# C_2007269EN.01005503.xml

| 10.11.2007 | EN | Official Journal of the European Union | C 269/55 |
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Action brought on 10 September 2007 — Telefónica and Telefónica de España v Commission

(Case T-336/07)

(2007/C 269/100)

Language of the case: Spanish

Parties

Applicants: Telefónica, S.A. and Telefónica de España, S.A. (Madrid) (represented by: F.-E. González Díaz and S. Sorinas Jimeno, lawyers)

Defendants: Commission of the European Communities

Form of order sought

| — | annul under Article 230 of the EC Treaty the Decision of the Commission of the European Communities of 4 July 2007 in Case COMP/38.784 — Wanadoo España vs. Telefónica; |
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| — | in the alternative, annul or reduce under Article 229 of the EC Treaty the amount of the fine imposed on it under that decision; |
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| — | in any event, order the Commission of the European Communities to pay the costs. |
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Pleas in law and main arguments

The present action is directed against the Decision of 4 July 2007 relating to proceedings under Article 82 of the EC Treaty (Case COMP/38.784 — Wanadoo España vs. Telefónica) under which the Commission imposed a fine of EUR 151 875 000 on Telefónica, S.A., jointly and severally with Telefónica de España, in respect of alleged margin squeeze.

In support of their claims, the applicants submit:

| — | infringement of the rights of defence, by basing the decision on various matters of fact which were not communicated during the administrative procedure and on which the applicants were not given the opportunity to comment; |
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| — | that the Commission committed a number of manifest errors of assessment relating to:
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the definition of three separate wholesale markets and not a single market for access to wholesale ADSL including both the local loop and national and regional access, or in the alternative, at least the latter two; —
the presumption that the applicants were dominant both on the relevant wholesale broadband product markets and on the retail market; —
the application of Article 82 EC in relation to its alleged abusive conduct. First, the Commission applies that article to the de facto refusal to contract when the wholesale products in question do not constitute ‘essential infrastructure’, thereby contradicting the case-law in Oscar Bronner. Secondly, even if Article 82 could be applied to the applicants' conduct, quod non, the decision disregards the requirements laid down in the case of Industrie des Poudres Sphériques according to which, in order to make a finding of illegal margin squeeze, it is necessary to show past evidence of both excessive pricing of the upstream product and predatory pricing of the final product; —
the alleged abusive conduct and its impact on the market; first, because it incorrectly selects the wholesale inputs for comparison, and secondly, because it commits, inter alia, major errors of calculation and omissions both in the application of the ‘period-by-period’ test and the ‘discounted cash flow’ test. These errors, both individually and collectively, invalidate the methodology and calculations set out in the decision. The decision also fails to probe sufficiently the alleged negative impact of the conduct on competition; —
the ultra vires acts of the Commission, which, in any event, infringe the principles of subsidiarity, proportionality, legal certainty, loyal cooperation and sound administration by intervening where the national telecommunications regulator had already acted, which was set up under European legislation and which acted in accordance with the powers and competences conferred on it by that legislation and under a set of rules based on the Community competition rules; | — | the definition of three separate wholesale markets and not a single market for access to wholesale ADSL including both the local loop and national and regional access, or in the alternative, at least the latter two; | — | the presumption that the applicants were dominant both on the relevant wholesale broadband product markets and on the retail market; | — | the application of Article 82 EC in relation to its alleged abusive conduct. First, the Commission applies that article to the de facto refusal to contract when the wholesale products in question do not constitute ‘essential infrastructure’, thereby contradicting the case-law in Oscar Bronner. Secondly, even if Article 82 could be applied to the applicants' conduct, quod non, the decision disregards the requirements laid down in the case of Industrie des Poudres Sphériques according to which, in order to make a finding of illegal margin squeeze, it is necessary to show past evidence of both excessive pricing of the upstream product and predatory pricing of the final product; | — | the alleged abusive conduct and its impact on the market; first, because it incorrectly selects the wholesale inputs for comparison, and secondly, because it commits, inter alia, major errors of calculation and omissions both in the application of the ‘period-by-period’ test and the ‘discounted cash flow’ test. These errors, both individually and collectively, invalidate the methodology and calculations set out in the decision. The decision also fails to probe sufficiently the alleged negative impact of the conduct on competition; | — | the ultra vires acts of the Commission, which, in any event, infringe the principles of subsidiarity, proportionality, legal certainty, loyal cooperation and sound administration by intervening where the national telecommunications regulator had already acted, which was set up under European legislation and which acted in accordance with the powers and competences conferred on it by that legislation and under a set of rules based on the Community competition rules; |
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| — | the definition of three separate wholesale markets and not a single market for access to wholesale ADSL including both the local loop and national and regional access, or in the alternative, at least the latter two; | | | | | | | | | | |
| — | the presumption that the applicants were dominant both on the relevant wholesale broadband product markets and on the retail market; | | | | | | | | | | |
| — | the application of Article 82 EC in relation to its alleged abusive conduct. First, the Commission applies that article to the de facto refusal to contract when the wholesale products in question do not constitute ‘essential infrastructure’, thereby contradicting the case-law in Oscar Bronner. Secondly, even if Article 82 could be applied to the applicants' conduct, quod non, the decision disregards the requirements laid down in the case of Industrie des Poudres Sphériques according to which, in order to make a finding of illegal margin squeeze, it is necessary to show past evidence of both excessive pricing of the upstream product and predatory pricing of the final product; | | | | | | | | | | |
| — | the alleged abusive conduct and its impact on the market; first, because it incorrectly selects the wholesale inputs for comparison, and secondly, because it commits, inter alia, major errors of calculation and omissions both in the application of the ‘period-by-period’ test and the ‘discounted cash flow’ test. These errors, both individually and collectively, invalidate the methodology and calculations set out in the decision. The decision also fails to probe sufficiently the alleged negative impact of the conduct on competition; | | | | | | | | | | |
| — | the ultra vires acts of the Commission, which, in any event, infringe the principles of subsidiarity, proportionality, legal certainty, loyal cooperation and sound administration by intervening where the national telecommunications regulator had already acted, which was set up under European legislation and which acted in accordance with the powers and competences conferred on it by that legislation and under a set of rules based on the Community competition rules; | | | | | | | | | | |

As regards the annulment or reduction of the fine, the applicants submit that the Commission infringed Articles 15(2) of Regulation No 17 First Regulation implementing Articles 85 and 86 of the Treaty (now Articles 81 and 82) and 23(2) of of Council Regulation (EC) No 1/2003 on the implementation of the competition rules laid down in Articles 81 an 82 of the Treaty, by considering that the infringement was committed in a deliberate or seriously negligent manner and by classifying the infringement as ‘characteristic abuse’.

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