# Official Journal C 83/2008

| | ISSN 1725-2423 |
| --- | --- |
| Official Journal
  of the European Union | C 83 |
| | |
| English edition | Information and Notices | Volume 512 April 2008 |

ISSN 1725-2423

Official Journal

of the European Union

C 83

English edition

Information and Notices

Volume 512 April 2008

---

| Notice No | Contents | page |
| --- | --- | --- |
| | IV   Notices |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES |
| | Commission |
| 2008/C 083/01 | Interest rate applied by the European Central Bank to its main refinancing operations: 4,23 % on 1 April 2008 — Euro exchange rates | 1 |
| 2008/C 083/02 | Opinion of the Advisory Committee on restrictive practices and dominant positions given at its meeting on 15 June 2007 concerning a preliminary draft decision relating to Case COMP/38.784 — Wanadoo España v Telefónica — Rapporteur: United Kingdom | 2 |
| 2008/C 083/03 | Final report of the Hearing Officer in Case COMP/38.784 — Wanadoo España v Telefónica (Pursuant to Articles 15 and 16 of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings — OJ L 162, 19.6.2001, p. 21) | 3 |
| 2008/C 083/04 | Opinion of the Advisory Committee on restrictive practices and dominant positions given at its 428th meeting on 29 June 2007 concerning a preliminary draft decision relating to Case COMP/38.784 — Wanadoo España v Telefónica — Rapporteur: United Kingdom | 5 |
| 2008/C 083/05 | Summary of Commission Decision of 4 July 2007 relating to a proceeding under Article 82 of the EC Treaty (Case COMP/38.784 — Wanadoo España v Telefónica) | 6 |

Notice No

Contents

page

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

2008/C 083/01

Interest rate applied by the European Central Bank to its main refinancing operations: 4,23 % on 1 April 2008 — Euro exchange rates

1

2008/C 083/02

Opinion of the Advisory Committee on restrictive practices and dominant positions given at its meeting on 15 June 2007 concerning a preliminary draft decision relating to Case COMP/38.784 — Wanadoo España v Telefónica — Rapporteur: United Kingdom

2

2008/C 083/03

Final report of the Hearing Officer in Case COMP/38.784 — Wanadoo España v Telefónica (Pursuant to Articles 15 and 16 of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings — OJ L 162, 19.6.2001, p. 21)

(Pursuant to Articles 15 and 16 of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings — OJ L 162, 19.6.2001, p. 21)

3

2008/C 083/04

Opinion of the Advisory Committee on restrictive practices and dominant positions given at its 428th meeting on 29 June 2007 concerning a preliminary draft decision relating to Case COMP/38.784 — Wanadoo España v Telefónica — Rapporteur: United Kingdom

5

2008/C 083/05

Summary of Commission Decision of 4 July 2007 relating to a proceeding under Article 82 of the EC Treaty (Case COMP/38.784 — Wanadoo España v Telefónica)

6

| EN | |
| --- | --- |

EN

---

IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

Commission

| 2.4.2008 | EN | Official Journal of the European Union | C 83/1 |
| --- | --- | --- | --- |

2.4.2008

EN

Official Journal of the European Union

C 83/1

---

Interest rate applied by the European Central Bank to its main refinancing operations (1):

4,23 % on 1 April 2008

Euro exchange rates (2)

1 April 2008

(2008/C 83/01)

