Judgments nº T-340/03 of Court of First Instance of the European Communities, January 30, 2007

• Resolution Date: January 30, 2007
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-340/03

In Case T-340/03,

France TÈlÈcom SA, formerly Wanadoo Interactive SA, established in Paris (France), represented by O. Brouwer, H. Calvet, M. Pittie, J. Philippe and T. Janssens, lawyers,

applicant,

v

Commission of the European Communities, represented initially by S. Rating and …. Gippini Fournier, acting as Agents, and subsequently by …. Gippini Fournier,

defendant,

APPLICATION for annulment of the Commission-s decision of 16 July 2003 relating to a proceeding under Article [82†EC] (Case COMP/38.233 - Wanadoo Interactive) or, in the alternative, for annulment or reduction of the fine imposed on the applicant,

THE COURT OF FIRST INSTANCE
OF THE EUROPEAN COMMUNITIES (Fifth Chamber, Extended Composition),

composed of M. Vilaras, President, M.E. Martins Ribeiro, F. Dehousse, D. -v·by and K. J¸rim‰e, Judges,

Registrar: J. Palacio Gonz·lez, Principal Administrator,

having regard to the written procedure and further to the hearing on 26 April 2005,

gives the following

Judgment

†Facts and procedure

1††††††††In the context of the development of high-speed internet access, the Commission decided, in July 1999, to launch a sectoral inquiry within the European Union pursuant to the powers conferred on it by Article 12(1) of Regulation No 17 of the Council of 6 February 1962: First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87), which focused in particular on the provision of local loop access services and use of the residential local loop. Against this background, in the light of the information gathered the Commission decided to take a close look at the prices which Wanadoo Interactive SA (-WIN-) charged its residential customers in France for high-speed internet access. To this end, it launched proceedings of its own initiative in September 2001.

2††††††††At the material time, WIN was part of the France TÈlÈcom group, 99.9% of its capital being held by Wanadoo SA. France TÈlÈcom-s shareholding in Wanadoo fluctuated between 70 and 72.2% during the period at issue. The group formed by Wanadoo and its subsidiaries (-the Wanadoo group-) encompassed all France TÈlÈcom-s internet activities and its telephone directory business. Within the Wanadoo group, WIN covered the operational and technical aspects of internet access services in France, including ADSL (asymmetric digital subscriber line) services.

3††††††††The Commission sent WIN a first statement of objections on 19 December 2001 (-the first statement of objections-) and a supplementary statement of objections on 9 August 2002 (-the supplementary statement of objections-), to which WIN replied on 4 March and 23 October 2002 respectively.

4††††††††On 16 January 2003, the Commission sent WIN a letter setting out facts (-the letter on the facts-) giving it access to the file which served as the basis for drafting that letter. WIN in fact had access to the file on 23 and 27 January 2003. By letter of 26 February 2003, WIN asked the Commission to clarify a number of aspects of the letter on the facts. The Commission replied by letter of 28 February 2003 and WIN then submitted a document in reply to the letter on the facts on 4 March 2003.

5††††††††By decision of 16 July 2003 relating to a proceeding under Article [82 EC] (Case COMP/38.233 - Wanadoo Interactive) (-the decision-), the Commission found that -[WIN] infringed Article 82 [EC] by charging for its eXtense and Wanadoo ADSL services predatory prices that did not enable it to cover its variable costs until August 2001 or to cover its full costs from August 2001 onwards, as part of a plan to pre-empt the market in high-speed internet access during a key phase in its development- (Article 1). The Commission ordered it to bring the infringement to an end (Article 2) and imposed a fine on it of EUR 10.35 million (Article 4).

6††††††††The decision defines the relevant market as the French market for high-speed internet access for residential customers. The products with which the infringement is concerned are internet access services based on ADSL technology (Wanadoo ADSL and eXtense).

7††††††††According to the decision, in the case of Wanadoo ADSL, at the material time, the customer had to pay a monthly subscription to France TÈlÈcom for supplying the service, renting the ADSL modem from France TÈlÈcom, together with a subscription to WIN as its internet service provider (-ISP-). In the case of the eXtense service, the modem was bought by the user who paid only a monthly subscription to WIN corresponding to the service supplied by France TÈlÈcom and the flat-rate unlimited internet access.

