On 26 September 2013, Advocate General Wathelet issued an Opinion on an appeal brought by Telefónica against a General Court judgment that upheld a Commission Decision against the company for margin squeezing. The Advocate General opined that the European Court of Justice ("ECJ") should refer the case back to the General Court for failing to carry out an in-depth examination of the calculation of the fine in accordance with its powers of unlimited jurisdiction.
On 4 July 2007, the European Commission (the "Commission") fined Telefónica € 152 million for abusing its dominant position in the market for access to broadband internet in Spain by engaging in a margin squeeze. Telefónica and the Kingdom of Spain both appealed the Commission decision. By judgment of 29 March 2012, the General Court dismissed the action (see VBB on Competition Law, Volume 2012, No. 4, available at www.vbb.com). Telefónica then lodged an appeal before the ECJ against the judgment of the General Court.
The Advocate General opined that the General Court did not carry out an in-depth examination of the calculation of the fine which it is required to make in accordance with its unlimited jurisdiction.
Telefónica had argued before the General Court that the Commission had infringed the principles of individualisation of penalties, proportionality, equal treatment, non-discrimination and the obligation to state reasons by setting the basic amount of the fine at € 90 million. The General Court dismissed all these arguments in 12 short points. The Advocate General took the view that the General Court had the obligation to carry out an in-depth examination of the amount of the basic fine both in fact and in law and should not have deferred to the discretion of the Commission in that regard. The Advocate General did not conclude that the principles identified by Telefónica were violated, but rather concluded that the General Court should have fully analyzed them in accordance with its power of unlimited jurisdiction.
The Advocate General stated that an in-depth examination was particularly necessary in the case given the exceptional amount of the base fine - € 90 million - which (i) was the second highest amount since the Microsoft case and exceeded by 40% the third highest amount – despite the fact that Telefónica's conduct concerned a single Member State while the other cases had a broader scope; (ii) was 4.5 times higher than the maximum amount provided in the 1998 Fining Guidelines for very serious infringements; (iii) was 9 to 10 times higher than the basic amount imposed on Deutsche Telecom and on Wanadoo Interactive for similar practices, markets, products and companies; and (iv) was increased an additional 25% by way of deterrence – an increase that had not been applied to Deutsche Telecom and Wanadoo Interactive.
The Opinion appears to follow from previous cases which have found that, since fines imposed by the Commission fall within the "criminal head" of Article 6 of the European Convention of Human Rights, they are compatible with the Convention only if they are subject to control by a judicial body which can and does have full jurisdiction. Thus, it is necessary for the General Court to actually exercise its full jurisdiction over fines, as Advocate General Bot also concluded in his Opinion in the E.ON case (see VBB on Competition Law, Volume 2012, No. 6, available at www.vbb.com).
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