1 euro=

| | Currency | Exchange rate |
| --- | --- | --- |
| USD | US dollar | 1,566 |
| JPY | Japanese yen | 157,55 |
| DKK | Danish krone | 7,4567 |
| GBP | Pound sterling | 0,7888 |
| SEK | Swedish krona | 9,3945 |
| CHF | Swiss franc | 1,5737 |
| ISK | Iceland króna | 120,38 |
| NOK | Norwegian krone | 8,072 |
| BGN | Bulgarian lev | 1,9558 |
| CZK | Czech koruna | 25,184 |
| EEK | Estonian kroon | 15,6466 |
| HUF | Hungarian forint | 258,55 |
| LTL | Lithuanian litas | 3,4528 |
| LVL | Latvian lats | 0,698 |
| PLN | Polish zloty | 3,5107 |
| RON | Romanian leu | 3,731 |
| SKK | Slovak koruna | 32,475 |
| TRY | Turkish lira | 2,0588 |
| AUD | Australian dollar | 1,7215 |
| CAD | Canadian dollar | 1,6069 |
| HKD | Hong Kong dollar | 12,1953 |
| NZD | New Zealand dollar | 2,0044 |
| SGD | Singapore dollar | 2,1602 |
| KRW | South Korean won | 1 541,96 |
| ZAR | South African rand | 12,6595 |
| CNY | Chinese yuan renminbi | 10,9802 |
| HRK | Croatian kuna | 7,2745 |
| IDR | Indonesian rupiah | 14 443,22 |
| MYR | Malaysian ringgit | 5,0026 |
| PHP | Philippine peso | 64,911 |
| RUB | Russian rouble | 36,951 |
| THB | Thai baht | 49,31 |
| BRL | Brazilian real | 2,7452 |
| MXN | Mexican peso | 16,6513 |

Currency

Exchange rate

USD

US dollar

1,566

JPY

Japanese yen

157,55

DKK

Danish krone

7,4567

GBP

Pound sterling

0,7888

SEK

Swedish krona

9,3945

CHF

Swiss franc

1,5737

ISK

Iceland króna

120,38

NOK

Norwegian krone

8,072

BGN

Bulgarian lev

1,9558

CZK

Czech koruna

25,184

EEK

Estonian kroon

15,6466

HUF

Hungarian forint

258,55

LTL

Lithuanian litas

3,4528

LVL

Latvian lats

0,698

PLN

Polish zloty

3,5107

RON

Romanian leu

3,731

SKK

Slovak koruna

32,475

TRY

Turkish lira

2,0588

AUD

Australian dollar

1,7215

CAD

Canadian dollar

1,6069

HKD

Hong Kong dollar

12,1953

NZD

New Zealand dollar

2,0044

SGD

Singapore dollar

2,1602

KRW

South Korean won

1 541,96

ZAR

South African rand

12,6595

CNY

Chinese yuan renminbi

10,9802

HRK

Croatian kuna

7,2745

IDR

Indonesian rupiah

14 443,22

MYR

Malaysian ringgit

5,0026

PHP

Philippine peso

64,911

RUB

Russian rouble

36,951

THB

Thai baht

49,31

BRL

Brazilian real

2,7452

MXN

Mexican peso

16,6513

---

(1)

Rate applied to the most recent operation carried out before the indicated day. In the case of a variable rate tender, the interest rate is the marginal rate.

(2)  Source: reference exchange rate published by the ECB.

---

| 2.4.2008 | EN | Official Journal of the European Union | C 83/2 |
| --- | --- | --- | --- |

2.4.2008

EN

Official Journal of the European Union

C 83/2

---

Opinion of the Advisory Committee on restrictive practices and dominant positions given at its meeting on 15 June 2007 concerning a preliminary draft decision relating to Case COMP/38.784 — Wanadoo España v Telefónica

Rapporteur: United Kingdom

(2008/C 83/02)

| 1. | The Advisory Committee agrees with the Commission that the relevant product markets in Spain are the retail broadband ‘mass’ market and the markets for wholesale broadband access at both national and regional level. A minority abstains. |
| --- | --- |

1.

The Advisory Committee agrees with the Commission that the relevant product markets in Spain are the retail broadband ‘mass’ market and the markets for wholesale broadband access at both national and regional level. A minority abstains.

| 2. | The Advisory Committee agrees with the Commission that Telefónica de España is dominant in the relevant markets. |
| --- | --- |

2.

The Advisory Committee agrees with the Commission that Telefónica de España is dominant in the relevant markets.

| 3. | The Advisory Committee agrees with the Commission with the methodology and data used to determine a margin squeeze by Telefónica, including the use of different data to CMT (the Spanish Regulator) in its decisions. A minority abstains. |
| --- | --- |

3.

The Advisory Committee agrees with the Commission with the methodology and data used to determine a margin squeeze by Telefónica, including the use of different data to CMT (the Spanish Regulator) in its decisions. A minority abstains.

| 4. | The Advisory Committee agrees with the Commission's calculations determining a margin squeeze. A minority abstains. |
| --- | --- |

4.

The Advisory Committee agrees with the Commission's calculations determining a margin squeeze. A minority abstains.

| 5. | As regards the Commission's conclusion on the impact of the margin squeeze on competition and harm to the consumer, the Advisory Committee agrees with (a) the Commission's assessment on likely effects; and (b) the Commission's assessment on actual effects. A minority disagrees on (b). |
| --- | --- |

5.

As regards the Commission's conclusion on the impact of the margin squeeze on competition and harm to the consumer, the Advisory Committee agrees with (a) the Commission's assessment on likely effects; and (b) the Commission's assessment on actual effects. A minority disagrees on (b).

| 6. | The Advisory Committee agrees with the Commission (a) that there is no objective justification for the margin squeeze; and (b) that the margin squeeze is an infringement of Article 82 of the Treaty. |
| --- | --- |

6.

The Advisory Committee agrees with the Commission (a) that there is no objective justification for the margin squeeze; and (b) that the margin squeeze is an infringement of Article 82 of the Treaty.

| 7. | The Advisory Committee agrees with the Commission that Telefónica had autonomy to set prices and that CMT's decisions regarding margin squeeze do not provide Telefónica with immunity from the application of Article 82. A minority abstains. |
| --- | --- |

7.

The Advisory Committee agrees with the Commission that Telefónica had autonomy to set prices and that CMT's decisions regarding margin squeeze do not provide Telefónica with immunity from the application of Article 82. A minority abstains.

| 8. | The Advisory Committee recommends the publication of this opinion in the Official Journal of the European Union. |
| --- | --- |

8.

The Advisory Committee recommends the publication of this opinion in the Official Journal of the European Union.

---

| 2.4.2008 | EN | Official Journal of the European Union | C 83/3 |
| --- | --- | --- | --- |

2.4.2008

EN

Official Journal of the European Union

C 83/3

---

Final report of the Hearing Officer in Case COMP/38.784 — Wanadoo España v Telefónica

(Pursuant to Articles 15 and 16 of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings — OJ L 162, 19.6.2001, p. 21)

(2008/C 83/03)

The draft Decision gives rise to the following observations:

Introduction

The present case arises out of a complaint submitted by Wanadoo España, SL (now France Telecom España, SA, ‘France Telecom’) against Telefónica, SA (‘Telefónica’) on 11 July 2003. After investigating the complaint and on the basis of additional information, the Commission came to the preliminary conclusion that Telefónica had engaged in pricing practices in violation of Article 82 of the EC Treaty since September 2001 by applying a margin squeeze between the prices Telefónica's subsidiaries, Telefónica de España, SAU (‘TESAU’), Telefónica Data de España, SAU (‘TDATA’) and Terra Networks España, SA (‘TERRA’) charge their competitors for wholesale broadband access in Spain and the retail prices they charge end-users.

The Statement of Objections and the time to respond

The Statement of Objections (the ‘SO’) was sent on 20 February 2006 to Telefónica, TESAU, TDATA and TERRA (the ‘Parties’). Upon reasoned request of the Parties, I extended the deadline to reply until 19 May 2006. The Parties duly responded (the ‘Reply’) on that date. A non-confidential version of the SO was sent to France Telecom for their comments.

During the course of the procedure, upon request, I admitted several companies and associations of companies that are competitors of Telefónica into the procedure as interested third parties, namely: Tele2 Telecommunication Services, SL (‘Tele2’), Grupo Corporativo ONO, SA (‘ONO’), Jazz Telecom, SA (‘Jazztel’) and Associación de Empresas Operadoras y de Servicios de Telecomunicaciones (‘ASTEL’).

