On September 16, 2020, the French Cour de cassation annulled a judgment of the Paris Court of Appeals for the second time in the saga between SFR and Orange. While the Cour de cassation confirmed the existence of a relevant market for fixed telephony for secondary homes, on which Orange is dominant, it ruled that the Paris Court of Appeals had failed to properly assess Orange’s allegedly abusive conduct.
As the historical telecom operator, Orange offers annual access to telephony services (“ATS”) to its competitors, including SFR. Competitors pay for this access on a monthly basis. The telecom regulator (the “ARCEP”) controls the monthly fees in order to ensure that they are transparent and non-discriminatory.
In 2000, Orange launched a secondary residence offer (“SRO”). The SRO allows owners to suspend the telephone line in their secondary residence when it is unoccupied (the “Suspension Option”) in exchange for a marginal fee.
In 2010, SFR sought to launch an offer competing with Orange’s SRO. It realized, however, that such an offer would not be commercially viable: while SFR would offer the possibility for customers to suspend their line for a marginal fee, SFR would have to continue to pay for Orange’s ATS for the entire year. SFR asked Orange to suspend the ATS monthly fees, but Orange refused. SFR therefore brought a damage claim against Orange for abusing its dominant position on a so-called market for secondary residence telephony services. It alleged that Orange had abused that position by refusing to suspend the payment of the ATS monthly fees, thereby preventing it from replicating Orange’s SRO.
In 2014, the Paris Commercial Court found Orange liable for abuse of dominant position and ordered it to pay €51.38 million in damages to SFR. The Paris Court of Appeals overturned the judgment ruling that there was no separate market for fixed telephony for secondary homes and, therefore, that Orange did not hold a dominant position on the alleged market.
In 2016, the Cour de cassation annulled the 2014 judgment, criticizing the market analysis carried out by the Paris Court of Appeals, and remanded the case to the same court.
In its 2018 ruling, the Paris Court of Appeals identified a relevant market for fixed telephony for secondary homes, qualified the abuse, and imposed a fine of €52.95 million on Orange. Orange appealed in cassation.
Orange challenged both the market definition and the qualification of the abuse. While the Cour de cassation rejected Orange’s arguments on the market definition, it overturned the Paris Court of Appeal’s finding that Orange had abused its dominant position on this market.
Orange argued that the ATS monthly fees reflected the cost incurred to maintain the network. Therefore, suspending the monthly fees would have had to have been compensated by increased monthly fees for the months when these were paid. At the time, SFR contacted the ARCEP to carry out an analysis of the replicability of Orange’s SRO, following which the ARCEP confirmed that the quantum of the monthly ATS fees would have to increase in order to cover Orange’s loss. However, when the ARCEP enquired whether ATS subscribers would agree to an increase in the ATS monthly fees in exchange for the right to suspend the ATS monthly payments, all subscribers, including SFR, refused.
The Cour de cassation accepted Orange’s argument, ruling that the Paris Court of Appeals should have taken into account SFR’s refusal to increase ATS monthly fees in its analysis. The Cour de cassation annulled the Paris Court of Appeals’ judgment and sent the parties back before the Paris Court of Appeals for a third round of arguments.
The ruling is an example of a complex situation intertwining antitrust and sectoral regulation. A sectoral regulation does not exonerate an undertaking from complying with competition law. In the present case, interestingly, the regulator’s intervention—and in particular SFR’s refusal to accept the ARCEP’s proposal to find a solution—was considered decisive in the qualification of the abuse.