French Mobile Phone Cartel Faces Big Fine

By LAURENCE FROST, AP Business Writer

French antitrust authorities slapped record fines on the country's mobile operators Thursday after a four-year investigation found that Orange, SFR and Bouygues illegally shared sales data and conspired to undermine competition.

The networks were ordered to pay a combined 534 million euros ($628 million) -- the largest penalty ever imposed by France's Competition Council and Europe's second-largest antitrust fine. All three vowed to appeal.

In a 90-page report, the watchdog said the operators had shared "precise and confidential" commercial information every month for six years and had even agreed to freeze their market shares in 2000-2002, easing competitive pressure on prices.

"The existence of this collusion has been established through the recovery of serious, precise and consistent evidence, including handwritten documents explicitly mentioning an 'agreement' between the three operators," the regulator said.

France's main consumer organization, UFC-Que Choisir, said it now plans to sue for damages estimated at 50 euros to 80 euros ($59 to $94) per mobile subscriber. UFC filed a complaint against all three networks in 2002, a year after the antitrust authority launched its own probe.

The decision is potentially embarrassing for Finance Minister Thierry Breton, who took over as chairman and chief executive of Orange parent France Telecom SA in 2002, a year before the illegal information exchanges stopped.

Prime Minister Dominique de Villepin came to Breton's defense Thursday when asked whether the minister's former France Telecom role -- relinquished earlier this year -- could undermine his position.

"That has absolutely nothing to do with it," Villepin said. "Thierry Breton is doing a great job as finance minister and he will continue doing his job."

Orange vowed to appeal its 256 million euros ($301 million) fine, the largest of the three, describing the penalty as "unfounded and excessive." Vivendi Universal SA's SFR and Bouygues SA's telecoms division also said they plan to challenge their respective penalties of 220 million euros ($259 million) and 58 million euros ($68 million) in the appeal courts.

During the investigation, the three mobile networks admitted sharing confidential sales data, arguing unsuccessfully that it had not distorted competition and that they had not sought to freeze market share.

But investigators found an incriminating paper trail, including a handwritten note seized from the office of SFR General Manager Pierre Bardon that mentions Michel Bon, Breton's France Telecom predecessor, and Orange France CEO Didier Quillot.

"Michel Bon via D. Quillot is OK to renew the 2000 market-share agreement in 2001," reads the note, as transcribed in the Competition Council report.

Documents recovered from France Telecom, including notebooks kept by Quillot, also referred to the deal as a "market-share Yalta" - an apparent reference to the 1945 conference that paved the way for Europe's postwar carve-up between East and West.

Quillot, who still heads Orange France, declined to comment through a spokesman.

The market-share deal was concluded at a time when sales were slowing on the maturing French mobile market, the regulator said, leading to "increased prices" for consumers as operators sought to squeeze profit growth from existing clients instead of new subscribers.

The three operators began exchanging sales data three years earlier, in 1997, and stopped the practice only in late 2003, in response to the antitrust probe.

The total fines announced Thursday are the second-largest in European antitrust history. In 2001, the European Commission fined eight drug companies a combined 855 million euros (then worth $755 million) for price-fixing.

U.S. shares of France Telecom, each worth one ordinary share, rose 39 cents to $25.38 in afternoon trading on the New York Stock Exchange. U.S. shares of Vivendi Universal rose 73 cents o $29.68 on NYSE.

Associated Press Writers Matt Moore in Frankfurt, Aoife White in Brussels, Toby Sterling in Amsterdam and David Ariel in Rome contributed to this report.

Copyright 2005 The Associated Press.

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