# C_2013140EN.01001101.xml

| 18.5.2013 | EN | Official Journal of the European Union | C 140/11 |
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18.5.2013

EN

Official Journal of the European Union

C 140/11

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Summary of Commission Decision

of 23 January 2013

relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union

(Case COMP/39.839 — Telefónica/Portugal Telecom)

(notified under document C(2013) 306 final)

(Only the English and Portuguese texts are authentic)

2013/C 140/07

1.   INTRODUCTION

INTRODUCTION

| (1) | On 23 January 2013, the Commission adopted a decision relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’). In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets. |
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(1)

On 23 January 2013, the Commission adopted a decision relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’). In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets.

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| (2) | The proceeding and decision concern a non-compete clause, which was included in the stock purchase agreement of 28 July 2010 (the ‘stock purchase agreement’) concluded by Telefónica, SA (Telefónica) and Portugal Telecom SGPS, SA (‘Portugal Telecom’), which gave Telefónica sole control over the Brazilian mobile operator Vivo, previously jointly owned by the parties (the ‘Vivo transaction’). |
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(2)

The proceeding and decision concern a non-compete clause, which was included in the stock purchase agreement of 28 July 2010 (the ‘stock purchase agreement’) concluded by Telefónica, SA (Telefónica) and Portugal Telecom SGPS, SA (‘Portugal Telecom’), which gave Telefónica sole control over the Brazilian mobile operator Vivo, previously jointly owned by the parties (the ‘Vivo transaction’).

| (3) | The non-compete clause reads as follows:
  ‘Ninth — Non-compete — To the extent permitted by law, each party shall refrain from engaging or investing, directly or indirectly through any affiliate, in any project in the telecommunication business (including fixed and mobile services, Internet access and television services, but excluding any investment or activity currently held or performed as of the date hereof) that can be deemed to be in competition with the other within the Iberian market for a period starting on the date of closing [27 September 2010] until December 31, 2011.’ |
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(3)

The non-compete clause reads as follows:

‘Ninth — Non-compete — To the extent permitted by law, each party shall refrain from engaging or investing, directly or indirectly through any affiliate, in any project in the telecommunication business (including fixed and mobile services, Internet access and television services, but excluding any investment or activity currently held or performed as of the date hereof) that can be deemed to be in competition with the other within the Iberian market for a period starting on the date of closing [27 September 2010] until December 31, 2011.’

| (4) | Following the opening of proceedings by the Commission on 19 January 2011, the parties removed the non-compete clause on 4 February 2011. |
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(4)

Following the opening of proceedings by the Commission on 19 January 2011, the parties removed the non-compete clause on 4 February 2011.

2.   ADDRESSEES

ADDRESSEES

| (5) | The decision is addressed to Telefónica, SA (Telefónica) and Portugal Telecom SGPS, SA (Portugal Telecom), who are parties to the stock purchase agreement which includes the non-compete clause. They are the parent companies of their respective group of companies. |
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(5)

The decision is addressed to Telefónica, SA (Telefónica) and Portugal Telecom SGPS, SA (Portugal Telecom), who are parties to the stock purchase agreement which includes the non-compete clause. They are the parent companies of their respective group of companies.

| (6) | Telefónica and Portugal Telecom are the Spanish and Portuguese incumbent telecommunications operators in Spain and Portugal respectively. They have high market shares in most electronic communications markets in their Member State of origin, but only a limited presence in the other party's Member State of origin. |
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(6)

Telefónica and Portugal Telecom are the Spanish and Portuguese incumbent telecommunications operators in Spain and Portugal respectively. They have high market shares in most electronic communications markets in their Member State of origin, but only a limited presence in the other party's Member State of origin.

3.   MAIN CONTENT OF THE DECISION

MAIN CONTENT OF THE DECISION

3.1.   Procedure

Procedure

| (7) | On 19 January 2011, the Commission decided to initiate proceedings in the present case within the meaning of Article 2(1) of Council Regulation (EC) No 773/2004 (2) and Article 11(6) of Council Regulation (EC) No 1/2003. During the investigation, the Commission sent several requests for information pursuant to Article 18 of Regulation (EC) No 1/2003 to Telefónica, Portugal Telecom and certain of their multinational customers. |
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(7)

On 19 January 2011, the Commission decided to initiate proceedings in the present case within the meaning of Article 2(1) of Council Regulation (EC) No 773/2004 (2) and Article 11(6) of Council Regulation (EC) No 1/2003. During the investigation, the Commission sent several requests for information pursuant to Article 18 of Regulation (EC) No 1/2003 to Telefónica, Portugal Telecom and certain of their multinational customers.

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| (8) | On 21 October 2011, the Commission adopted a statement of objections (‘SO’). In the SO, the Commission took the preliminary view that Telefónica and Portugal Telecom had infringed Article 101 of the TFEU by entering into the non-compete clause, which amounts to a market-sharing agreement. |
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(8)

On 21 October 2011, the Commission adopted a statement of objections (‘SO’). In the SO, the Commission took the preliminary view that Telefónica and Portugal Telecom had infringed Article 101 of the TFEU by entering into the non-compete clause, which amounts to a market-sharing agreement.

| (9) | Access to file was granted to Telefónica and Portugal Telecom on 4 November 2011. |
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(9)

Access to file was granted to Telefónica and Portugal Telecom on 4 November 2011.

| (10) | Telefónica and Portugal Telecom submitted their respective replies to the SO on 13 January 2012. They did not request an oral hearing. |
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(10)

Telefónica and Portugal Telecom submitted their respective replies to the SO on 13 January 2012. They did not request an oral hearing.

| (11) | The Advisory Committee on restrictive practices and dominant positions issued favourable opinions on 19 November 2012 and 21 January 2013. These opinions were issued pursuant to Article 14 of Council Regulation (EC) No 1/2003. |
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(11)

The Advisory Committee on restrictive practices and dominant positions issued favourable opinions on 19 November 2012 and 21 January 2013. These opinions were issued pursuant to Article 14 of Council Regulation (EC) No 1/2003.

3.2.   Relevant markets

Relevant markets

| (12) | The decision finds that the non-compete clause and infringement covered: (a) all electronic communication services, with the exception of the markets for global telecommunication services and wholesale international carrier services, where both parties were present in the Iberian Peninsula at the date of the agreement and which refer to services in connection with multinational customers; and (b) television services, which are expressly mentioned by the non-compete clause. |
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(12)

The decision finds that the non-compete clause and infringement covered: (a) all electronic communication services, with the exception of the markets for global telecommunication services and wholesale international carrier services, where both parties were present in the Iberian Peninsula at the date of the agreement and which refer to services in connection with multinational customers; and (b) television services, which are expressly mentioned by the non-compete clause.

| (13) | In this case, the precise limits of the relevant markets can be left open given the broad scope of the non-compete clause. In any event, the decision lists the different relevant markets in accordance with the lines identified in Commission Recommendation 2007/879/EC (3) and in accordance with previous Commission's decisions and case-law. |
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(13)

In this case, the precise limits of the relevant markets can be left open given the broad scope of the non-compete clause. In any event, the decision lists the different relevant markets in accordance with the lines identified in Commission Recommendation 2007/879/EC (3) and in accordance with previous Commission's decisions and case-law.

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| (14) | The relevant geographic markets are national in scope and refer to Spain and Portugal. |
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(14)

The relevant geographic markets are national in scope and refer to Spain and Portugal.

| (15) | Telefónica and Portugal Telecom have made several submissions seeking to limit the scope of the non-compete clause. In particular, based on the wording ‘excluding any investment or activity currently held or performed as of the date hereof’, they have submitted that any markets where ZON (a Portuguese operator in which Telefónica held a 5,46 % stake at the time of the stock purchase agreement) is present should be excluded from the scope of the clause. They also submitted that any markets where competition from the other party would, in their view, not be a possibility (for example, wholesale markets due to high barriers of entry) should be excluded from the scope of the clause. |
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(15)

Telefónica and Portugal Telecom have made several submissions seeking to limit the scope of the non-compete clause. In particular, based on the wording ‘excluding any investment or activity currently held or performed as of the date hereof’, they have submitted that any markets where ZON (a Portuguese operator in which Telefónica held a 5,46 % stake at the time of the stock purchase agreement) is present should be excluded from the scope of the clause. They also submitted that any markets where competition from the other party would, in their view, not be a possibility (for example, wholesale markets due to high barriers of entry) should be excluded from the scope of the clause.

| (16) | The decision rebuts these submissions. On the one hand, the decision finds that Telefónica cannot be considered to have performed the activities developed by ZON, as Telefónica did not control ZON. On the other hand, the decision notes that the non-compete clause prohibits the parties from engaging in activities and investments ‘that can be deemed to be in competition with the other’. This means that, in the event of entry by one party in a market where the other is already present, this market will be ‘caught’ by the clause, as the entrant would ‘be deemed to be in competition’ with the other party. In addition, Telefónica and Portugal Telecom should, as a minimum, be considered potential competitors in all markets for electronic communications and television services where they are present. |
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(16)

