Short Reads

Court of Justice dismisses appeal by Telefónica on non-compete clause in telecoms transaction

Court of Justice dismisses appeal by Telefónica on non-compete clause

Court of Justice dismisses appeal by Telefónica on non-compete clause in telecoms transaction

02.01.2018 EU law

On 13 December 2017, the Court of Justice dismissed the appeal brought by Telefónica against a judgment of the General Court (GC) regarding a non-compete agreement [see our July 2016 Newsletter]. The judgment confirms the finding of the GC that the non-compete clause agreed upon between Telefónica and Portugal Telecom (PT) amounted to a market sharing agreement with the object of restricting competition.

In 2010, Telefónica and PT concluded a share purchase agreement by which Telefónica acquired sole control over the Brazilian telecom company Vivo. Telefónica and PT had previously jointly held the shares of Vivo. That agreement included a non-compete clause prohibiting the companies from conducting business in the telecommunications sector that "can be deemed to be in competition with the other in the Iberian market", excluding economic activities already performed by the companies. The clause also contained the wording "to the extent permitted by law".

In 2013, the Commission found that the non-compete clause amounted to a market sharing agreement with the object of restricting competition and fined Telefónica and PT EUR 67 million and EUR 12 million respectively. The GC upheld this finding, but found that the Commission erred in calculating the fine.

Telefónica appealed this judgment and argued, among other things, that its right of defence had been breached and that the GC erred in law in finding that the non-compete clause amounted to a by object infringement. The Court firstly established that the GC had in fact examined the evidence brought forward by Telefónica and its right of defence had not been breached. As to classifying the non-compete clause as an by object infringement, the Court acknowledged that it is well established that market sharing agreements constitute a particularly serious breach of competition law. This finding was not affected by the fact that the clause contained the wording "to the extent permitted by law".

Telefónica also argued that the GC's assessment of the circumstances surrounding the adoption of the non-compete clause should have been called into question. The Court, however, held that these claims were based on a misreading of the judgment under appeal. The GC did not find that the clause was not essential for PT because it did not qualify as an ancillary restriction under competition law. It simply found that Telefónica had not submitted any evidence to demonstrate the essential character of the non-compete clause.

The judgment confirms that the non-compete clause entered into by the parties qualified as an by object infringement. Non-compete clauses agreed upon in the context of a transaction could qualify as ancillary restraints only if they are essential for the implementation of that transaction.

This article was published in the Competition Law Newsletter of January 2018. Other articles in this newsletter:

1. Court of Justice: Suppliers of luxury goods may prohibit their authorised distributors from selling on third party internet platforms
2. Court of The Hague confirms that the ACM can copy mobile phones during an inspection

Team

Related news

20.06.2018 NL law
Op weg naar één Europese spoorwegruimte: de aanpassing van de Nederlandse wetgeving aan het Europese recht

Articles - Het zogenaamde 'Vierde Spoorwegpakket' zal belangrijke gevolgen hebben voor de Europese spoorwegruimte. De Nederlandse regering maakt goede vaart met de aanpassing van het nationale recht aan de eisen die uit het Vierde Spoorwegpakket voortvloeien. Inmiddels is een daartoe strekkend wetsvoorstel aanhangig bij de Tweede Kamer. De vaste commissie voor Infrastructuur en Waterstaat heeft eind vorige maand het verslag van haar bevindingen ten aanzien van het wetsvoorstel uitgebracht.

Read more

01.06.2018 EU law
European Court of Justice rules EY did not violate stand-still obligation in Danish merger

Short Reads - On 31 May 2018, the European Court of Justice ruled that Ernst & Young (EY) did not illegally implement the acquisition of KPMG Denmark (KPMG DK) before obtaining antitrust clearance.  Following the announcement of the transaction, KPMG DK terminated a cooperation agreement. According to the Court, that act cannot be regarded as a violation of the stand-still obligation since it did not contribute to the change of control of the target undertaking.

Read more

20.06.2018 NL law
Naar een volwaardig recht op toegang tot de rechter en een eerlijk proces onder het EVRM?

Articles - Het recht op een toegang tot de rechter en een eerlijk proces van artikel 6 EVRM is één van de hoekstenen van dit verdrag. Naast strafzaken en zaken over bestuurlijke boetes vallen de meeste andere geschillen onder het toepassingsbereik van deze bepaling. Dit omdat er volgens de autonome Straatsburgse uitleg al snel sprake is van een geschil over de vaststelling van ‘civil rights and obligations’ als bedoeld in artikel 6 EVRM.

Read more

05.06.2018 EU law
New EU rules to reduce marine pollution

Articles - Plastic pollution has become a key environmental concern. And it is not surprising why: according to a recent study, of the 8.3 billion metric tons of plastics that have been produced so far, 6.3 billion metric tons has become plastic waste. Of this plastic waste, 79% is accumulating either in landfill sites or in the oceans. Therefore, on 28 May 2018 the EU Commission issued a new draft Directive aimed at tackling marine litter by addressing single use plastic items and abandoned fishing gear.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring