iPhone
LexInter | May 12, 2002 | 0 Comments

iPhone

The case was debated on January 6, 2009, in open court, before the Court

made of :

– Mr. Didier PIMOULLE, President

– Mr. Christian REMENIERAS, Advisor

– Mrs. Agnès MOUILLARD, Advisor

who deliberated

CLERK, during the debates: Mr. Benoît TRUET-CALLU

PUBLIC MINISTER :

The case was communicated to the public prosecutor, represented during the proceedings by Mr. Hugues WOIRHAYE, Advocate General, who made his opinion known.

STOP:

– contradictory

– pronounced by making the judgment available to the registry of the Court, the parties having been notified beforehand under the conditions provided for in the second paragraph of Article 450 of the Code of Civil Procedure.

– signed by Mr. Didier PIMOULLE, president and by Mr. Benoît TRUET-CALLU registrar

***

Apple Inc. is an American multinational corporation historically active in

the computer products sector. In 2001, it entered the digital music player market by marketing an MP3 player, the iPod, which was very successful, then diversified its activity by developing, in 2004, an online music store and other digital content, the iTunes Music Store, with the feature that a song purchased from the iTunes Music Store is protected by a digital rights management (DRM) system and cannot be easily played on an MP3 player other than an iPod .

In 2007, Apple released a first mobile terminal called iPhone.

Under the category of smartphones, the iPhone combines the uses of a telephone

mobile phone and a personal assistant and also offers an iPod-type digital music player, a GPS and a portable game console. In addition to the fact that it is particularly optimized for Internet browsing, it has many features that distinguish it from its competitors, such as an interface consisting of a multipoint touch screen, replacing traditional keyboards or buttons, detectors light and proximity optimizing the battery of the device and locking the use of the touch keyboard when it is worn to the ear, a large screen whose display in landscape mode is done automatically thanks to a gyroscopic device when the user rotates the device. Activation of iPhone is done via Itunes, a multimedia library management software distributed free of charge by Apple, which gives the latter 1 direct registration of new customers. There is also the peculiarity already mentioned, namely that the songs marketed by the iTunes Store can be downloaded only on an iPod or an iPhone.

Since June 2008, Apple has made a platform available to iPhone users.

Dedicated Internet, called the “App Store”, which puts them in touch with developers of

adapted software and applications (games, converters, applications to find Vélib terminals, to manage your bank account, dictionaries, Facebook, etc.).

Like the first model (2G), the 3G version of this terminal is available in

France since July 18, 2008, under the exclusive distribution of the company Orange France (Orange), the preeminent mobile telephone network operator since this company had, on September 30, 2008, 43.5% of the customer base, against 33.7% for the Société Française de Radiotéléphone (SFR), 17.3% for the company Bouygues Telecom and 5.5 / o for the virtual operators (MVNO or mobile virtual network operator).

The distribution system set up by Apple Inc., via its subsidiaries

and more specifically by the company Apple Sales International, is based on several contracts:

– a network partnership contract (key terms agreement) concluded with the company

France Telecom, holding company of Orange, on October 1, 2007 and amended in May 2008, by

leauel Orange is designated as the exclusive network operator for a period of five years.

from the launch of the iPod 2G is November 29, 2007, however Apple has

a right of exit without compensation at the end of a period of three years;

– a distribution agreement concluded for a period of five years in October 2UU /

between Apple and Orange, modified in May 2008, which sets up a distribution network

selective, designating Orange as the exclusive wholesaler for France responsible for delivering the

distributors approved by Apple and defining the criteria to be met by Orange stores

for the distribution of the iPhone; ,,. -i • ur ^ •

 contracts by which Apple approves other retail distributors, which oblige

each point of sale to offer the full range of mobile phone services for

iPhone from authorized network operators inside selective distribution –

either in this case Orange exclusively – and to be able to activate these services;

– distribution contracts concluded between Orange and retail distributors

ventilated by Apple which require these distributors to supply themselves exclusively with terminals

and directly from Orange and prohibit them from obtaining supplies from other sources

supply without the prior written consent of Orange, do not allow them to be resold

that in authorized points of sale in France and require them to match this

marketing of an Orange telephony offer or, in the event of the sale of terminals

“naked” to provide devices with a SIM card blocked on the Orange network, being added that

“unlocking” operations would be billed at 100 euros.

On September 18, 2008, the Bouygues Télécom company, complaining of having been

excluded from the marketing of the iPhone although it had requested it on the

1 May 4, 2008 referred the practices implemented in connection with the distribution of the iPhone on the French market to the Competition Council, requesting the pronouncement of precautionary measures. She denounced the distribution system put in place, constituting, according to her, a prohibited cartel in that it imposes minimum resale prices on

consumers, restricts the freedom of resale of authorized distributors and separates

national markets, and invoked the unjustified character of certain selection criteria and

their discriminatory application.

The Competition Council, after having gathered, on November 4, 2009, the opinion of

the Electronic Communications and Postal Authority (ARCEP) a, by decision 08-

MC-01 issued on December 17, 2008, pronouncement of provisional measures, as follows:

Article l “: It is ordered to Apple Sales International, to Apple Inc. and to France Téléconi, to

protective title and pending a decision on the merits, to suspend, the notification

of this decision, the application for France of the stipulations making Orange

the exclusive mobile operator for iPhone products. They are also enjoined not to

introduce in any contracts that would be concluded for the marketing of

iPhone models of the same type of exclusivity for a duration of more than three

month. The first injunction has the effect of suspending:

. article 2-1 a) and the mention France in appendix 1) of the contract signed on October 12, 2007, “contract on key conditions”.

. article 3.1 a) of the first amendment to this contract signed on May 15, 2008.