The decision rebuts these submissions. On the one hand, the decision finds that Telefónica cannot be considered to have performed the activities developed by ZON, as Telefónica did not control ZON. On the other hand, the decision notes that the non-compete clause prohibits the parties from engaging in activities and investments ‘that can be deemed to be in competition with the other’. This means that, in the event of entry by one party in a market where the other is already present, this market will be ‘caught’ by the clause, as the entrant would ‘be deemed to be in competition’ with the other party. In addition, Telefónica and Portugal Telecom should, as a minimum, be considered potential competitors in all markets for electronic communications and television services where they are present.

3.3.   Infringement of Article 101 of the TFEU

Infringement of Article 101 of the TFEU

| (17) | Telefónica and Portugal Telecom have argued that the non-compete clause merely provides for an obligation to self-assess the legality and scope of a separate non-compete agreement, which would be ancillary to the Vivo transaction. According to the parties, they each carried out such a self-assessment exercise and shared the results in two conference calls held on 26 and 29 October 2010, where they concluded that a non-compete agreement could not be justified. They argued that as a consequence of the self-assessment exercise and its results, the non-compete clause had been ‘exhausted’ as no other obligations could derive from it. |
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(17)

Telefónica and Portugal Telecom have argued that the non-compete clause merely provides for an obligation to self-assess the legality and scope of a separate non-compete agreement, which would be ancillary to the Vivo transaction. According to the parties, they each carried out such a self-assessment exercise and shared the results in two conference calls held on 26 and 29 October 2010, where they concluded that a non-compete agreement could not be justified. They argued that as a consequence of the self-assessment exercise and its results, the non-compete clause had been ‘exhausted’ as no other obligations could derive from it.

| (18) | Contrary to the parties' allegations, the decision finds that the non-compete clause constitutes an infringement by object of Article 101(1) of the TFEU because of its very wording (which clearly provides for a non-compete obligation), the economic and legal context of which the clause forms part (e.g., the electronic communications markets, which are liberalised), and the actual conduct and behaviour of the parties (including, for example, the fact that they only removed the clause on 4 February 2011 via an agreement which, while setting out reasons for the removal of the clause, did not mention any self-assessment exercise or obligation). In particular, the decision carefully assesses the evidence provided by the parties regarding the content and results of the conference calls of 26 and 29 October 2010. The Commission finds this evidence insufficient and contradicted by the rest of the evidence in the Commission's file. |
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(18)

Contrary to the parties' allegations, the decision finds that the non-compete clause constitutes an infringement by object of Article 101(1) of the TFEU because of its very wording (which clearly provides for a non-compete obligation), the economic and legal context of which the clause forms part (e.g., the electronic communications markets, which are liberalised), and the actual conduct and behaviour of the parties (including, for example, the fact that they only removed the clause on 4 February 2011 via an agreement which, while setting out reasons for the removal of the clause, did not mention any self-assessment exercise or obligation). In particular, the decision carefully assesses the evidence provided by the parties regarding the content and results of the conference calls of 26 and 29 October 2010. The Commission finds this evidence insufficient and contradicted by the rest of the evidence in the Commission's file.

| (19) | Moreover, the decision finds that the non-compete clause cannot be considered as a restraint ancillary to the Vivo transaction, as a non-compete obligation covering the entire Iberian Peninsula cannot, in any manner, be considered as being directly related to or necessary for the implementation of the stock purchase agreement for Vivo in Brazil. The decision also finds that at the time when the stock purchase agreement was signed there could not have been reasonable doubts as regards the status (i.e. ancillary or non-ancillary) of a non-compete commitment between the parties, which would have justified the need for a later self-assessment exercise in this connection. |
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(19)

Moreover, the decision finds that the non-compete clause cannot be considered as a restraint ancillary to the Vivo transaction, as a non-compete obligation covering the entire Iberian Peninsula cannot, in any manner, be considered as being directly related to or necessary for the implementation of the stock purchase agreement for Vivo in Brazil. The decision also finds that at the time when the stock purchase agreement was signed there could not have been reasonable doubts as regards the status (i.e. ancillary or non-ancillary) of a non-compete commitment between the parties, which would have justified the need for a later self-assessment exercise in this connection.

