On 19 May 2016, the Paris Court of Appeal upheld the decision of the French Competition Authority ("FCA") imposing fines on the French telecoms operators Orange and SFR for having abused their dominant position in the mobile call termination market. The Court nevertheless granted the operators a 20% reduction of the fines on account of the complexity and novelty of the test applied by the FCA when calculating the price differentiation that underlie the finding of an abuse.
In its decision of 2012, the FCA imposed fines totalling € 183 million on Orange and SFR on the ground that they had applied rates that excessively differentiated between calls to telephone numbers within their network ("on net calls") and calls to telephone numbers linked to a competitor's network ("off net calls") (see VBB on Competition Law, Volume 2012, no 12, available at www.vbb.com).
The FCA found that the operators had marketed abusive offers allowing subscribers to make unlimited "on net" calls during certain hours or towards specified numbers for the flat-rate subscription cost only. In contrast, "off net" calls did not benefit from these advantages.
Although the prices per minute for both "on net" and "off net" calls were subject to the same flat-rate subscription and therefore identical, when the FCA calculated the "on net" price per minute it took into account the advantages that applied to these calls compared to the "off net" price per minute. Following this test, the FCA found that the price of "on net" calls, which included the advantages, amounted to price differentiation which negatively impacted the mobile telephone market.
Orange and SFR sought the annulment of the FCA's decision. One of their claims was that the FCA did not find any below-cost sales. The Court, however, held that the FCA was not required to establish whether the offers proposed by Orange and SFR were below cost. Rather, the test carried out by the FCA to compare the price differentiation between "on net" and "off net" calls was considered appropriate to assess the potential negative effects on competition.
The Court nevertheless accepted the claimants' argument that the test applied by the FCA was new and therefore lacked predictability. According to the Court, past case-law on abusive price differentiation was based on an explicit difference in prices between "on net" and "off net" calls. The test applied by the FCA, however, which considered the benefits granted to subscribers making "on net" calls was found to be very complex and novel. The Court held that the complexity and novelty of the test should give rise to a 20% reduction of the fines imposed on Orange and SFR.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