Access to file

Access to the Commission's file was granted by CD-ROM on 21 February 2006. On 7 April 2006, the relevant Commission service supplemented the access to file by providing new non confidential versions of certain documents.

On 21 April 2006, Telefónica wrote to me requesting further access to certain documents on the Commission's file. The relevant Commission service had refused to grant access to these documents on the basis of their confidentiality. Telefónica argued that these documents, in particular information about competitors' costs and lines contracted through alternative wholesale offers, could contain exonerating evidence relevant to Telefónica's defence. I took the view that the requested information constituted business secrets and was not necessary for Telefónica's defence; therefore, I did not allow the disclosure of these documents.

Oral Hearing

An oral hearing took place on 12 and 13 June 2006 at the request of Telefónica and other interested third parties. The complainant, France Telecom; further, Jazztel, ONO, and ASTEL attended the hearing and presented their views.

Letter of Facts

On 11 January 2007, the relevant Commission service sent a Letter of Facts to Telefónica informing them of certain new facts that the Commission intended to include in a potential final decision. Further access to file was provided by way of a new CD-ROM. Telefónica replied to the Letter of Facts on 12 February 2007.

In their reply, Telefónica raised certain issues which they considered to be relevant to their rights of defence. In particular, Telefónica argued that they had not been given the opportunity to comment meaningfully on certain issues in the Letter of Facts.

After examining the relevant circumstances, I found that the relevant Commission service provided further explanations upon Telefónica's request and granted a one week extension because of this additional information. Telefónica did not request any further clarification. I considered that Telefónica had been properly informed and provided with sufficient opportunity to comment on the issues contained in the Letter of Facts and the conclusions the Commission intended to draw therefrom.

The draft Decision

In the draft Decision, the Commission updated the margin squeeze calculations for the second half of 2005 and the year 2006 as indicated in the Letter of Facts.

The draft Decision submitted to the Commission only contains objections in respect of which the parties have been afforded the opportunity of making known their views.

I conclude that the rights of the parties to be heard have been respected in the present case.

Brussels, 15 June 2007.

Karen WILLIAMS

---

| 2.4.2008 | EN | Official Journal of the European Union | C 83/5 |
| --- | --- | --- | --- |

2.4.2008

EN

Official Journal of the European Union

C 83/5

---

Opinion of the Advisory Committee on restrictive practices and dominant positions given at its 428th meeting on 29 June 2007 concerning a preliminary draft decision relating to Case COMP/38.784 — Wanadoo España v Telefónica

Rapporteur: United Kingdom

(2008/C 83/04)

| 1. | The Advisory Committee agrees with the Commission's proposal to impose a fine. A minority abstains. |
| --- | --- |

1.

The Advisory Committee agrees with the Commission's proposal to impose a fine. A minority abstains.

| 2. | The Advisory Committee agrees that the fine should be in the very serious range. A minority disagrees. |
| --- | --- |

2.

The Advisory Committee agrees that the fine should be in the very serious range. A minority disagrees.

| 3. | The Advisory Committee agrees with the Commission's proposal to reduce the fine under mitigating circumstances to take account of some of Telefónica's charges being subject to sector specific regulation by the Spanish CMT. |
| --- | --- |

3.

The Advisory Committee agrees with the Commission's proposal to reduce the fine under mitigating circumstances to take account of some of Telefónica's charges being subject to sector specific regulation by the Spanish CMT.

| 4. | The Advisory Committee agrees with the final amount of fine. A minority abstains and disagrees. |
| --- | --- |

4.

The Advisory Committee agrees with the final amount of fine. A minority abstains and disagrees.

| 5. | The Advisory Committee agrees that its opinion should be published. |
| --- | --- |

5.

The Advisory Committee agrees that its opinion should be published.

| 6. | The Advisory Committee asks the Commission to take into account all the other points raised during the discussion. |
| --- | --- |

6.

The Advisory Committee asks the Commission to take into account all the other points raised during the discussion.