Article 2: Apple Sales International, Apple Inc. and France Telecom are ordered, as a precaution and pending a decision on the merits, to suspend, upon notification of this decision, the application of the stipulations designating Orange as a wholesaler exclusively authorized to purchase iPhone products for distribution purposes.

This injunction has the effect of suspending article 5.1 of appendix 3, “Country Agrée-France Addendum model” of the first amendment, dated May 15, 2008, to the distribution contract signed on October 12, 2007.

Article 3 : Apple Sales International, Apple Inc. and France Telecom are ordered, as a precaution and pending a decision on the merits, to suspend, upon notification of this decision, the application of the stipulations of article 3 of the distribution contracts signed with multi-brand distributors in France, which requires the distributor not to obtain C [u “” ‘exclusively and directly from Orange. The reseller may not purchase the authorized Products from other sources of supply without the prior written consent of Orange, and must resell them exclusively in authorized points of sale located in the territory [France ^and of article 5.4 of the same distribution contracts according to which “/ the reseller will not market the terminals in a telephony offer which is not that of Orange. Notwithstanding what has just been specified, the reseller may sell bare terminals but whose SIM card will be blocked on the Orange network “.

Article 4 : Apple Sales International, Apple Inc. and France Telecom are ordered, as a precaution and pending a decision on the merits, to suspend, upon notification of this decision, the application of the following clauses included in the selective distribution contract concluded with authorized distributors in France:

. clause 2.2 obliging each point of sale to offer for sale the full range of mobile telephone services for the iPhone of each authorized network operator within the selective distribution territory and to be able to activate these services ;

. any reference to the network Operatevir insofar as it exclusively targets Orange;

THE COURTYARD :

Having regard to the summons issued on December 24, 2008 to the Orange company, to the France Telecom company, to the Apple Europe Ltd company, to the Apple France company, to the Minister in charge of the economy and to the Director General of Consumption and Competition and the repression of fraud, and on December 26, 2008 to the company Bouygues Telecom, the Competition Council and the Attorney General, through which the companies Apple Sales International and Apple Inc. ask the court to annul Articles 1, 2 and 4 of the decision in that it orders them provisional measures and ruled that there is no need to pronounce provisional measures against them;

Having regard to the summons issued on December 29, 2008 to the company Bouygues Telecom, to the company Apple Sales International, to the company Apple Inc., to the company Apple Europe Ltd, to the company Apple France, to the company Apple Middle East Africa, to Competition Council, the Minister for the Economy, the Director General of Consumer Affairs, Competition and Fraud Control and the Public Prosecutor, through which the companies France Telecom and Orange France ask the court to annul in its entirety the decision of December 17, 2008 and the provisional measures pronounced and to declare that provisional measures do not take place, in the alternative to reform these provisional measures by limiting them to what is necessary for face the emergency, in accordance with the provisions of Article L. 464-1 of the Commercial Code, and finally to order Bouygues Télécom to pay them the sum of 150,000 euros under Article 700 of the Code of Civil Procedure ;

Having regard to the conclusions filed on January 2, 2009 and January 5, 2009 by which

Bouveues Télécom asks the court, respectively, to dismiss the companies’ appeal

Apple Sales International and Apple Inc. and that of France Telecom and Orange and recites a

the latter two a sum of 100,000 euros under Article 700 of the Code of

Civil Procedure ;

Considering the accessory voluntary interventions, dated January 5, 2009, of SFR

which requests the dismissal of the appeals and the in solidum condemnation of the Apple companies

to pay him a sum of 25,000 euros under Article 700 of the Code of

Civil Procedure ;

Considering the voluntary intervention, dated January 5, 2009, of the association Union

Federal Consumers’ Federation – Qne choise (UFC-Que Choisir), in support of the demands

of Bouygues Télécom and seeking to dismiss the appeals;

Considering the additional conclusions of the companies Apple Sales International and

Apple Inc., dated January 6, 2009, which raise the inadmissibility of the intervention

SFR volunteer;

Having regard to the written observations of the Competition Council dated

January 5, 2009;

Heard at the public hearing of January 6, 2009, in their oral observations, the

counsel for the applicants, who were enabled to reply and had the floor in

last, the advice of Bouygues Télécom and the intervening parties, as well as

the representative of the Competition Council, that of the mimstre of 1 economy and the mimstere

public;

Considering the note under advisement filed on January 23, 2009 by the companies Apple Inc. and

Apple Sales International;

Considering the fax of January 26, 2009 by which the President of the Chamber, seen

urgency, invited the other parties, the Competition Council, the mimstre responsible for

the economy and the public prosecutor to file their possible observations on this note

before January 30, 2009;

Having regard to the additional observations of the Competition Council dated

January 28, 2009;

Considering the observations in response to the note under advisement filed on January 29, 2009

by SFR and on January 30, 2009 by the company Bouygues Telecom and by UFC-Que Choisir;

SO :

Considering that it is necessary to join the two actions, which attack the same

decision;

On the admissibility of the note under advisement and of the annexed documents filed by

Apple Inc. and Apple Sales International on January 23 , 2009

Considering that these applicants wished to bring to the attention of the court

a new fact resulting from the fact that, on the same evening of the day on which the hearing of

pleadings, Apple announced that it was lifting protective devices (DRM) on a

large part of the music catalog marketed through the iTunes Store;

Considering that it is in the interest of the good administration of justice to

receive this note, in that it mentions an element, which arose after the closure of the debates, which touches the heart of the question under discussion as will be seen, and of

when the adversarial principle has been respected, the parties have been enabled to submit their possible observations;

Considering, however, that the same does not apply to the bailiff’s report, carried out

January 14 and 15, 2009, relating to the conditions for downloading a piece of music

purchased on the iTunes Store, which the applicants were free to obtain previously and which must be discarded;

