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 NL 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

03.10.2019 NL law
It's in the details: HSBC fine quashed for insufficient reasoning

Short Reads - The General Court annulled the EUR 33.6 million fine imposed on banking group HSBC for its participation in the euro interest rates derivatives cartel. Full annulment was granted based on the Commission's failure to provide sufficiently detailed reasoning for the first step of the fine calculation, establishing the value of sales. As the value of sales could not be established in a straightforward way, the Commission used a proxy. When doing so, the Commission needs to properly explain its reasoning to allow the companies fined to understand how it arrived at the proxy. 

Read more

03.10.2019 NL law
The postman will no longer ring twice: Minister unblocks postal merger

Short Reads - The Dutch Authority for Consumers and Markets (ACM) recently blocked postal operator PostNL's acquisition of its only national competitor, Sandd, because this would create "a monopolist on the postal delivery market". However, the Dutch Minister of Economic Affairs and Climate Policy has overruled the ACM's decision on grounds of public interest. Invoking industrial policy or public interest reasons for merger clearance seems to be catching on.

Read more

03.10.2019 NL law
The ACM has to pay: moral damages awarded to real estate traders

Short Reads - The Dutch Authority for Consumers and Markets (ACM) needs to cough up a total of EUR 120,000 in moral damages to three real estate traders. The Dutch Trade and Industry Appeal Tribunal (CBb) agreed with the real estate traders that the annulment of the ACM's cartel decisions against them was insufficient compensation for the harm they suffered as a result of the length of the procedure and the press coverage of their cases.

Read more

02.10.2019 NL law
Politie aansprakelijk voor schietpartij Alphen aan den Rijn

Short Reads - De politie is aansprakelijk voor de schietpartij in een winkelcentrum Alphen aan den Rijn in 2011. Dat oordeelt de Hoge Raad in zijn arrest van 20 september 2019 (ECLI:NL:HR:2019:1409). Bij deze schietpartij vonden zes mensen de dood en raakten zestien mensen gewond. De dader doodde ook zichzelf. Nabestaanden van dodelijke slachtoffers, slachtoffers die gewond raakten en winkeliers spreken de politie aan tot schadevergoeding. Zij voeren aan dat de politie de vergunning voor de wapens die de man gebruikte, niet had mogen verlenen.

Read more

03.10.2019 NL law
Margrethe Vestager to play matchmaker between enforcement and regulation

Short Reads - Current Competition Commissioner Margrethe Vestager may face even greater challenges in the next European Commission. President-elect Ursula von der Leyen has not only nominated Vestager for a second term as Commissioner for Competition, but has also asked her to coordinate the European Commission's digital agenda. As a result, Vestager may soon be tackling digital issues through competition enforcement whilst also proposing additional regulation to deal with these (and related) issues pre-emptively.

Read more

02.10.2019 NL law
Dutch national police service liable for unlawful granting of firearms permit

Short Reads - In a recent decision (ECLI:NL:HR:2019:1409), the Supreme Court has decided that the Dutch national police force is liable for damage suffered by victims of a shooting which took place in a shopping centre in 2011; an event that shocked the Netherlands. The Supreme Court held that the police had unlawfully granted a permit for the firearms used in the shooting.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring