Bird & Bird Wins Landmark Ruling by French Competition Council

26 March 2002

France Telecom found guilty of unfair competitive advantage

International law firm Bird & Bird has recently advised on-line provider of ADSL services, T-Online in France (trading as Club Internet), on a landmark case which has brought into question France Telecom's competitive position in the selling of ADSL packages and the implications for the unbundling of the local loop.

The ruling which was handed down by the French Competition Council last week should severely restrict the commercial development of France Telecom in the ADSL market for residential users in forthcoming months and open the market for broadband Internet Access services to other ISPs.

France Telecom has been ordered by the Competition Council to suspend retail distribution of a packaged product named "Extense", which combines an ADSL modem and a subscription to Internet Access Services through its subsidiary Wanadoo, in France Telecom's 750 retail outlets in France. This more favourable distribution environment has enabled Wanadoo to gain a near de facto monopoly in the market at the expense of other ISPs. Wanadoo was planning to have one million more ADSL subscribers in 2002 resulting mainly from 60,000 sales per month, 90 % of these being generated through France Telecom's 750 retail outlets. The period of suspension is linked to the provision by France Telecom of a new information system which should enable other ISP's to order ADSL services under conditions which allows them to freely distribute their own package of internet services as a mass-market product.

The decision reached by the French Competition Council and which France Telecom has appealed against, is significant for suppliers of services to ISPs. It also raises the issue of unbundling the local loop. As long as Wanadoo is a near de facto monopoly, there are no potential clients for other telecommunications operators who want to invest in the unbundling of the local loop. This recent ruling provides a market opportunity for these other telecommunications operators, as it should give ISPs the opportunity to overcome the structural discrimination created by France Telecom. Indeed, unlike Germany, where over 400,000 telecommunication lines have been unbundled, France lags behind with only 400.

The Bird & Bird team advised Club Internet on all competition aspects relating to the appeal. Olivier Fréget, Head of Bird & Bird's International Competition practice led the work in Paris.

Commenting, Olivier Fréget, said:

"We have worked with Club Internet for more than 8 years. This decision is highly significant for them. It is also a first because the French Competition Council very rarely grants interim measures - a decision which is particularly notable in this case when we also consider that France Telecom sells several tens of thousands of Wanadoo packaged products per month in its own retail networks. A vital part of this exercise was the close working relationship we have with Emmanuel Sordet, general counsel of T-Online and Maud Fagniez, legal counsel, over an intensive two month period to prepare the case. This is an important win for Club Internet and we are extremely pleased with the result."

For more information, case please contact Larry Cattle, Director of Marketing, on +44 (0) 20 7415 6156.