---

| 2.4.2008 | EN | Official Journal of the European Union | C 83/6 |
| --- | --- | --- | --- |

2.4.2008

EN

Official Journal of the European Union

C 83/6

---

Summary of Commission Decision

of 4 July 2007

relating to a proceeding under Article 82 of the EC Treaty

(Case COMP/38.784 — Wanadoo España v Telefónica)

(Only the Spanish text is authentic)

(2008/C 83/05)

On 4 July 2007, the Commission adopted a decision relating to a proceeding under Article 82 of the EC Treaty. 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 interests. A non-confidential version of the full text of the decision can be found in the authentic languages of the case and in the Commission's working languages at DG COMP website at:

http://europa.eu.int/comm/competition/index_en.html

I.   INTRODUCTION

The Decision imposes a fine of EUR 151 875 000 on Telefónica SA and Telefónica de España SAU (jointly and severally liable) for infringing Article 82 of the EC Treaty. From September 2001 to December 2006, Telefónica abused its dominant position by imposing unfair prices in the form of a margin squeeze in the Spanish broadband markets.

II.   CASE DESCRIPTION

1.   Procedure

On 11 July 2003, Wanadoo España submitted to the Commission a complaint alleging that Telefónica was engaging in a margin squeeze in the Spanish broadband internet access markets. The Commission sent a Statement of Objections to Telefónica on 20 February 2006, to which Telefónica replied on 19 May 2006. An oral hearing was held on 12-13 June 2006. On 11 January 2007, the Commission issued a letter containing additional factual information susceptible to being relied on in the draft decision. Telefónica replied to this letter on 12 February 2007.

The Advisory Committee on restrictive practices and dominant positions gave a favourable opinion on the draft decision on 29 June 2007.

2.   Background

The main technology used in Spain to provide broadband internet access services to consumers is ADSL (80 % of broadband connections at the end of 2006), which provides access using a fixed telephone line. The incumbent Telefónica is the only Spanish telecommunications operator that has a nation-wide fixed telephone network. It rolled out this local access network over significant periods of time protected by exclusive rights and was able to fund investment costs through monopoly rents.

Telefónica controls the entire ADSL value chain in Spain. It is uneconomical to duplicate Telefónica's local access network. Therefore, alternative network operators wishing to provide retail broadband services have no other option but to contract wholesale broadband access products, all of which are built on Telefónica's local access network. Entry on the basis of wholesale products built on alternative technologies (cable-modem) has not been possible.

3.   Legal assessment

3.1.   The relevant markets and dominance

The Decision identifies three relevant product markets, the retail broadband ‘mass’ market and two different wholesale broadband markets, namely the market for wholesale broadband access at regional level and the market for wholesale broadband access at national level.

The delineation of the wholesale markets is mainly based on the heavy network roll out investments required when switching from one wholesale product to the other: (i) national wholesale access concentrates traffic at a single point of access allowing operators to offer retail broadband services without having to roll out any (or hardly any) network; (ii) regional wholesale access requires rolling out a costly network reaching up to 109 regional access points.

Telefónica is also the exclusive supplier of a third type of wholesale broadband access, namely local loop unbundling which is not defined as a relevant market for the purposes of this Decision. In view of its very high investment-intensity it is not a substitute to the above-mentioned wholesale products. In addition, there have been significant problems with its effective availability, which have been sanctioned by the Spanish regulatory authority in November 2006.

Telefónica is dominant on both wholesale markets. It holds a monopoly in the provision of regional wholesale access and a market share of 80 % in the national wholesale market. Telefónica has been in the position to exert decisive influence (margin squeeze, generalised delays in the provision of local loop unbundling) on the availability of competing national wholesale offers (which are necessarily based on Telefónica's other wholesale offers).

3.2.   The abuse

From September 2001 to December 2006, the margin between Telefónica's retail prices and the price for wholesale access at regional level, on the one hand, and the margin between the retail prices and the price for wholesale access at national level, on the other hand, was insufficient to cover the costs that an operator as efficient as Telefónica would have to incur to provide retail broadband access.

