Bloomberg News

Telefonica Loses Fight on 152 Million-Euro EU Antitrust Fine

March 29, 2012

Telefonica SA (TEF) lost a court challenge to a 152 million-euro ($202 million) antitrust fine by European Union regulators.

The EU’s General Court rejected the appeal by Spain’s biggest phone company and said the European Commission “rightly held that Telefonica had abused its dominant position” over the Spanish internet market, according to a statement. The court also backed regulators’ view that deliberately underpricing wholesale services to hurt rivals, called “margin squeeze,” was a form of monopoly abuse.

Telefonica was fined by the commission in 2007 for abusing its monopoly over broadband Internet access in Spain by charging wholesale rates that were too close to retail prices between 2001 and 2006. Regulators said this prevented rivals from making a profit.

Telefonica will appeal the ruling to the region’s highest tribunal and is in “complete and profound disagreement” with today’s decision, it said in an e-mailed statement. The company “scrupulously abided by the telecommunications regulations imposed” by Spanish regulators.

The EU antitrust agency said the judgments “are important because they confirm the commission’s methodology for determining the existence of a margin squeeze and the commission’s power to intervene” in monopoly abuse cases in regulated markets, such as telecommunications, according to a statement published on its website.

Portugal Telecom

The court said Telefonica must have been aware that compliance with Spanish rules didn’t prevent the EU from applying its own competition rules and that the Madrid-based company was allowed to increase its prices at any time.

Telefonica last year got an EU antitrust complaint over an agreement with Portugal Telecom SGPS SA (PTC) not to compete in each other’s home countries. Telefonica was also among five European telecommunications operators questioned this year by regulators about talks over technology standards to compete with Google Inc. and Apple Inc.

The case is T-336/07 Telefonica and Telefonica de Espana v. Commission.

To contact the reporter on this story: Aoife White in Luxembourg at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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