On 31 March 2017, the French Supreme Administrative Court ("Court") upheld a fine of €15 million imposed by the French Competition Authority (“FCA”) on SFR-Numericable and its shareholder Altice Luxembourg. The fine related to a failure to comply with a commitment made at the time of Altice/Numericable's acquisition of the telecommunications operator SFR.
In a decision of 30 October 2014, the FCA cleared the acquisition of SFR by Numericable (a subsidiary of the Altice group), subject to commitments. In particular, in order to address the significant market power that the merged entity would hold on certain mobile telephony markets in the Indian Ocean (66% market shares in La Réunion and 90% in Mayotte), Altice and Numericable committed to divest the mobile phone business of Outremer Telecom, a subsidiary of SFR, in La Réunion and Mayotte. In addition, pending the completion of that divestment, Altice and Numericable committed to ensure that Outremer Telecom remained economically viable by (i) doing their best to avoid any loss of competitiveness and (ii) not interfering with the divestment business' commercial strategy.
However, three weeks after obtaining clearance, the subscription tariffs applied by Outremer Telecom, which had remained unchanged for a long period, were increased by between 17% and 60% in La Réunion and Mayotte. This resulted in a reduction in the volume of new subscriptions and a spike in contract terminations.
By a decision of 19 April 2016, the FCA considered that the price increases had reduced the competitiveness of the Outremer Telecom business and had been caused by Altice's and Numericable's involvement in its commercial strategy. Consequently, the FCA held that Altice and Numericable had violated their commitment and it imposed a fine of €15 million.
The FCA’s decision was upheld on 31 March 2017 by the French Supreme Administrative Court, following an appeal by SFR-Numericable and Altice Luxembourg. Interestingly, the Court set aside SFR-Numericable's argument that the commitment had been complied with as the divestment had eventually occurred. For the Court, ensuring that the divestment business remained fully viable pending its divestiture was a distinct commitment in and of itself. Hence, the Court’s ruling is in line with settled case law on the textual interpretation of commitments made at the time of a merger. This is the latest blow for Altice, which was recently fined €80 million by the FCA for jumping the gun and starting to implement its acquisition of two mobile phone businesses, SFR and OTL.
With thanks to Julie Tirtiaux of Ashurst for her contribution
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