On the admissibility of voluntary interventions, contested by the companies

Apple Inc. and Apple Sales International with regard to that of SFR

Considering that SFR bases its voluntary intervention in support of requests

of Bouygues Télécom on the provisions of Articles 330 et seq. of the Code of Procedure

civil law which specify that the intervention is ancillary when it supports the claims of a

other party and that it is admissible if its author has an interest, for the preservation of his rights,

to support this part;

Considering that the companies Apple Inc. and Apple Sales International are opposed to it,

by arguing that none of the provisions of the Commercial Code that regulate the procedure

followed for appeals before the Court of Appeal authorizes such intervention and that, for

these remedies, only the provisions of the Code of Civil Procedure to which

it is not derogated from the aforementioned texts and which are compatible with the specific nature of the

competition litigation, which is not the case with the voluntary intervention of a third party

for the protection of his private interests;

But considering that the Competition Council may be referred to by

companies, local authorities, professional or trade union organizations,

accredited consumer organizations, chambers of agriculture, chambers of

trades and chambers of commerce and industry (article L. 462-5 of the code of

trade), and that, when it intends to accept commitments of such a nature as to

end of anti-competitive practices, it must proceed to a public consultation

allowing any interested third party to present their observations (article R. 464-2); he

results from these provisions that the procedure followed before the Council is, under certain

conditions, accessible to industry players and interested third parties and thus,

the intervention of third parties before the court is not incompatible with the specific nature of this

litigation; that it follows from there that articles 330 and following of the code of civil procedure

are applicable in the case;

Considering that in the present case, SFR, a mobile telephone operator which was not

involved before the Competition Council and who has a financial interest in maintaining

the contested decision in so far as it puts an end to the exclusivity of Orange sm iPhone, must be

received in his accessory voluntary intervention;

The same goes for the UFC-Que Choisir association, which has the capacity to sue

and which acts, in accordance with its statutes, for the defense of the collective interests of

consumers, affected by the contested decision, is admissible in its intervention

accessory volunteer;

– on the regularity of the procedure followed before the Competition Council

On the scope of the referral under provisional measures

Considering that the companies Apple Sales International and Apple Inc. request

the court to find that the Competition Council pronounced measures

conservatories against them even though they had not been regularly

procedure and consequently annul Articles 1, 2 and 4 of the decision in so far as they

orders protective measures; that they claim in this regard that, since the

seizing party, Bouygues Télécom, had misdirected its request for precautionary measures by directing it against the company Apple France, which was not concerned, the Competition Council, which does not have the right to self-refer in matters provisional measures, did not have the power to extend the request on its own initiative to other entities of the Apple group;

That the companies France Telecom and Orange also pursue the annulment of the decision as far as it concerns them, by relying on an irregularity relating to the fact that they claim that thus, the Council exceeded the scope of the referral by extending to this agreement, not referred to by the complaining party;

But considering that the Competition Council is seized in rem of the practices

denounced, that under Article L. 464-1 of the Commercial Code, he may at the request of the Minister responsible for the economy or of the seizing party and after hearing the parties in question and the government commissioner , take the precautionary measures which are requested of it or those which appear necessary; that it follows from there that, required to rule on the request to rule on the request for provisional measures brought before it, the Council must pronounce the measures which it considers appropriate to remedy the serious and immediate attacks caused by the practices of which it is seized, and this without being bound by the description, the qualification or the analysis of the practices proposed by the applicant, which moreover does not have its powers of

Apple Europe only consists of facilitating the marketing and distribution of products, Apple France managing commercial relations with French distributors; that the Council did not therefore exceed its powers by pronouncing the provisional measures requested by Bouygues Télécom against those of the entities of the Apple group to which they concerned directly, since it had enabled them to present their observations, and little important in this regard that the latter were limited to soliciting, by way of oral observations, their exclusion without defending themselves on the merits as they claim on page 18 of their summons; Apple France managing commercial relations with French distributors; that the Council did not therefore exceed its powers by pronouncing the provisional measures requested by Bouygues Télécom against those of the entities of the Apple group to which they concerned directly, since it had enabled them to present their observations, and little important in this regard that the latter were limited to soliciting, by way of oral observations, their exclusion without defending themselves on the merits as they claim on page 18 of their summons; Apple France managing commercial relations with French distributors; that the Council did not therefore exceed its powers by pronouncing the provisional measures requested by Bouygues Télécom against those of the entities of the Apple group to which they concerned directly, since it had enabled them to present their observations, and little important in this regard that the latter were limited to soliciting, by way of oral observations, their exclusion without defending themselves on the merits as they claim on page 18 of their summons;

Q ue is even in strict fulfillment of its mission that the Council, having considered the contractual documents governing trade relations of the parties implicated, has selected, among them, those who seemed to him likely to start practice denounced, unimportant that they had not been targeted by the seizing party, which moreover had not had access to it previously;

On the rights of the defense, the requirements  of a fair trial and the principle of contradiction

Considering that France Telecom and Orange argue that the procedure and the

decision are marred by “serious” irregularities justifying the annulment in its entirety of the decision and of the provisional measures pronounced;

That they support in this regard:

1 – that the decision violated the rights of the defense and the requirements of the trial

fair by validating the unfair procedural behavior of Bouygues Télécom which, at the

date of 10 November 2008 fixed in the procedural calendar for his observations in

reply to the observations of Orange and Apple, filed 150 pages of documents comprising

new grievances – some of which are based on new legal foundations – and

with 33 new appendices – 360 ratings – including three new studies

economy, while they themselves only had until November 17, 2008 to

file rejoinder observations, that while they had denounced these productions

late and voluminous such as to compromise the effective exercise of

defense by asking that the three new complaints and the three

economic studies in question, the general rapporteur confined himself to granting them a period of

two additional days for their duplicate observations, while Bouygues

Téléconi continued its unfair actions by filing on November 19, 2008, i.e.

