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Last updated: November 28, 2005 2:09 pm

Court rules against Telefónica in competition lawsuit

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A Spanish court has ordered Telefónica to pay damages for breach of competition rules in an unprecedented case that is likely to clear the way for further lawsuits related to abusive practices in the country’s regulated sectors.

Madrid’s Fifth Commercial Court, created last year to expedite legal action against companies, ordered Telefónica to pay €670,000 in compensation to Conduit, the Ireland-based directory services group.  The award stems from complaints in 2003 to Spain’s telecommunications regulator that the former state monopoly had provided “inaccurate and incomplete” subscriber information to Conduit, in breach of European Union directives on market liberalisation. The payment recognises costs incurred by Conduit as a result of Telefónica’s action as well as its legal expenses.

However, Telefónica officials said on Monday that the ruling only recognised one out of five claims against the company lodged by Conduit, which had sought damages of €5m. Telefónica is likely to appeal the decision.

Lawyers hailed the decision, the first of its kind in Spain, as an important advance in the enforcement of EU rules on access to liberalised markets. They say it is likely to lead to similar cases on access to Telefónica’s network by small fixed-line operators, and could have repercussions in the electricity sector, where non-Spanish companies have long complained about abuses in the liberalised market.

Although regulators are constantly finding against, and fining, incumbents and large companies for anti-competitive practices, direct legal action tends to be buried for years in Spain’s slow court system. By contrast, the ruling against Telefónica came just 10 months after the case was filed by lawyers at Spanish firm Cuatrecasas, acting for Conduit.

“The message for the telecommunications and other regulated sectors is clear,” said Paul Hitchings, a lawyer at Cuatrecasas.

“Failure by companies, particularly those with market power, to comply strictly with regulatory and competition rules is not only open to challenge before competition and regulatory authorities but also to parallel private court actions for damages.”

Liam Young, chief executive of Conduit, said: “We are delighted with the ruling as it is a formal acknowledgement of the unfair competitive advantage we had been put under by Telefónica.

“Furthermore, we hope that this acts as a signal to other major operators in the sector that their dominant position is not abused.”

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