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December 1, 2005

French mobile operators hit with fines for collusion

France's top three mobile operators have been hit with fines totaling 534m euros ($625m) following a fraud investigation by French competition authorities. The move came after reports first surfaced earlier this year that the operators had been colluding by fixing market shares and minimum prices.

By CBR Staff Writer

The French operators fined are Orange SA (owned by France Telecom SA), SFR SA (owned by Vivendi Universal SA), and Bouygues (owned by Bouygues Telecom SA).

Orange was handed the stiffest penalty of all, with a 256m euros ($300m) fine. SFR was next with a 220m euros ($258m) charge, while Bouygues Telecom was hit with a 58m euros ($68m) fine. All three had previously denied the allegations of collusion, and Orange and SFR have confirmed they will appeal. IOrange was particularly indignant, calling the fines unfounded and excessive.

The ruling, based on events that are now long past, has been handed down despite months of actions of all kinds seeking to discredit the telecommunications sector in France, Orange said.

It warned that the excessive nature of the fines could have serious impact on public confidence in one of the most dynamic sectors of the country’s economy, and one of the main drivers of the national competitiveness and attractiveness, and a key source of job creations.

It is perhaps no surprise that France Telecom is slightly touchy at the moment. Recently it was fined 80m euros ($93m) for barring access to the wholesale broadband market. The carrier is also to appeal that fine as well.

Fellow culprit SFR said the ruling was unjustified and out of proportion with fines imposed by the council in similar circumstances.

It was back in August that reports first emerged of the fraud investigation. An official report in the matter was issued, based on evidence seized during a raid in August 2003. It said the operators had begun to exchange confidential information about their market figures at monthly meetings as far back as 1997.

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The DGCCRF report was then transferred to France’s competition authority, the Conseil de la Concurrence, which has now issued the record fine. In a statement it said the practices of the three firms were very serious and had damaged the economy very significantly.

The report says that employees of the three mobile operators apparently met on a monthly basis from 1997 to 2003 to discuss their market strategies and exchange confidential information. The evidence for such meetings was found in the documents of a manager at Orange confiscated by the French Fraud Investigators. The three operators are said to have caught wind of the investigations into their practices at the end of 2003 and discontinued the meetings.

Apparently, the managers referred to the meetings as the Yalta of Market Shares at a board meeting. This is a reference to the historic meeting in 1945 when Churchill, Roosevelt, and Stalin met in the Ukrainian city of Yalta to discuss how to divide Europe up among themselves.

The report was the latest in a number of corruption scandals that have rocked the French establishment. Thierry Breton, France’s Minister of Finances, Economics, and Industry, was the CEO at France Telecom at the time and was allegedly present at a board meeting at Orange at which the Yalta agreement was reportedly discussed.

Meanwhile, it has been reported that a consumer association, UFC-Que Choisir, which lodged the original complaint, has now said it will begin a court case similar to an American class-action suit.

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