same day on which they had to file the said observations, new submissions and documents

consisting of about fifty odds;

2 – that the investigation was conducted unfairly and only at the expense of

that after having accepted, by four decisions of 14 November 2008, to classify under the

business secrecy part of the agreements between Apple and Orange produced by the latter, the rapporteur informed her on November 18, 2008 that he would need to use almost all of the protected documents, which she opposed in vain, and that thus, by forcing the downgrading of the agreements on the day of the filing of their last entries and only a few

days before the session, by not telling them, before the session, the grievances and measures

likely to be required under the agreements thus downgraded and by establishing in meeting the

requisitions on certain clauses of these agreements, the investigation ignored the

contradictory demands and violated the rights of the defense;

3 – that the decision is based on data that is not in the file

instruction and which have not been submitted to the adversarial proceedings, either:

. ARCEP “mobile indicators” (§ 9),

. data taken from the “Source Canalys Estimâtes” to establish the

recent growth in market share in the smartphone segment (§ 36),

. of sales figures achieved by SFR on terminals close to

the iPhone (§ 1 68) which, if they were transmitted by SFR to the rapporteur on a confidential basis, did not

not communicated to the parties in question in a non-confidential version or

deconfidentialized,

. the 1 3rd report on the electronic communications markets of

2007 (§ 145 and 166) and opinion n ° 08- A- 16 of the Council of July 30, 2008 (§ 16, 172, 173 and

4 – that in violation of Article L. 463-6 of the Commercial Code which prohibits the

disclosure by the parties of information concerning another party of which they do not have

may have become aware that following communications or consultations to which they

have proceeded, and Article L. 463-7 of the same code which provides that Board meetings

are not public, which prohibits any disclosure to the press of the content of these

sessions, a fortiori during deliberation, Bouygues Télécom revealed to the press that the

Rapporteur presented at the meeting of the conclusions that were her “very supportive” of

so that the fact that the decision was made in line with these conclusions “makes it possible to

do not rule out that the outcome of the procedure was already decided at the start of the debates in

session, even oriented for a long time “;

5 – that the Council violated the rights of the defense and the principle of transparency

by issuing a press release almost at the same time as the decision

was communicated to them and excluding their press attaché from the press conference

that he held the same day about the decision, thus making it impossible for them to

react usefully to the press;

Considering first of all, on the first two points, that no provision of the

0 commercial code imposes deadlines for the preparation of the measurement procedures

conservatories, which are characterized by urgency and whose instruction must allow, in

necessarily limited time, to gather as many elements as possible on the merits

of the request and, when the general rapporteur, using the option he derives from the article

R. 463-8 of the aforementioned code, decides, in order to ensure a better organization of the debates,

to set deadlines for the parties for the filing of their writings, the filing of documents or

of writings after the expiry of the allotted time cannot justify, on this sole basis,

their rejection of the procedure, as soon as the opposing parties have benefited from a

sufficient to answer them;

That the Council, having recalled that the procedure implemented to instruct a

request for provisional measures must be adapted to the emergency while respecting the

adversarial principle, rightly considered that in this case, the seven-day period, extended

new at the request of Orange and France Telecom to enable them to meet the

observations, studies and reply exhibits filed on November 10, 2008,

and also the eight-day period available to them to respond in writing or orally

in session, on November 27, 2008, to new studies and documents submitted by the

November 19, 2008, were sufficient with regard to this principle;

That, likewise, the downgrading of parts provided for by article R. 463-15 of the French code

trade is not subject to any deadline and the documents initially withdrawn from the file,

at Orange’s request, in respect of business secrecy, only remained so for four days,

it being observed that the applicants could not hope that they would remain so since they

contained most of the clauses founding the practices complained of and that, in any event,

they knew their content since it was they who had produced them; that they

furthermore cannot complain about the absence of a statement of objections prior to the

session, which no text provides, nor claim to have ignored what were the measures

likely to be pronounced when they were aware of the requests made

by Bouygues Télécom in this capacity;

Considering then, on the third point, that, if the instruction before the Council

competition must be fully contradictory, the possible absence of documents in

the file submitted to the parties is only likely to lead to the annulment of the decision if it

is proven to have harmed their interests; that in this regard, if the Council does not deny that

part of the documents cited in the decision were not submitted to the applicants, the court

observes that the latter do not claim that they have discussed the teneui- or

accuracy, essentially being public data that the decision cites for

describe the overall functioning of the markets concerned and of which, in their capacity as operators

of mobile telephony, they were necessarily aware (monitoring of “indicators

mobile devices “published by ARCEP relating to the total number of customers, Apple’s market share in

title of the worldwide marketing of smartphones, Orange shares, in fleet data,

on the mobile telephony market) or the resumption of previously

expressed in an opinion, this reference not conferring on them any

incontestable for the parties, and that, in view of what is the documents transmitted “as

confidential “by SFR, it is not specified whether they had been the subject of a

classification under business secrecy and, in any case, if the decision refers to it in

general terms, the data it cites in this regard in point 168 only concern

Bouygues Telecom ; that thus, no harm to the interests of France Telecom and Orange

does not result from the communication fault invoked;

Considering finally, on the last two points, that no nullity of the procedure

or the decision cannot result from the conditions under which the parties, at the end of the

debates, or the Council, after the decision had been rendered, communicated with the press

about this trial, since these communications, were they proven, could not

have influence on the decision rendered by the college and thus undermine impartiality

of the last ; that moreover, the court observed that Bouygues Télécom contested the

acts attributed to him and that none of the documents produced in the

this appeal does not formally demonstrate them;