| (20) | Telefónica and Portugal Telecom submitted that the non-compete clause produced no effects on the market. However, the decision finds that, in accordance with settled case-law, in cases of violations by object, there is no need to take into account the effects of the agreement for the purpose of applying Article 101(1) of the TFEU. |
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(20)

Telefónica and Portugal Telecom submitted that the non-compete clause produced no effects on the market. However, the decision finds that, in accordance with settled case-law, in cases of violations by object, there is no need to take into account the effects of the agreement for the purpose of applying Article 101(1) of the TFEU.

| (21) | Thus, in view of the scope and nature of the non-compete clause, the decision finds that Telefónica and Portugal Telecom deliberately agreed to exclude or limit competition on each other's home markets. Therefore, the decision finds that the non-compete clause amounts to a market-sharing agreement and infringes Article 101(1) of the TFEU. |
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(21)

Thus, in view of the scope and nature of the non-compete clause, the decision finds that Telefónica and Portugal Telecom deliberately agreed to exclude or limit competition on each other's home markets. Therefore, the decision finds that the non-compete clause amounts to a market-sharing agreement and infringes Article 101(1) of the TFEU.

| (22) | Finally, the decision finds that the non-compete clause does not fulfil the conditions for an exemption under Article 101(3) of the TFEU, as the parties have not proven any efficiency which could have been brought about by the clause. |
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(22)

Finally, the decision finds that the non-compete clause does not fulfil the conditions for an exemption under Article 101(3) of the TFEU, as the parties have not proven any efficiency which could have been brought about by the clause.

3.4.   Duration of the infringement

Duration of the infringement

| (23) | The infringement lasted from 27 September 2010, when the parties closed the Vivo transaction, until 4 February 2011, when the parties agreed to remove the non-compete clause. |
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(23)

The infringement lasted from 27 September 2010, when the parties closed the Vivo transaction, until 4 February 2011, when the parties agreed to remove the non-compete clause.

3.5.   Fines

Fines

| (24) | Fines are imposed in this case. The calculation of the fine for each company is based on the 2006 Guidelines on Fines (4). As regards gravity, the decision takes due account of the fact that the non-compete clause was not kept secret by the parties, who published the clause in several ways and also notified it to the Brazilian regulators. In view of the specific circumstances of the case, the decision finds that to achieve deterrence it is proportionate and sufficient to take into account a low proportion of the value of sales. |
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(24)

Fines are imposed in this case. The calculation of the fine for each company is based on the 2006 Guidelines on Fines (4). As regards gravity, the decision takes due account of the fact that the non-compete clause was not kept secret by the parties, who published the clause in several ways and also notified it to the Brazilian regulators. In view of the specific circumstances of the case, the decision finds that to achieve deterrence it is proportionate and sufficient to take into account a low proportion of the value of sales.

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| (25) | In addition, the decision recognises as an attenuating circumstance the fact that the parties terminated the infringement rapidly. Indeed, the removal of the non-compete clause by the parties on 4 February 2011 took place only 16 days after the opening of proceedings by the Commission. |
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(25)

In addition, the decision recognises as an attenuating circumstance the fact that the parties terminated the infringement rapidly. Indeed, the removal of the non-compete clause by the parties on 4 February 2011 took place only 16 days after the opening of proceedings by the Commission.

4.   OPERATIONAL PART OF THE DECISION

OPERATIONAL PART OF THE DECISION

| (26) | The decision establishes that Telefónica and Portugal Telecom have infringed Article 101 of the TFEU by participating in a non-compete agreement, included as clause nine of the stock purchase agreement entered into by them on 28 July 2010. The duration of the infringement was from 27 September 2010 until 4 February 2011. |
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(26)

The decision establishes that Telefónica and Portugal Telecom have infringed Article 101 of the TFEU by participating in a non-compete agreement, included as clause nine of the stock purchase agreement entered into by them on 28 July 2010. The duration of the infringement was from 27 September 2010 until 4 February 2011.

| (27) | The decision imposes the following fines on the parties for this infringement: (a) Telefónica: EUR 66 894 000; and (b) Portugal Telecom: EUR 12 290 000. |
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(27)

The decision imposes the following fines on the parties for this infringement: (a) Telefónica: EUR 66 894 000; and (b) Portugal Telecom: EUR 12 290 000.

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(1)  Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, p. 1).

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(2)  Council Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the Treaty (OJ L 123, 27.4.2004, p. 18).

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(3)  Commission Recommendation 2007/879/EC of 17 December 2007 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services (OJ L 344, 28.12.2007, p. 65).

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ex ante

(4)  Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 (OJ C 210, 1.9.2006, p. 2).

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