The Conduit Case

AutorPaul Hitchings
Cargo del AutorPartner. Cuatrecasas, Madrid1
Páginas157-176

Ver nota 1

Page 157

1 Introduction: the case and its significance

On 11 November 2005, the Fifth Commercial Court of Madrid emitted its judgment on a claim for damages brought by the Spanish subsidiary of

Page 158

Irish directory enquiry provider, Conduit, against Telefónica for breach of telecommunications regulations and competition law. The judge partially upheld the claim, awarding damages of approximately €670,000 against Telefónica. The judgment is currently under appeal by both parties.

The case marks a milestone in the private enforcement of competition law in Spain and raises a number of interesting issues in relation to private damages actions based on competition law.

1. 1 Background

April 2003 marked the beginning in Spain of competition in real terms in the provision of directory enquiry services, a service whereby a user, calling from a telephone, can make enquiries concerning telephone numbers and certain other data relating to subscribers of telephone services. On that date, Conduit, in parallel with one other international player, Telegate, launched its 11850 directory enquiry service in competition with the existing service provided by Telefónica de España (the regulated 11818 service) and the new 11888 service launched by Telefónica Publicidad e Información two months earlier in February. In the following months, a whole raft of further services was launched marking an explosion of alternatives for consumers and a critical period for the positioning of new brands.

The launch of these new services followed the implementation of a number of regulatory measures which facilitated the effective liberalization of the directory enquiries market2. Concretely, those measures included:

(i) the allocation of a new and exclusive number range for the provision of information services over the telephone (118XY), which would permit a level playing field whereby all competing services would be identified by a unique number of an identical type and length, and the concomitant requirement on Telefónica to withdraw the legacy number for directory enquiry services (1003) on 4 April 2003 and replace it with a 118 number (11818); and

Page 159

(ii) the obligation on all operators to deliver their vital subscriber data to the telecommunications regulator (the Comisión del Mercado de las Telecomunicaciones or CMT) for use by directory enquiry providers at no cost3 in their services, in a format (and with a frequency) to be determined subsequently by the CMT4.

Among a number of successful complaints before the CMT brought by Conduit, and other competitors, concerning issues affecting their access to the market (for example, access to the telephone networks on non-discriminatory and cost-oriented terms in accordance with regulatory and competition requirements), Conduit lodged a complaint in May 2003 alleging that the subscriber data furnished by Telefónica de España to the CMT did not comply with the requirements for format and content established by the regulator and, furthermore, was of a notably inferior quality and completeness to the data which the incumbent operator in fact possessed and made available for use in its own directory enquiry service.

This complaint was first upheld by the CMT by virtue of a Resolution adopted on 26 June 2003 in which it found prima facie existence of the facts alleged by Conduit and, in order to alleviate the prejudice and costs caused to Conduit’s service by the poor data loads, required Telefónica, as an interim measure, to permit Conduit free on-line access to the subscriber database utilized for its own directory enquiry service or, in the event that this were not technically feasible, to permit free access to its so-called E.115 on-line database access service5. The complaint was subsequently upheld in

Page 160

a final decision adopted by the CMT on 13 November 2003 in which the CMT held that the data provided by Telefónica was incomplete and deficient (in contravention of regulatory requirements) and, furthermore, constituted a discriminatory practice (given that the data used by Telefónica for its own services was distinct), amounting, as such, to an abuse of its dominant position.

It is interesting to note the decision adopted by the administrative court (Audiencia Nacional) on 1 March 2006 on an appeal filed by Telefónica against the CMT’s Resolution of 13 November 2003. In that judgment, the court held that the CMT had acted ultra vires by declaring the abuse of dominance (this being a faculty invested in the Competition Authority, Servicio and Tribunal de Defensa de la Competencia, and in the courts) but upheld the CMT’s finding on the facts: i.e. Telefónica had, indeed, provided defective data loads and discriminated in favour of its own directory enquiry operations6.