On the reason for the decision

Whereas the companies Apple Inc. and Apple Sales International are suing

annulment of the decision for lack of reasoning in that it does not meet the

proof requirements required for the application of Article L. 464-1 of the Commercial Code,

for lack of proof of a serious, certain and immediate damage, and in that it

pronounces measures which, not being able to be justified, under the urgency, by the imminence

end-of-year celebrations are necessarily disproportionate;

That, for their part, France Telecom and Orange pursue the cancellation under the

same defect, arguing that the decision was exempt from any reasoning with regard to

of essential data brought by them in the debate;

But considering that the decision contains the statement of the considerations of fact and

law which constitute its basis and which make it possible to control its legality and that, under

covered by the unfounded complaint of lack of reasons, the applicants discuss the relevance of the

reasoning followed by the Council, which the court will examine in the exercise of its power to

reformation;

On the bottom

Whereas the company Apple Inc. and Apple Sales International consider that

the provisional measures pronounced violate, in fact and in law, the requirements of Article

L. 464-1 of the Commercial Code and ask the court to rule that there is no need to

pronounce provisional measures against them;

That they accuse the Council of having disregarded the applicable standard of proof

in the matter, for lack of proof of a serious infringement, since it based its decision on

the strengthening of Orange’s position, on the basis of figures which he himself wrote

that it would be premature to draw any conclusions (paragraphs 167-170), and on the weakening

competition (paragraphs 171-173), purely hypothetical;

That they also denounce contradictory reasons, arguing that the

Conseil could not simultaneously retain, under the consequences of the exclusivity

granted to Orange, an Orange reinforcement wine that may lead, in the long term, to the exclusion of

Bouygues Télécom, and a weakening of competition between operators reinforced by

the vertical partitioning of the market;

That they still discuss the demonstration of an immediate attack by noting

that the Council base itself in this regard on the importance of the sales of the iPhone by advancing the

figure, as of November 5, 2008, of 300,000 devices sold since its launch on the

market, without specifying whether it is only 3G iPhones or 2G and 3G iPhones combined,

and without referring to other sales allowing to appreciate the importance of this figure, then

that, given the number of customers in France (53 million) and the renewal rate

average of their terminal by users (every year and a half) is some 35 million

items that are sold in France each year; that they further claim that the

Conseil contradicted himself by noting that we could not measure the beginning of reinforcement

of Orange’s position (point 167) no more than a weakening of the position of

Bouygues Télécom, and then in addition that ARCEP underlined in its opinion that

“/ ‘the attractiveness of the iPhone does not yet translate into volume leadership on the

smartphone market “;

Finally, they object that the Council could not base its assessment on

the urgency on the seasonality of sales of mobile terminals on the grounds that sales of

Telephone boxes are particularly dynamic during the holiday season

(paragraph 213) since the decision on provisional measures, issued on 17 December 2008

and notified on Friday, December 19, could not deploy its effects, taking into account

the legal imbroglio that it generated, before several weeks, at least not for the

December 24 following, and that thus, for lack of demonstrated urgency, the measures were

necessarily disproportionate;

That by note under advisement, they add that on the evening of January 6, 2009,

Apple announced that 80% of the music catalog on the iTunes Store will now be sold

without a protective device, this decision having taken effect on the same day and that the 20 / o

remaining would be available without protection before the end of March 2009,; that they

deduce that any debate on possible interoperability problems between

music files purchased from the iTunes Store for the future and therefore can no longer be

opposed the particular attractiveness of the iPhone on iPod owners and their capture

possible;

Whereas France Telecom and Orange, for their part, are asking the court

to say that there is no need for provisional measures and, in the alternative, to reform these

protective measures by limiting them to what is necessary to deal with the emergency,

in accordance with the provisions of Article L. 464-1 of the Commercial Code on the grounds that:

– exclusivity is exempted pursuant to Regulation No 2790/1999,

– the exclusivity does not affect competition in any way, as far as it does

not a monopoly on the iPhone and is not locked, in that its duration is not

abnormal and in that the attractiveness of the iPhone does not make it an essential product, and

in that the Council relied on grounds irrelevant to the position

Orange and the structure of competition in this market;

– the exclusivity is in any case justified because of the efficiency gains

of which she is the carrier,

– the exclusivity does not seriously and immediately affect the interests referred to

Article L. 464-1 of the Commercial Code,

– the serious and immediate damage alleged by the Council has no causal link

with exclusivity,

– the provisional measures pronounced are disproportionate, in that they

limit the duration of future exclusives to three months, and in that they induce a

imbalance between the totally speculative profits that can be expected from

measures and their definite deleterious effects;

on the application of exemption regulation n ° 2790-1999 of the Commission of

22 December 1999 concerning the application of Article 81. paragraph 3 of the EC Treaty to

categories of vertical agreements and concerted practices

Considering Article 81, 1 of the EC Treaty prohibits all agreements between companies, all decisions of associations of companies and all concerted practices which are liable to affect trade between Member States and which have the object or effect of preventing , restrict or distort competition, but the aforementioned regulation has declared the prohibition inapplicable to certain categories of vertical agreements and concerted practices;

Considering that under article 4, d, of this regulation, the exemption does not

not apply to vertical agreements which, directly or indirectly, isolate or

cumulated with other factors under the control of the parties, have as their object the restriction of

cross-deliveries between distributors within a selective distribution system, including

included between distributors operating at different stages of trade; that this is the

in the case of the contractual documents produced and the exclusivity clauses they contain, in particular

particular of the distribution contract signed between Orange and Apple which prohibits Orange

purchase Approved Products from sources other than Apple, except with prior written consent

of the latter (article 2 of the First Amendment, of May 15, 2008, number 3515 of the file) which

encourages Orange to ensure that the product is not sold to a buyer who hears

export it outside of France and prohibit it from engaging in active cross-selling

