On June 13 2014, the French Competition Authority (FCA) issued a decision in which it fined French mobile phone company SFR and its subsidiary SRR almost EUR 46 million for having implemented and maintained an “abusively” high gap in prices between calls made between clients of SFR’s network (referred to as “on net” calls) and calls from SFR’s clients to clients of SFR’s competitors (referred to as “off net” calls).
In June of 2009, Orange Réunion, Orange Mayotte and Outremer Télécom, the principal competitors of SFR and its subsidiary SRR, complained to the FCA that they suffered an abuse of dominance by SRR, in the Islands of Réunion and Mayotte. The claimants argued that SRR abused its dominant position on the relevant mobile phone markets by differentiating tariffs to customers with respect to “on net” and “off net” calls and thus creating an incentive amongst the customers not to turn to SRR’s competitors.
On June 16 2009, the FCA issued a injunction ordering SRR to ensure that that the gap in prices between on net and off net calls would not exceed the cost to SRR to route these two types of calls. The interim decision was not challenged by SRR or SFR.
On January 24 2012, the FCA fined SRR EUR 2 million for not having fully complied with the 2009 decision. The FCA considered that despite the 2009 decision, SRR had maintained differentiated tariffs in 2010 in the Island of Réunion which exceeded the routing costs. Still, such decision was not challenged.
In its June 13 2014 decision, the FCA held that the existence of differentiated tariffs was not wrongful per se, but became wrongful to the extent that such differences exceeded the costs borne by the operator. The FCA found that the differentiated tariffs (for both calls and text messages) implemented by SRR were not justified by the routing costs borne. Indeed, the gap in applied prices was three times higher than the costs borne by SRR for the Island of Réunion and 50% higher for Mayotte.
The FCA also held that such practices (i) generated an artificial “club effect”, (ii) made the competitors appear more expensive and (iii) weakened their ability to adequately invest in the business going forward. As for the “club effect”, the FCA noted that the excessive difference in the prices between on net and off net calls and text messages was an incentive for the customers to subscribe to SRR (which had the largest number of customers) and tarnished the price image of the claimants, who appeared as more expensive. Finally, the FCA noted that by artificially reducing the number of calls and text messages towards its competitors’ networks, SRR was likely to have deprived its competitors from revenue on calls and text messages services and consequently limited their investment capacity.
SRR did not dispute the facts and undertook to implement a competition compliance program, a training program for its employees as well as a whistleblowing procedure and an internal follow-up procedure. The fine initially amounting to EUR 56 024 100 was accordingly reduced by 18%.
Such decision is not the first of its kind in the French mobile phone sector. The FCA has several times fined French mobile phone companies (Orange Caraibes, France Télécom, Orange, SFR) for similar abusive practices, including on-net/off-net differentials. For example, on December 9 2009, the FCA, after a complaint from major competitor Bouygues Telecom, fined Orange Caraibes and France Télécom nearly EUR 53 million. More recently, through a decision of December 13 2012, the FCA, acting again on complaint from Bouygues Telecom, fined Orange and SFR a total of EUR 183 million, notably for on and off network price differentiation.