1. 2 The claim

Conduit filed a claim against Telefónica de España before the Commercial Courts of Madrid on 15 January 2005 for damages for breach of telecommunications regulations and EC competition law. The claim alleged that, by virtue of a number of illicit practices, key among these the provision of poor subscriber data, Telefónica had seriously impeded the proper and timely launch of Conduit’s 11850 service in Spain, had caused Conduit a series of direct costs it would not otherwise have borne (including the cost of alternative data sources and increased operational

Page 161

costs) and a lowering of its service levels which had impacted the market share it attained and, consequently, caused the company a loss of profit.

1. 3 The judgment

Less than ten months after the filing of the claim, on 11 November 2005, the Fifth Commercial Court of Madrid adopted its judgment upholding partially Conduit’s claim. In line with the findings of the CMT, the judge held that Conduit had proved that Telefónica had supplied deficient subscriber data and that the data was not of the same quality or completeness as the data provided by Telefónica to its own directory enquiry services, held that these facts constituted a breach of applicable telecommunications regulations and an abuse of the company’s dominant position (in breach of Article 82 of the EC Treaty) and awarded damages, based on Article 18.5 of the 1991 Unfair Competition Act7, consisting in part of the direct costs claimed by Conduit but none of the damages for loss of profit.

On 5 January 2006, both Telefónica and Conduit filed appeals to the appeal court of Madrid against this judgment. Judgment is pending.

1. 4 A landmark in private enforcement

Perhaps the key aspect of this case from the perspective of the private enforcement of competition law is that it marks the first case of its kind before the Commercial Courts and, crucially, confirms EC jurisprudence and doctrine that damages actions based on EC competition law can be brought directly before the courts without it being necessary first to obtain a binding and final decision of the competition authority (what are sometimes referred to as "follow-on" actions).

As is well known, until recently, private actions based on breaches of competition law have been limited in Spain by both the legislator and the Supreme Court which have vested in the Spanish Competition Authority the exclusive competence to interpret and apply the Competition Act (Ley

Page 162

de Defensa de la Competencia) and EC competition law. As a result, such actions have been limited to "follow-on" cases conditioned on there being a prior administrative decision by the Competition Authority and that such decision not be subject to judicial appeal. So, for instance, while there is statutory provision in the Competition Act for damages claims based on a breach of national competition law, the same provision establishes the procedural rule that a claim for damages cannot be brought until there is a prior and firm decision by the Competition Authority (Article 13.2 of the Act). Furthermore, in the Supreme Court’s controversial judgment of 30 December 1993 in the CAMPSA case, the Court held that neither national competition law nor EC competition law (in direct defiance of the principle of direct effect) could ground an action before the courts unless and until there had been a prior decision by the Competition Authority (which it considered had been vested with exclusive competence in this matter by the Spanish legislator).

This rule had made it extremely difficult for private parties to bring actions based on antitrust infringements. First, parties would be required to obtain a favourable decision by the Competition Authority, the Tribunal de Defensa de la Competencia (or TDC). Given that the TDC can only decide on cases proposed to it by the Government Competition Service (Servicio de Defensa de la Competencia), complaints in antitrust cases currently face a double barrier: their complaints must be investigated and upheld first by the Service and then by the TDC (and, even if successful, such investigations would typically last two years or more). Secondly, the TDC’s decision on which any private actions is based must not be open to judicial appeal - which can imply additional delays, often of many years. Indeed, in practice, there have been very few successful claims for damages based on a competition infringement, and that many years after the infringement took place8.

Page 163

There were two exceptions to this general absence of private enforcement: one, claims under the Spanish Unfair Competition Act based on breaches of competition law9 and, two, the...

Para continuar leyendo

Solicita tu prueba

VLEX utiliza cookies de inicio de sesión para aportarte una mejor experiencia de navegación. Si haces click en 'Aceptar' o continúas navegando por esta web consideramos que aceptas nuestra política de cookies. ACEPTAR