The French competition authority has fined three operators a total of €534 million for two distinct breaches of fair market practices.
Orange France has been fined €256 million and SFR €220 million, while Bouygues has been hit for €58 million. The regulator said that the operators had, between 1997 and 2003, exchanged confidential customer information on new sign-ups and cancellations, and that between 2002-2003 the operators had agreed on each’s market share. The fines range from between 14.6-18.3% of the operators’ 2004 net profits, according to market analyst Ovum.
The competition authority said that the operators had exchanged confidential informaiton concerning new customers and of the number of clients who were leaving their contracts. The authority said that it considered the exchange of such information to reduce the intesity of competition in the mobile market. It found that having such information would be very important in planning their commercial strategies, as well as affecting adversely the commercial strategies of their competitors.
Of the second charge, that the operators agreed on their respective market shares between 200 and 2002, the competition authority found that the operators were colluding to ensure that their market shares would remain stable. This damaged not only rivals’ strategies but also the economy, the authority found.
“The existence of this collusion has been established through the recovery of serious, precise and consistent evidence, including hand-written documents explicitly mentioning an ’agreement’ between the three operators,” the Authority said.
France’s main consumer organisation, UFC-Que Choisir, said it planned further legal action to recover damages it estimates at €50-80 per mobile subscriber. UFC filed an antitrust complaint against all three networks in 2002, a year after the antitrust authority launched its own probe.
Orange vowed to appeal against the decision and its €256m fine — the largest of the three levvies.
“Orange France disputes the unfounded and excessive penalty levied against the mobile telephone sector in France,” the company said.
A statement pointed out that it had, since the beginning of the market in 1995, put in place a scheme to map the nascent market and exchange information on sales on a quarterly basis. Orange said it contested the view that the exchange of such information was uncompetitive. The operator also said that it was “unrealistic” to think that it would be possible to fix a market that involved 40 million clients, 20,000 points of sale and an average churn rate of 20%.
SFR, a unit of Vivendi Universal, also said it was “profoundly shocked” by its €220m fine and planned to appeal.
Bouygues Telecom said it had co-operated for several years with the Telecoms Regulator and the Competition Authority and described the decision from the Authority as “deeply unjust”.
Vincent Poulbere, Senior Consultant at Ovum commented, “This is really bad news for the French operators, for two reasons: first, because of the record amount of the fine (from 14.6-18.3% of the operators’ net profit in 2004); second, because of the bad press resulting from this decision and the damage it will do to the operators’ brands and credibility.
“We were surprised by the competition authority’s findings (published on its website) about how operators exchanged confidential information and agreed on market shares. The main justification behind these practices seems to have been the desire to “pacify” the market, i.e. to reduce the uncertainties of future results and lower commercial costs.”