(points 70 and 7l of the decision), combined with the contracts signed between Orange and the

di stributeurs approved, which require these distributors to provide terminals exclusively

and directly from Orange and prohibit them from sourcing from other

sources without the prior written consent of Orange, finally which only allow them to resell

in authorized points of sale in France (point 79);

Moreover, as Bouygues Télécom emphasizes, the iPhone distribution system thus set up, together with the obligation imposed on authorized retailers to associate an Orange mobile telephone service with each terminal sold, including in case of

sale of “bare” terminal, in fact necessarily accompanied by a SIM card blocked on the

Orange network and while a simple operation of “unlocking” generates in this case

rather dissuasive costs, also contravenes article 4, c, of the exemption regulation,

which prohibits the restriction of active sales or passive sales to end users

by members of a selective distribution system who operate as retailers

on the market ;

Considering that the very existence of these clauses, as they appear at this

stage of the procedure, therefore constitutes an obstacle to the exemption; that there is no place as soon as

when examining the plea based on the respective market shares of Apple and Orange and of

the application of article 3 of the regulation;

On the harm to competition

Considering that provisional measures can be decided, on the

basis of Article L. 464-1 of the Commercial Code, by the Competition Council,

within the limits of what is justified by the emergency, in the event of serious and immediate damage to

the general economy, that of the sector concerned, in the interests of consumers or

the complainant company, since the facts denounced and covered by the instruction in the

procedure on the merits, appear capable, in the light of the elements produced in the proceedings, of

constitute a practice contrary to Articles L. 420-1 or L. 420-2 of the same code, practice

the direct and certain origin of the breach noted;

That the pronouncement of provisional measures is therefore justified only if, first of all,

it appears that the practice denounced and targeted by the investigation is likely to constitute

an anti-competitive practice;

Considering that in this regard, the decision rightly holds that the system of

distribution set up by Apple, and in particular the exclusive partnership contract signed

between Apple and Orange for a period of five years, is, subject to the instruction in

course, likely to be contrary to the provisions of Article 8l of the EC Treaty and L. 420-1

of the Commercial Code;

That indeed, under this partnership. Orange is the exclusive operator charged by

Apple to distribute the iPhone in France, it is also the exclusive wholesaler of this product

in France, the exclusivity granted to it as a network operator is reinforced

in the selective distribution contracts offered by Apple to its authorized distributors, which

provide that these must offer for sale the full range of services of

mobile telephony for the Orange iPhone in France and that, if they can sell the

“bare” terminals, it is on condition that they are equipped with a SIM card

blocked on the Orange network, finally, authorized distributors cannot obtain

only to Orange and can neither import nor export iPhones within the

European Community ;

That these cross-exclusives, which lead to the iPhone being marketed

only with an Orange subscription, exclude any marketing of the iPhone

in the single-brand networks of network operators competing with Orange and impose

a consumer wishing to acquire an iPhone to simultaneously take out a contract

at Orange, or to pay unjustified “unlocking” costs, thus increasing the

cost of changing operator and hence making the circumvention of the monopoly more

difficult ; that, moreover, the file reveals that this circumvention remains very limited,

since, with regard to 3G iPhones activated by the various operators, part of which

moreover could be purchased abroad, SFR declared 2000 in August 2008 out of a total of 2505 “ unlockings ” recorded by Apple and against 133,590 terminals sold by Orange at the same time (rating 2431 and following), and Bouygues Télécom 2500 in October 2008 ((p 73 of the observations in response to France Telecom and Orange’s appeal) to compare the 300,000 3G terminals that Orange declared to have sold in November 2008; that it is also in vain that the companies Orange and France Telecom claim that the “simlocking” which is carried out for the benefit of the Orange network by virtue of a “bare” terminal would be normal, whereas the ARCEP itself has affirmed the opposite by recalling that the “simlocking”only derives its justification from what it allows

to an operator having subsidized a terminal to recover the costs incurred when the customer prematurely changes service provider;

Considering that the exclusivity thus granted to Orange, the duration of which

exception was underlined by ARCEP in its opinion (5 years for all products of

the range instead of, usually, 3 to 6 months and for a terminal gives), attached to

the particular attractiveness of the terminal, which is intended to benefit from 1 leverage effect

resulting from the largely preeminent position of Apple, thanks to the iPod, in the market of

digital music players-approximately 48% market share in France in 2007 (cited on page 6 of

ARCEP opinion), far ahead of competitors whose respective shares do not exceed

10% – and in the market for paid online music downloads, proportional to the park

iPod being further emphasized that iPhones are currently marketed by

Orange at a price lower than that of iPods of equal capacity, is likely to confer to this

operator a major competitive advantage;

That given the low competitive intensity that already reigns in the

market for mobile telephony services, due to the circumstances – which the applicants do not

do not dispute – that the operators are few (3 licenses and a few MVNOs)

that they are used to combining the sale of terminals with long-term commitments

the costs of changing operators are high, this advantage is likely to

further strengthen Orange’s position in the mobile telephony services market and

to weaken a little more the competition that operators can have in this market,

regardless of their previous behavior;

That it is also wisely that the Council has retained the risk of compartmentalization

of the market yes could result from the cumulative effects of such partnerships, in particular if

other operators chose, in response, to be granted similar exclusivities

risk which SFR itself has confirmed to be true, specifying in its conclusions

intervention (pages 9 and 10) that it already has a one-year exclusivity

RIM’s Blackberry Storm designed precisely for a defensive strategy;