In accordance with established case law the methodology applied for establishing the existence of a margin squeeze consists in assessing whether Telefónica's downstream arm would operate profitably on the basis of the upstream charges levied by Telefónica's upstream arm. Two profitability methods are used: the so-called period-by-period (which assesses Telefónica's profitability every year), and the discounted cash flows (‘DCF’) method (which allows below cost pricing in the initial phase of an expanding market (2) but requires Telefónica to be profitable over 2001-2006) proposed by Telefónica itself. Both methods lead to the same conclusion: Telefónica engaged in a margin squeeze from September 2001 to December 2006.

According to Telefónica, the practices concerned by the decision, i.e. margin squeeze, constitute a constructive refusal to supply and therefore the Commission should have proved that the criteria applied in the Oscar Bronner case (3) are fulfilled. However, the factual, economic and legal circumstances of this case fundamentally differ from those in Oscar Bronner. In the present case, Spanish regulation compatible with Community law imposes on Telefónica an obligation to provide wholesale access at both regional and national level. This duty has been established with a view to promoting competition and consumer interest and results from a balancing test made by the public authorities between the incentives of Telefónica and its competitors to invest and innovate and the need to promote downstream competition in the long term. In any event, Telefónica's ex ante incentive to invest in its infrastructure have never been at stake in the present case: Telefónica's upstream network is to a large extent the fruit of investments that were undertaken well before the advent of broadband services in Spain and in a context where Telefónica was benefiting from special or exclusive rights that protected it from competition.

At no time was Telefónica prevented from putting an end to the margin squeeze by proposing lower wholesale prices to its competitors. Until 21 December 2006, its national wholesale prices were not subject to any price regulation and wholesale regional prices have been regulated in the form of maximal prices only.

The abuse ended with the intervention of the Spanish regulatory authority in December 2006, which reduced the wholesale prices. The regulator never pronounced itself as to the existence of a margin squeeze in relation to Telefónica's two national wholesale products, and its assessment as to the existence of a margin squeeze in relation to Telefónica's regional wholesale product were based on forecasts made in October 2001 by Telefónica, whereas the Commission used the effectively incurred historical costs.

3.3.   The effects of the abuse

In the case at hand, there was likely foreclosure because the margin squeeze affected Telefónica's competitors' ability to enter the relevant market and exert a competitive constraint on Telefónica (4). The margin squeeze restricted competition by imposing unsustainable losses on equally efficient competitors: they were either ultimately forced to exit or in any event constrained in their ability to invest and to grow. Even if they met Telefónica both on prices and marketing expenditure, they were poorly placed in the long run to offer a vigorous competitive challenge to Telefónica as a result of their continuing losses. As a result, Telefónica's conduct was likely to delay the entry and growth of competitors. Therefore, Telefónica's conduct was likely to delay as long as possible the arrival of ADSL operators at a level of economies of scale which would have justified investments in their own infrastructure and, ultimately, the use of local loop unbundling.

The immediate harm to consumers was likely to be significant: absent the distortions resulting from Telefónica's margin squeeze in this case, the retail market for broadband services would have been likely to have witnessed more vigorous competition and would have delivered greater benefits to consumers in the form of lower prices, increased choice and innovation.

The margin squeeze has had concrete foreclosure effects in the retail market and a detrimental impact for end users. Due to the margin squeeze, the Spanish retail prices are among (if not) the highest amongst EU-15 and the Spanish broadband penetration rate is below EU-15 average. There are no demand or supply factors that can adequately explain the high level of the Spanish retail prices. It follows that Telefónica's conduct has led to significant consumer harm.

4.   Fines

Telefónica behaviour was intentional. Telefónica's data shows that the company could not have been unaware that it was incurring downstream losses. With regard to the prices for regional wholesale access, even under the favourable assumption that Telefónica could have believed at the outset that the Spanish regulator's model was based on realistic estimations, very soon it must have, or should have, realized that the actual cost data did not match these estimates. Seen in the most favourable light for the company, any continued reliance of Telefónica on the accuracy of the CMT's estimates and calculations, despite the accumulation of actual data to the contrary, is — at the very least — seriously negligent behaviour. If at all relevant, the ex ante regulatory intervention in relation to the regional wholesale product may be considered as an attenuating circumstance. Therefore, a fine should be imposed on Telefónica.

The fine was determined in light of the gravity and duration of the infringement.

4.1.   Gravity

The gravity of an infringement is determined by the nature and impact of the abuse, and by the size of the relevant geographic market.

4.1.1.   Nature of the infringement

Telefónica's conduct constitutes clear-cut abuse by an undertaking holding a virtual monopoly for which there are already several precedents. In particular the Deutsche Telekom Decision clarified the conditions of application of Article 82 of the EC Treaty to an economic activity subject to sector-specific ex ante regulation. Such abuse is capable of being qualified as a very serious infringement under the Commission guidelines on fines applicable at the relevant period of time.

As the Commission indicated in Deutsche Telekom, the type of abuse committed by Telefónica jeopardises the objective of achieving EU-wide establishment of an internal market for telecommunications networks and services with undistorted competition, and can certainly be ranked as a very serious infringement (5). The Commission at the time did not qualify Deutsche Telekom's abuse as a very serious infringement for a number of reasons, none of which apply in the present case.

4.1.2.   Impact of the infringement

In determining the gravity of the infringement, the Commission has taken into consideration the fact that the relevant markets in this Decision are markets of considerable economic importance and which play a crucial role in the development of the Information Society. Broadband connections are a prerequisite for the provision of a variety of on-line commercial and public services to end-users.

As explained in 3.3 above, Telefónica's conduct has constrained the ability of competing ADSL operators to grow sustainably in the retail market and has led to significant consumer harm.

4.1.3.   Size of the relevant geographic market

The relevant geographic market is Spain. The fact that the abuse was limited to one single Member State does not alter the finding that the infringement must be qualified as very serious, since the assessment of the gravity of an infringement has to be determined in the light of all the circumstances of the case. In the telecommunications sector, margin squeeze cases are necessarily limited to one Member State (the geographic scope of the incumbent's network) but prevent new entrants from other Member States from entering a fast growing market.

4.1.4.   Conclusion as to gravity

In view of the above, the infringement must overall be qualified as very serious although it was not necessarily of uniform gravity throughout the period.

The initial amount of the fine takes into account the fact that the gravity of Telefónica's abuse became clearer throughout the relevant period and in particular after the Deutsche Telekom Decision.

4.2.   Duration of the infringement

The infringement in the present case lasted from September 2001 to December 2006, i.e. 5 years and 4 months, which is a long duration abuse under the Commission's guidelines on fines.

4.3.   Mitigating circumstances

On the basis of all the evidence available, the Commission considers that the existence of certain mitigating circumstances can be recognised in this case because, for part of the period in question, some of the charges applied by Telefónica were subject to sector specific regulation. Similarly to Deutsche Telekom where the fact that Deutsche Telekom's retail and wholesale charges were subject to sector specific regulation was taken into consideration as a mitigating circumstance and a reduction of 10 % was applied, a 10 % reduction is applied in this case, although Telefónica benefited from a much wider room of manoeuvre to set its price.

In view of all the factors considered above, the amount of the fine is EUR 151 875 000. This fine is jointly and severally imposed on Telefónica SA and its daughter company Telefónica de España SAU.

---

(1)  OJ L 1, 4.1.2003, p. 1.

(2)  For example, the DCF method takes into account learning effects and economies of scale that characterise fast growing markets like the one at hand.

(3)  Case C-7/97, Oscar Bronner [1998] ECR I-7791, paragraphs 43-46.

(4)  The establishment of foreclosure effects does not mean that rivals are forced to exit the market: it is sufficient that the rivals are disadvantaged and consequently led to compete less aggressively.

(5)  See Deutsche Telekom, paragraph 203-204.

---