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WASHINGTON (Reuters) - A U.S. appeals court has upheld a law barring Verizon Communications Inc (VZ.N) from using proprietary information of its rivals to try to convince customers from switching to rival phone services.
The court rejected Verizon's request that it be allowed to offer better deals to customers when it learned from rival cable companies that a customer planned to switch carriers.
The notification is part of a technical process to "port," or transfer a customer's existing phone number to a new service.
Comcast Corp (CMCSA.O), Time Warner Inc (TWX.N) and Bright House Networks LLC had complained to the Federal Communications Commission that Verizon's actions violated a federal law restricting the use of proprietary information of rival companies for marketing purposes.
The FCC sided with the cable companies last year.
On Tuesday, the federal appeals court upheld the FCC's view that the law was intended to ensure the losing carrier's neutral role in transferring a customer's phone number.
Consumers Union, which had joined the case against Verizon, the second biggest U.S. phone company after AT&T Inc (T.N) , praised the decision.
"If Verizon is allowed to do this kind of retention marketing, consumers in general get less competitive deals on phone service," said Chris Murray, a lawyer with the group.
Verizon spokesman David Fish it "looks like a loss for consumers, who now will have less information available when choosing between different competitors."
Verizon had challenged the FCC decision in the appeals court, arguing that upholding the cable companies' complaint would put it at an unfair disadvantage.
The court found that the FCC's interpretation of the U.S. Telecommunications Act's restrictions on carriers' use of rivals' information was reasonable.
Comcast, the biggest U.S. cable company, said the ruling was good news for consumers. "(It will) ensure that consumers who choose to leave their incumbent phone provider will have their wishes respected," said spokeswoman Sena Fitzmaurice.
Both Verizon and AT&T offer high-speed Internet and video services that compete with cable, while cable providers also sell phone and Internet services.
The ruling was issued in Verizon California Inc v FCC, U.S. Court of Appeals for the District of Columbia, No. 08-1234.
Reporting by Diane Bartz and Kim Dixon; Editing by Tim Dobbyn and Lisa Von Ahn