also the right to access the file and to request an oral hearing amongst other procedural rights.

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