That it is therefore by a relevant assessment that the court adopts that the

Advice based as it should on the characteristics of the market concerns what

France Telecom and Orange reproach him wrongly, has retained that in the state of the file of which he was

seized, it exsitated an infringement of competition resulting from the distribution system put in

place by Apple, such as to justify the pronouncement of provisional measures, subject to

that the other conditions provided for in Article L. 464-1 are met;

On the exemption due to efficiency gains

Considering that, although Article 8l § 1 of the EC Treaty prohibits all agreements between

companies all decisions of associations of companies and all concerted practices which

are liable to affect trade between Member States and which have as their object or for

e ‘to prevent, restrict or distort the play of competition, in derogation from this

rule paragraph 3 of the same article provides that this prohibition may be declared

inapplicable to agreements that contribute to improving the production or distribution of

products or to promote technical or economic progress, while reserving for users a fair share of the resulting profit, and without imposing

restrictions which are not indispensable to the attainment of these objectives or to give these

companies the possibility, for a substantial part of the products in question, of eliminating the

competition;

That the companies France Telecom and Orange, who maintain that exclusivity is

justified by the need to amortize the investments made by Orange for the

launch of the iPhone, by the particular risk represented by a partnership with a new

entering and by the fact that it allows the terminal to be sold at a more attractive price for

consumers, claim that the Competition Council wrongly considered

in the light of the elements at his disposal at this stage of the investigation, the infringement of

conciirrence in the market for mobile telephony services resulting from exclusivity

was not offset by efficiency gains for the benefit of consumers;

That they argue that Orange has not been able, given the

downgrade just before the meeting of the agreements concluded with Apple, to justify

in a detailed manner of the extent of the obligations and expenses incurred under its

partnership with Apple and in return for its exclusivity, that it is only in session

that it was able to provide information, in particular a quantified assessment of a total of

86.5 million euros for the period from October 2007 to the end of 2008, but which it has refined and

updated its assessments in this regard and now justifies the amount of its counterparties

which, at the end of December 2008, reached the sum of 106 million euros;

That they accuse the Council of having refused to take into account in its

assessment of specific charges for income sharing and over-subsidization,

believing that exclusivity and all of its counterparts form an inseparable whole

and that there is no need to doubt the causal link between the exclusivity and the dream

subsidization contractually granted by it (§ 65 of the decision),

particularly high (310 euros or more than 20% of the amount charged for other

terminals), for the benefit of the consumer, and further stressing that, in any event, a

competitive situation will not make it possible to lower the price of terminals;

They also argue that the decision erred in manifesto

attributing all communications revenue to iPhone sales

mobile devices generated by device buyers and not additional revenue, which amounts to

to consider that it could not have retained or acquired all or part of its customers or

of this income without the iPhone;

That they finally object that the decision should have taken into account the risks

individuals taken by Orange when it decided to invest in October 2007 in a

industrial partnership with Apple, which should not be confused with investments

specific;

But considering, first of all, that if Orange regretted the withdrawal of documents

useful to his defense, he was free to request that it be classified in a confidential annex,

as provided for in Article L. 463-4 of the Commercial Code; that, anyway, these

circumstances are irrelevant to the discussion since the court must proceed in its turn

a substantive examination;

Considering that in this regard, even taking into account the current assessments of Orange

– 106 M € of specific investments including 60 million for the iPhone 2G and

42 million for the iPhone 3G, in addition to 4 million indiscriminately attributed to the two models

that it justifies only by the declarations of its financial director, the court considers

that the Council’s assessment remains relevant;

That in fact, in the first place, if, when a distributor has made investments

to protect or build the image of a brand or to launch a new product, it must

be taken into account for efficiency gains as only a period of time

sufficiently long contract period can ensure a return on investment in

economically reasonable conditions, the Council rightly objects that these specific investments are those which have the character of fixed costs, independently of the quantities that will be sold subsequently, and that therefore expenses of the nature of variable costs cannot be used as such. , in particular those that are incurred once the sale has been made, such as the subsidization of the 3G terminal

(54 € 3 million) or the sums paid for revenue sharing for the iPhone 2G

(€ 35.6 million); that thus, the specific investments to be taken into account in this case

amount, after deduction of these two items, to 16.7 million euros for the two

models including 6.6 million euros for the iPhone 3G;

However, considering that on December 17, 2008, Orange declared that it had sold 150,000

2G iPhones and 450,000 3G iPhones, which she also specified that, on average, her customers

commit for 18 months and spend monthly 86 € HT and that it carries out a

net margin (EBITBA) of around 40%; that it follows from there that at the end of 18 months, the

450,000 customers who bought an iPhone 3G will have enabled Orange to generate a figure

telephony service business of € 696,600,000 (450,000 x 86 x 18), i.e. a profit

of € 278,640,000 (696,600,000 x 40%) from which the cost of the subsidy of

the iPhone (310 € on average) or 139,500,000 € for 450,000 devices, so that its

net profit amounted to € 139,140,000 (278,640,000 -139,500,000), it being specified that, for

this appreciation of the return on investment is the full price of the subscription

that should be taken into account and not a simple additional income since the sale

subsidized devices is conditioned by a period of engagement or

re-engagement of 18 months on average;

That in less than five months, Orange has ensured, with only 3G models,

a net profit of nearly 140 million euros, for specific investments of

16 5 million for the two models, which results in the exclusivity period of 5 years

would it be reduced to 3 years by Apple’s will, is largely disproportionate to the

specific investments made by Orange, it being emphasized that this observation

remains correct even if we retain the figure of 46 M € advanced by this dermere;

