MEMO #11

(France Telecom broke Antitrust Rules)

In 2003, the European Commission first pointed out France Telecom’s breach of antitrust rules relating to the high-speed Internet market. In addition, once again, Europe’s second-highest court ruled this past January, upholding a 2003 European Commission decision. The court decided that France Telecom kept its competitors out of the high-speed Internet market illegally by charging artificially low prices. According to ZDNet.com, the Court of First Instance imposed a 13.37 million dollar fine to France Telecom, which is the partially state-owned incumbent telecommunications operator. The court said that a too low service price can be considered as unfair economic activity.

More precisely, the court said some of France Telecom’s units, such as Wanadoo, charged consumers rates for high-speed network access that did not cover the costs, elbowing out rivals who could not compete at such prices. In a statement, the court explained that this type of France Telecom’s activity was an obvious breach of antitrust rules because it is part of a plan to pre-empt the market during a key phase in its development. Truly, France Telecom tried to recover losses on the sale of the service by making considerable profits on the prices it charged Wanadoo’s rivals for access to the network. In fact, Wanadoo’s predatory pricing ran from March 2001, when mass marketing of ADSL services started, to October 2002, when France Telecom cut its service prices by more than 30 percent.

Based on this situation, the European Commission and Europe’s second-highest court decided that France Telecom obviously broke antitrust rules in the high-speed Internet market.

Reference

1. ZDNet.com. (2007). “EU: France Telecom broke Antitrust Rules.” Retrieved online on March 24, 2007, from http://news.zdnet.com/2100-1035_22-6154576.html