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Brussels, 24 January 2011

Antitrust: Commission probes co-operation between Telefónica and Portugal Telecom on Iberian markets

The European Commission has opened a formal investigation to ascertain whether the Spanish and Portuguese telecoms incumbents Telefónica S.A. and Portugal Telecom SGPS S.A. have breached EU rules by agreeing not to compete with each other in their respective home markets. The agreement being investigated under Article 101 of the EU Treaty, which bans restrictive business practices, was concluded last year when Telefónica acquired sole control over their previously-held Brazilian joint venture Vivo. The Commission will also investigate whether the non-compete agreement pre-dates the Vivo deal, which is not concerned by this probe. Opening antitrust proceedings means that the Commission will treat the case as a priority. It does not prejudge the outcome of the investigation.

The Commission has opened an investigation into an agreement between Telefónica and Portugal Telecom not to compete on the Iberian telecommunications markets concluded in the context of Telefónica's 2010 acquisition of sole control over the Brazilian mobile operator Vivo, previously jointly owned by the two Iberian telecoms incumbents. The Commission has a copy of the agreement and of the non-compete clause, which runs from September 2010 to the end of 2011. The Brazilian deal itself is not affected by the investigation.

The Commission will also investigate the scope and effects of the co-operation between the parties in Spain and Portugal prior to the 2010 Vivo transaction. Telefónica and Portugal Telecom concluded a co-operation agreement in 1997 concerning markets outside the EU, which was notified to the Commission at the time. The Commission will seek to ascertain whether that co-operation may have included a non-compete strategy affecting EU markets, in particular Spain and Portugal, even before the non-compete clause concluded as part of the Vivo deal.

The opening of proceedings does not imply that the Commission has conclusive proof of an infringement but means that the Commission will deal with the case as a matter of priority.

There is no legal deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned co-operate with the Commission and the exercise of the rights of defence.

What is the legal basis for the decision?

Article 101 prohibits agreements and concerted practices which may affect trade and have as their object or effect the prevention or restriction of competition. The implementation of this treaty provision is defined in the Antitrust Regulation (Council Regulation No 1/2003) which can be applied by the Commission but also national competition authorities.

Article 11(6) of the Antitrust Regulation provides that the initiation of proceedings by the Commission relieves the competition authorities of the Member States of their authority to apply Articles 101 and 102 (ban on abuse of dominant positions) to the practices concerned. Article 16(1) also provides t national courts refrain from giving decisions, which could conflict with a decision contemplated by the Commission in proceedings that it has initiated.

The Commission informed the parties about the initiation of proceedings before rendering them public. The competition authorities of the Member States concerned have also been informed.

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