On 23 January 2013, the European Commission (EC) fined telecoms operators Telefónica and Portugal Telecom EUR67 million and EUR12 million, respectively, for entering into a non-compete arrangement with each other. The case provides a stark reminder that non-compete agreements must be justified and, if they are not, they may be seen and fined as cartels.
The non-compete arrangement was entered into in the context of the July 2010 acquisition by Telefónica of the Brazilian mobile operator Vivo, which until then had been jointly owned by Telefónica and Portugal Telecom. However, the arrangement had no relationship with that transaction, since it provided that from the end of September 2010 the two companies would not compete with each other in Spain and Portugal. The arrangement was terminated in early February 2011 after the EC had opened an investigation into it.
The EC, in announcing the fine, commented that “non-compete agreements are one of the most serious violations of EU competition rules, as they potentially result in higher prices and less choice for consumers”. The level of the fines, for a four-month agreement, reflected this.