8††††††††Having looked into various elements, including the market shares (recitals 211 to 222 in the preamble to the decision) and the effects of the -link-up- with France TÈlÈcom (recitals 223 to 228), the Commission concludes that WIN occupied a dominant position on the relevant market. It then concentrates on showing that the below-cost pricing applied by WIN formed part of a deliberate strategy of predation aimed at -pre-empting- the market and thereby constitutes an abuse of a dominant position within the meaning of Article 82 EC (recital 254).

9††††††††The decision fixes the starting date of the infringement as 1 March 2001 and the end as 15 October 2002, the date on which the remedy put forward by France TÈlÈcom in March 2002 entered into force. The variable costs were not covered by the prices charged from March to August 2001 and the full costs were not covered from August 2001 (Article 1 of the decision, see paragraph 5 above).

10††††††That decision was notified to WIN on 23 July 2003 and, by document lodged at the Registry of the Court of First Instance on 2 October 2003, WIN sought annulment of the decision.

11††††††Following a merger on 1 September 2004, France TÈlÈcom succeeded to the rights of WIN.

†Forms of order sought

12††††††The applicant claims that the Court should:

-††††††††annul the decision;

-††††††††in the alternative, cancel or reduce the fine;

-††††††††order the defendant to pay the costs.

13††††††The Commission contends that the Court should:

-††††††††dismiss the action;

-††††††††order the applicant to pay the costs.

†Law

I†-††The claim for annulment of the decision

14††††††In support of its claim for annulment, the applicant puts forward a number of procedural pleas, breach of the principle that penalties must be specific to the offender and breach of Article 82 EC.

A†-††The plea alleging breach of the rights of the defence and of essential procedural requirements

1. †††††Arguments of the parties

   15††††††According to WIN, in a case involving predatory pricing the calculation of costs should be regarded as a key part of the objection in question. In its view, not only did it encounter difficulties in relation to access to the file, but also significant elements of the calculation of variable and full costs contained in the decision were never raised in a statement of objections and were only made known in the letter on the facts. This amounts to a breach of WIN-s rights of defence and a breach of essential procedural requirements. WIN submits that it was unable to ascertain the significance of those elements or their position in the scheme of the Commission-s reasoning and objections and therefore could not properly exercise its rights of defence in this regard.

   16††††††In addition, in its decision the Commission applied calculations which, in terms of both the method used and the results achieved, are different from those used in the supplementary statement of objections. By modifying its cost recovery test, the Commission thus modified its objection. Moreover, the duration of the infringement established in the decision is greater than that referred to in the statement of objections, without the parties having had the opportunity to comment in this regard.

   17††††††The Commission considers that WIN-s arguments are factually wrong and legally unfounded. It contends that, in the letter on the facts, it merely corrected errors in the calculation pointed out by WIN in its reply to the supplementary statement of objections, and did not change either the test or the complaints. It points out, moreover, that WIN was heard on the content of the letter on the facts. The purpose of this was precisely to afford the undertaking the opportunity to effectively make known its views as to whether the facts asserted by the Commission were true and relevant; WIN took this opportunity. By letter of 26 February 2003, WIN thus asked the Commission to provide clarification on a number of aspects of the letter on the facts. The Commission contends that it replied by letter of 28 February 2003, thus allowing WIN the opportunity to reply in turn to the letter on the facts on 4 March 2003. At the time of sending out the letter on the facts, the Commission claims to have given WIN access to the entire file which provided the basis for drafting the letter. WIN in fact had access to the file on 23 and 27 January 2003. As regards the duration of the infringement, the fact that the infringement was still ongoing at the time of sending the statement of objections prevented the Commission from doing more than establish the starting point of the infringement.

2. †††††Findings of the Court

   18††††††It should be noted at the outset that, according to settled case-law, the statement of objections must be couched in terms that, even if succinct, are sufficiently clear to enable the parties concerned properly to identify the conduct complained of by the Commission. It is only on that basis that the statement of objections can fulfil its function under the Community regulations of giving undertakings and associations of undertakings all the information necessary to enable them properly to defend themselves before the Commission adopts a final decision. Furthermore, it is settled case-law that that obligation is satisfied if the decision does not allege that the persons...