Consumers suffered after ‘market-share Yalta’

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Pierre Bardon, managing director of SFR, France’s number two mobile telephone operator, insisted that there was a perfectly innocent explanation for the note, handwritten in a mixture of green and blue ink.

“Despite its appearance, this document does not constitute in any way an exchange with our two competitors to share out the market,” he told investigators when quizzed about the document, dated March 28, 2001.

Alas, for Mr Bardon, France’s Competition Council did not buy his version of events.

On Thursday, SFR, Orange France, the French market leader in mobiles, and Bouygues Télécom, the number three, were fined a total of €534m ($672m) for colluding to the detriment of consumers.

The SFR note, seized in a raid in the summer of 2003, was one of several key pieces of evidence – albeit fragmentary ones – produced by the Competition Council to justify the fine, the biggest in its history.

The note, part of which was crossed out, read: “Michel Bon [former chairman and chief executive of France Télécom, parent of Orange] via D. Quillot [chief executive of Orange France] is OK to renew in 2001 the agreement on market share 2000 in gross sales, although they didn’t respect it in the second half of 2000. Philippe Montagner [chief executive of Bouygues Télécom] after having asked for 23 per cent of gross sales is accepting 22 per cent.”

When they raided Orange France, investigators found intriguing internal documents there too, including the references to a “market share Yalta”.

Investigators interpreted this as a reference to the territorial carve-up carried out by Roosevelt, Churchill and Stalin towards the end of the second world war.

Another document referred to a policy of “pacifying the market”.

Bouygues Télécom said on Thursday the fine was “deeply unjust”, claiming that it had actually lost three percentage points of market share in the period analysed by the council.

It also said that it had consistently complained about its two bigger competitors to various regulators in recent years. It claimed that none of these requests had been seriously investigated.

After details of the investigation were leaked in the summer to the Canard Enchaîné, the French satirical newspaper, Bouygues Télécom claimed unsuccessfully that the process had been tainted by a presumption of guilt.

Orange France claimed on Thursday that the size of the fine was likely to “gravely” affect public confidence in what it described as “one of the most dynamic” sectors of the economy.

It said that the exchange of information between the three operators was harmless and linked to the establishment of a regulator to gather information on the development of the mobile market.

Market shares during the period under review had fluctuated on a monthly basis, “demonstrating the intense competitiveness of the sector,” it argued. Consumers, it argued, had enjoyed a price cut of about 20 per cent over the same period.

Aside from the sheer size of the market, one of the reasons given by the regulator for the heaviness of the fine was the fact that the operators were given licences by the government partly on their perceived ability and willingness to create a highly competitive market.

Mobile telephones have been taken up more slowly in France than in other European countries. In March 2003, 63.4 per cent of the population had a mobile phone, against 97 per cent in Italy, 87.7 per cent in the UK, 86.7 per cent in Spain and 73.7 per cent in Germany.

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