Telecom company faces fine despite settlement of original case
By Rick Mitchell
PARIS--France Télécom S.A. faces a fine of up to €120 million in an Internet-access sector case before France’s competition watchdog, La Conseil de la Concurrence, even though the two companies that originally made complaints dropped their cases years ago.
In 2001, when the Paris-based telecommunications giant controlled about 90% of the French market, the start-up Internet service providers Liberty Surf and Club Internet, at the time a subsidiary of Deutsche Telecom, accused France Télécom’s Internet subsidiary Groupe Wanadoo S.A., now named Orange S.A., of unfairly using its privileged information as France’s national carrier to win back customers it had lost to competition.
The two ISP rivals, who leased network capacity from France Télécom, also charged that France Télécom’s technical arrangements favored its own Internet subsidiary, and that its bulk-access tariffs left competitors no room for earning a profit, while its own access packages were priced below cost.
Taking advantage of France’s so-called alternative-mechanism rules, France Télécom has admitted to the charges and pledged to clean up its act, thereby cutting the potential fine it faces from €120 million to €60 million, provided the Conseil accepts the arrangement, sources said.
A spokesman for France Télécom confirmed the company had admitted to the charges, but declined to elaborate. “We note that these are old facts. Today, the French market for ADSL is known worldwide for being very competitive. Since 2002, there has been no court case for this market in France,” he said.
Rare move by competition authority
In settling with Liberty Surf and Club Internet nearly five years ago, “France Télécom probably paid a very high settlement, but the amounts were withheld,” said Marie Hindre-Gueguen, a Paris-based attorney specializing in competition law for the New York law firm Proskauer Rose L.L.P.
Although both rivals dropped their cases, and both have also since been acquired by other companies, the Conseil de la Concurrence elected to open its own case, said a spokeswoman for the Conseil. “It can do this when it decides a case is sufficiently serious for the country’s economic well-being,” she said.
“It is quite rare for the Conseil to take up a case on its own like this. So France Télécom might not have expected that to happen, or perhaps they decided to take the risk,” said Ms. Hindre-Gueguen.
“In any case [by settling], France Télécom did what it had to do financially at the time,” she said. “The Conseil only levies fines. After that, complaining parties can take their cases to civil court. In these long cases, France Télécom could have faced damages and interest, which can add up to quite a lot,” she added.
By admitting to the charges and promising to turn over a new leaf, under provisions of a 2001 law, La Nouvelle Réglementation Economique, France Télécom potentially reduced the fine it faces by half. “It could have faced up to a €120 million fine in this case,” Ms. Hindre-Gueguen said. They have been fined several times in the last few years. In the recent mobile-network collusion case, they were fined several hundred thousand euros, along with SFR and Bouygues Télécom.”
The company could also spare its image a beating, she noted. “In a conviction, the Conseil puts out a complete communication package. That could have had a much more damaging effect on France Télécom’s image,” she said.
The Conseil spokeswoman said that, although the Conseil’s rapporteur has recommended settlement of the case with a €60 million fine, “The Conseil, when it meets, is free to reject the recommendation and impose a higher fine. It can also lower the fine and even drop it, although it has never done this,” she said.
The spokeswoman said that since 2001, 12 companies have elected to admit to charges under the transaction process, to reduce their fines, and in the vast majority of cases, the Conseil accepts the rapporteur’s recommended fine.
(Appeared Sept. 10, 2007)
