Wednesday, September 12, 2007

European Commission - Telefonica de Espana

Telefónica appeals against Brussels fine

Telefónica on Tuesday formally challenged a record €152m antitrust fine imposed on it by the European Commission, arguing that an investigation into its abusive practices in the Spanish broadband market had been technically and legally flawed.

Lawyers for the company on Tuesday filed an appeal with the Court of First Instance in Luxembourg, two months after Brussels found Telefónica guilty of freezing out ADSL rivals. Telefónica says it was denied proper defence against the allegations, which, it argues, were based on misinformation.

Regulators charged that the company, among the world’s largest telecoms groups, had distorted competition in the lucrative broadband market by setting network access charges too close to its own retail prices to allow a profit margin.

This, in turn, had discouraged investment in the sector and undermined broadband growth in one of Spain’s largest economies, according to Nellie Kroes, the EU competition commissioner. The €152m fine was more than 10 times larger than those levied against Deutsche Telekom and France Telecom in similar cases, and aimed at dissuading further abuses by national incumbents.

Ms Kroes said she wanted to send “a strong signal to dominant undertakings in all sectors that could be tempted to engage in similar practices that I will not tolerate such behaviour”.

Telefónica on Tuesday appealed for the “annulment or reduction” of the fine, arguing that the Commission had “violated the principles of proportionality and of equal treatment” in setting it so high.

In its appeal against the original antitrust ruling, it claims that Brussels had overstepped its jurisdiction by “intervening” where Spain’s Telecoms Market Commission (CMT) had already adapted and enforced European Union rules aimed at ensuring fair competition. The CMT was forced to defend itself during the investigation, which called into question its own tariff-setting systems.

The Telefónica appeal also alleges “factual errors” in the definition of wholesale broadband markets in Spain, as well as mistakes in the calculation of pricing margins.

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