Summary of Commission Decision

of 25 January 2022

amending Decision C(2013) 306 final relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union (the Treaty)

(Case AT.39839 - Telefónica and Portugal Telecom)

(notified under document C(2022) 324)

(Only English and Portuguese version is authentic)

(2022/C 286/10)

On 25 January 2022, the Commission adopted a decision relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union. 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.

1. INTRODUCTION

(1) On 23 January 2013, the Commission adopted a Decision fining Telefónica and Portugal Telecom for entering into a non-compete agreement with the object of restricting competition in the internal market and thus infringing Article 101 TFEU (the ‘2013 Decision’). The General Court, in its judgements of 28 June 2016 ( 2 ) (later confirmed by the judgment of the Court of Justice of 13 December 2017), upheld the Commission’s reasoning as regards the infringement in its Decision, but annulled the fines imposed by the Commission. In accordance with the Court judgments, the Decision determines the services for which Telefónica and Portugal Telecom were not in potential competition at the time of the infringement and excludes them for the purposes of the fines calculation.

2. PROCEDURE

(2) The Commission found in its Decision of 23 January 2013 that Telefónica and Portugal Telecom infringed Article 101 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 in the context of the acquisition by Telefónica of sole control over the Brazilian mobile service operator Vivo.

(3) For this infringement, the Commission imposed fines of EUR 66 894 000 on Telefónica and of EUR 12 290 000 on Portugal Telecom under Article 23(2) of Regulation (EC) No 1/2003.

(4) Both Telefónica and Portugal Telecom appealed the Commission Decision to the General Court. In its judgments of 28 June 2016, the General Court upheld the Commission’s conclusion in Article 1 of the Commission Decision that Telefónica and Portugal Telecom infringed Article 101 TFEU from 27 September 2010 until 4 February 2011 by participating in a non-compete agreement.

(5) As regards the imposition of fines, the General Court annulled Article 2 of the Commission Decision in so far as the amount of the fines was set on the basis of the value of sales taken into account by the Commission.

(6) Telefónica appealed the Telefónica judgment. On 13 December 2017, the Court of Justice issued its judgment in Case C-487/16 P Telefónica SA v European Commission , rejecting Telefónica’s appeal. Pharol did not appeal the PT judgment.

3. FACTS

(7) The situation whereby the Commission’s finding of an infringement remains in effect and has res judicata value, while the fines for that infringement have been annulled, should be remedied by a new Decision under Article 23(2) of Regulation (EC) No 1/2003 for Telefónica’s and Portugal Telecom’s infringement of Article 101 TFEU established in the 2013 Decision.

(8) For the calculation of the fine, the Commission relies on the assessment of the facts established in the 2013 Decision. At the same time, it applies the principles established in the General Court’s judgments regarding the Commission’s obligation to determine, on the basis of the material put forward by the Parties, the services for which the Parties were not in potential competition with each other within the Iberian Peninsula during the period of application of the non-compete clause. The Commission therefore excludes those services from the value of sales for the purpose of calculating the fines.

(9) Moreover, in the current process of recalculating the fines, the Commission discovered several miscalculations made by Telefónica when providing their value of sales figures, which ultimately affected the fines calculation in the 2013 Decision.

(10) Such calculation mistakes cannot be left unaddressed. If not corrected, the value of sales would remain erroneous and unduly low and would result in a fine calculated on the basis of incorrect information. Therefore, the Commission bases itself on the new revised figures provided by Telefónica during the current investigation in order to establish the correct value of sales in its Decision.

(11) In the new Decision, the Commission subtracts the value of sales of services for which the Commission considers that there was no potential competition between the Parties during the period of application of the non-compete clause.

(12) The Advisory Committee on Restrictive Practices and Dominant Positions issued a favourable opinion on 21 January 2022. The Decision was adopted on 25 January 2022.

