On 30 November 2015, the French Competition Authority (“FCA”) fined, yet again, the telecommunications company SFR, jointly with one of its subsidiaries, SRR, for having abused its dominant position in the overseas departments of La Réunion and Mayotte. SFR is one of the three major players in the French telecommunications field.
For the FCA, this is the end of a long prosecution journey. Initially alerted by SFR’s competitors Orange and Outremer Telecom, the FCA had imposed emergency measures on 17 September 2009 enjoining SFR to re-establish competition in those overseas regions. Following these measures, the FCA split the case on the merits against SFR into two: the first dealing with the practices in the residential market and the second with those in the business sector. On 13 June 2014, the FCA handed down a 46 million euro fine against SFR for having abused its dominant position in the residential market. We commented on the sanction applied to SFR for its price differentiation scheme in our July 2014 EU & Competition Bulletin.
As far as the business market was concerned, SFR has now also been found to have implemented an excessive price differentiation between calls within its network (“on net calls”) and calls to competitors’ networks (“off net calls”). The FCA found that off net calls were sometimes charged 10 times more than their actual cost for SFR.
The FCA explained once more that pricing differentiation can in theory be perfectly acceptable, even for a company in a dominant position on a relevant market such as SFR, which at the time had a 60% market share in La Réunion and 80% in Mayotte. However it quoted from its 2009 injunction decision against SFR to clarify that such differentiations must be “objectively justified, particularly by differences in costs of the services” which was not the case here.
The FCA held that because of SFR’s pricing differentiation scheme, small and medium businesses (“SMEs”) had a very strong incentive to subscribe to SFR, which had the largest number of customers in both territories, enhancing what the FCA dubs a “club effect”. The damage to the economy was therefore particularly strong since almost all SMEs were affected. Moreover, the FCA concluded that the image of SFR’s competitors was damaged by making their offer seem more costly, and that it was nearly impossible for new market entrants to emerge in this context.
SFR was thus fined 10.7 million euros on 30 November 2015, taking into account both the seriousness of the damages but also a 10% reduction of the theoretical fine since SFR did not contest the reality of the facts.