Brussels fines Telefónica and Portugal Telecom for non-competition pact

The European Commission on Wednesday slapped a fine of 66.8 million euros on Telefónica and 12.3 million on Portugal Telecom for agreeing a non-aggression pact in their respective domestic markets in breach of European Union competition rules.

The agreement not to compete in each other’s main markets formed part of a deal reached in September 2010 under which Telefónica acquired PT’s stake in their Brazilian mobile joint venture Vivo for 7.5 billion euros. Brussels said the Vivo transaction itself is not affected by the decision.

“We will not tolerate anticompetitive practices by incumbents to protect their home markets, as they harm consumers and delay market integration," said EC vice president, Spaniard Joaquín Almunia, who heads the competition department.

Telefónica said it would appeal the decision. When Brussels opened its investigation into the non-aggression pact in January 2011, the Spanish firm argued that the agreement would only become effective if it was ruled to be legal, effectively making it null and void from the start. The two operators broke off the accord in February 2011.

Telefónica was fined 152 million euros by Brussels in 2007 for imposing wholesale prices on rivals

At the time of the Vivo deal, the Portuguese government voiced concerns about an invasion of the domestic market by Telefónica.

The bigger fine imposed on Telefónica reflected its higher sales. The Commission said that in determining the amount, it took into consideration the fact the pact was not secret and that it was only in place for four months.

Telefónica was fined 152 million euros by Brussels in 2007 for imposing wholesale prices on its broadband rivals for use of its network in an effort to stymie competition. At the time, it was the second-largest fine imposed by the European anti-trust authorities.

Telefónica also appealed that decision but the European Court of Justice ratified it in March of last year.