4. LEGAL ASSESSMENT

4.1. Potential competition

(13) insurmountable barriers to entry ’. At the same time, the Commission applies in this case a stricter approach than required and verifies that the possibility to enter the market was not purely hypothetical, taking into account the specific circumstances of the different markets or services. The Commission considers, in accordance with consistent case-law ( 3 ) , that in market-sharing agreements, such as the one concerned in this Decision, the standard of proof to assess potential competition is ‘’. At the same time, the Commission applies in this case a stricter approach than required and verifies that the possibility to enter the market was not purely hypothetical, taking into account the specific circumstances of the different markets or services.

(14) Therefore, the services for which the Commission considers that there was no potential competition between the Parties during the period of application of the non-compete clause are the following: A) For Telefónica: (i) wholesale (physical) network infrastructure access (LLU); (ii) universal services; (iii) SIRDEE (Emergency Digital Radio System) services; and (iv) certain services, part of the fixed communication services in public areas provided by Telefónica (payment services, sale of defibrillators and rental of outdoor advertising solutions). B) For Pharol: (i) wholesale (physical) network infrastructure access (LLU); (ii) wholesale services for broadcasting digital television; and (iii) wholesale analogue terrestrial television broadcasting services.

5. FINES

(15) The Commission applies the same considerations as in 2013 as regards the gravity factor for the fine, duration of the infringement, proportion of the value of sales to be taken into account and existence of aggravating and mitigating circumstances.

(16) The adjusted basic amount does not exceed 10 % of Telefónica’s total turnover in 2020. Following a series of successive transactions and re-organisation within the company, Pharol did not attain any turnover in 2020, which does not reflect appropriately its economic weight. The Commission finds that, as required by the case-law, the turnover of Pharol in the year 2013, which represents the last full year of Pharol’s normal economic activity over a period of 12 months ( 4 ) , best reflects Pharol’s real economic situation and guarantees a sufficient deterrent effect. Pharol’s adjusted basic amount does not exceed 10 % of its total turnover for the business year 2013.

(17) Finally, although the errors relating to Telefónica’s value of sales resulted from Telefónica’s own erroneous calculations, the Commission would not have discovered these errors regarding the value of sales and would therefore not have been able to increase the fine, had the fines of the 2013 Decision not been annulled by the General Court. In those circumstances, and given the relatively modest effect those errors had on the size of the fine, and the fact that a significant time period has already lapsed since those errors occurred (12 September 2012), the Commission considers it reasonable in this particular case to use its margin of discretion, in accordance with point 37 of the Guidelines on fines ( 5 ) , to reduce the fine for Telefónica to the level that was established in the 2013 Decision.

(18) The final amount of the individual fines imposed pursuant to Article 23(2) of Regulation (EC) No 1/2003 is therefore the following: Party Total fine (EUR) Telefónica 66 894 000 Pharol 12 146 000

(1) OJ L 1, 4.1.2003, p. 1. Regulation as amended by Regulation (EC) No 411/2004 (OJ L 68, 6.3.2004, p. 1).

(2) Case T-216/13 Telefónica SA v European Commission (the ‘Telefónica judgment’) and Case T-208/13 Portugal Telecom SGPS SA v European Commission (the ‘PT judgment’).

(3) Telefónica judgment, paragraph 221 and the PT judgment, paragraph 181; Case T-691/14, Servier SAS and Others v European Commission, ECLI:EU:T:2018:922, paragraphs 319, 327 and 328, Judgment of the General Court of 21 May 2014, T-519/09, Toshiba Corp. v European Commission, ECLI:EU:T:2014:263, paragraph 231.

(4) As referenced for example in Judgment of the General Court of 28 April 2010, T-456/05 and T-457/05, Gütermann et Zwicky, ECLI:EU:T:2010:168, paragraphs 94-103 and other references thereof.

(5) ‘Although these Guidelines present the general methodology for the setting of fines, the particularities of a given case or the need to achieve deterrence in a particular case may justify departing from such methodology or from the limits specified in point 21’.