European Union: Commission Fines Mobile Operators For Non-Compete Clause

On 23 January 2013 the European Commission ("Commission") announced its decision to fine Telefónica and Portugal Telecom a total of €79 million for the implementation of a non-compete contract clause contrary to Article 101 TFEU, which, broadly, prohibits anti-competitive arrangements between 'undertakings'. The clause, inserted into a contract concluded between the parties in the context of Telefónica's 2010 acquisition of sole control over the Brazilian mobile operator Vivo, previously jointly owned by the parties, confirmed that the parties would not compete with each other in their respective home markets, Spain and Portugal, from September 2010 until the end of 2011.

Market partitioning, which is considered to have as its 'object' the restriction of competition, is viewed by antitrust regulators as one of the most serious types of violations as it delays market integration to the ultimate detriment of consumers. In the present case, the Commission noted that the parties deliberately agreed to stay out of each other's home markets and which hindered the integration process of the EU telecoms sector.

However, in setting the level of fines in this case, the Commission took into account a number of mitigating factors, as provided for in its 2006 Guidelines on the setting of fines, including:

• the duration of the infringement (4 months);
• the fact that it was not kept secret by the parties; and
• its early termination. However, had the agreement been secret, the Commission would not have taken this into account, in accordance with its fining guidelines.

It is the Commission's practice to issue a prohibition decision under Article 7 of Regulation 1/2003 and to impose fines, as in this case, where there is value in deterring similar practices from occurring again. In addition, it considers that prohibition decisions set a strong precedent for future cases. In the present case, the Commission noted that the fact that the parties terminated the agreement after the Commission had opened antitrust proceedings did not "erase" the fact that it existed in the first place.

The Commission has made it clear that the Vivo transaction itself is not affected by the decision.

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