On 13 December 2012, following a complaint by the mobile network operator (MNO) Bouygues Telecom, the French competition authority, Autorité de la concurrence (the “Autorité”), fined the two leading French MNOs, Orange and SFR, a total of €183.1 million for abusing the dominant position each of them held in their respective call termination markets, i.e. the wholesale interconnection service they offer other operators to terminate’ calls on their networks.
In particular, the Autorité came to the view that Orange and SFR had implemented excessive rate differentiation practices between ‘on net’ calls, i.e. calls made within their own network) and ‘off net calls (i.e. calls by their subscribers to a rival network, when offering unlimited ‘on net’ offerings. These offerings had several negative effects including:
- artificially increasing the ‘club’ effect, i.e. the propensity for close relatives to regroup under the same operator, and locking in consumers by significantly raising exit costs, which restricted competition in the retail market; and
- automatically favouring large MNOs, like Orange and SFR, over small MNOs like Bouygues (through a ‘network effect’) which, in order to compete, was forced to offer unlimited ‘cross net’ call offerings significantly raising its termination costs and the consequential risk of market exit.
The Autorité was of the view that Orange and SFR had not demonstrated that the anticompetitive practices could be objectively justified on the basis of costs differences for the supply of the two types of calls or that the practices were indispensible for the achievement of efficiency gains which would prevail over the identified anticompetitive effects.
It is interesting to note that an abuse was found to have occurred despite the presence of sector-specific price regulation with which the MNOs complied. This is unsurprising, as the Court of Justice of the European Union (“ECJ”) has held that it is only if “anti-competitive conduct is required” of an undertaking by national legislation, or if the latter creates a legal framework which itself “eliminates any possibility of competitive activity” by that undertaking, that Article 102 TFEU does not apply, see for example Deutsche Telekom Case C-280/08 P. In the present case, the existing regulation, i.e. wholesale price caps for termination calls, did not prevent the MNOs from offering unlimited ‘cross net’ calls which would have eliminated or reduced the above negative effects.
However, the presence of sector-specific regulation may lead to a reduction in fines where it is found to be a contributing factor to a breach of the competition rules. In this case, the Autorité took the view that existing regulation had the effect of creating a “transitional economic interest for operators” to carry out the anticompetitive practices and so reduced the fines imposed by 50 per cent.
Orange and SFR have appealed this decision to the Paris Court of Appeal.
This case, which should be of interest to both regulators and regulated entities, is a further example of how the imposition of sector-specific rules can facilitate, and even encourage, a breach of the antitrust rules.