Considering, secondly, with regard to the risk, that if Apple were a new

entering the telephone terminal market. Orange does not know notoriety

world of this brand in 2007 and the considerable success that the iPhone had met

in countries where it had already been launched, which its representatives have also added to the

during the course of the investigation, by relating that the balance of power was on Apple’s side, that they themselves

hoped, thanks to the iPhone which had “done well in the United States”, to attract a guy

high-income tech-savvy customer ” and benefit from a favorable ” image impact “ by

associating with “M” e brand which approaches technology in a simple way while conveying

an image of innovation “, which they considered important in the emerging market of

mobile internet; that thus, the risk invoked is not demonstrated;

Considering finally, with regard to the alleged over-subsidization and the profit which

would result for the consumer, that it is by relevant considerations that the court

agrees that the Council noted that the fact that it is contractually provided for does not

necessarily the consideration for the exclusivity granted, whereas the first contract signs

by Apple with operators in different countries, whether or not they are exclusive, provided

an obligation to subsidize, which the Council (paragraphs 32 and 33) also noted

that there were highly variable subsidies for various 3Lr terminals,

up to 700 euros, with no proven link with a possible exclusivity, and that in

principle the subsidization of a terminal finds its counterpart in the duration of

the user’s commitment, even in the type of package chosen, this dermer elernent being

confirmed, as regards the iPhone 3G, by the Council’s findings that

the price of this terminal, in July 2008, varied according to the package subscribed (poirrt 34);

that, moreover, the Council correctly argues that it follows from the table produced by Orange

(point 33) that terminals sold by a single operator do not benefit from a level

subsidy greater than those offered by several competing operators, which tends to

to demonstrate the absence of a causal link between the level of subsidy and exclusivity;

That thus, in the state of the matter, it is rightly that the Council refused to apply

the exemption provided for in Article 8l § 3 of the EC Treaty;

On the serious and immediate infringement justifying the pronouncement of provisional measures

Considering that it has already been said that the exclusivity of an exceptional duration

granted to Orange for the marketing of the iPhone Joined to the particular attractiveness

terminal, is likely to give this operator a major competitive advantage which,

given the low competitive intensity that already reigns in the

mobile phone services, is likely to further strengthen its market position

of mobile telephony services and weaken the competition a little more than

make operators in this market;

Considering that this situation is now seriously damaging the interests

the sector and, simultaneously, those of consumers;

That in fact, the terminal market in France is characterized by a strong

renewal dynamic (in 2006, nearly one in three French customers intended

to renew their device within 12 months, mainly to have a terminal

“more modern”), and that of the multimedia terminal in particular, in full development,

is experiencing strong growth: the deployment of mobile broadband networks is recent,

unlimited data exchange offers appeared at the end of 2007 and the park

customers is increasing rapidly (more than double in one year at Orange at

September 30, 2008);

That, in fact, the iPhone 3G has known in France since its launch in July 2008

wine spectacular success: 35,000 items sold in the first four days, 300,000

in four months (ie 15% of Orange’s gross sales), and 450,000 in five months;

That in the state of the elements appearing in the file, it can be considered that this

explosion, even if it was accentuated by the end-of-year celebrations, given the

partially seasonal nature of the market (paragraph 213), and that it is unquestionably

linked to the novelty effect, does not risk, given the worldwide success of the iPhone, of

fall quickly in significant proportions: in June 2008, the iPhone 2G was

the third best-selling smartphone in the world, behind RIM’s Blackbeny, and, at

third quarter 2008, when the iPhone 3G was the best-selling cellphone in the United States.

United, Apple overtook RIM by selling 7 million iPhone 3Gs, thus achieving a

growth of 523% in one year (points 35 to 37);

However, considering that this development is being done essentially to the detriment of

other operators since Orange itself declared that 50% of its iPhone 3G sales

corresponded to new falls (point 38); that this collection of subscribers is

almost irreversible since they are committed on average for 18 months and many

of them were, until now, quickly captured by Apple through

iTunes Music Store, with which they were put in direct relation by the iTunes software,

unavoidable from the terminal activation phase, and the influence of which was described with

force by professionals (point 48 relating to the statements of representatives of Fnac:

“P / M5 customers bought songs downloaded from iTunes (…), the more captive there are

Apple “,” after 6 months of use on the basis of one album purchased per month, the customer is

defeated captive ‘} ;

That in this regard, if Apple has announced its intention to quickly lift DRM on

80% of the catalog sold on the iTunes Store, the court notes that the press release which

state also specifies that customers who already have downloaded songs will be able to download them.

convert “to iTunes Plus format without DRM” on condition of paying € 0.30 per song or

30% of the album price; that this additional price, knowing that a piece is in

movenne sold 0.99 €, appears sufficiently high so that it can already be

It is believed that few of these “old clients” will take advantage of the opportunity; so if the

new device used by Apple Inc. and Apple Sales International

seems likely to ease for the future the possibilities of migration to competition

new iPhone or iPod owners, it cannot have the effect ^ of making

instantly their freedom to all those who currently own an iPhone

or an iPod, already have a music library purchased from the iTunes Store that is

will have little immediate interest in leaving the system and turning to the operators

competitors

Considering further that this situation is detrimental, also, to

consumers, currently deprived of the freedom of choice of ^ ‘oP ^ Eft ^^ /’ i ^^ want

buy an iPhone and strongly encouraged to stay with Orange for a long time after such

purchase, all the more so if they already own a music library acquired on

iTunes Store;

Considering finally that having been observed that Orange, at the time when the decision was

returned, had already benefited from 14 months of exclusivity on the iPhone 2G and 5 months on

iPhone 3G and that the file revealed that in three months, the specific investments

that it had agreed for the iPhone 3G had been largely recovered, the niesures

pronounced conservatories, consisting essentially in suspending exclusivity on es

models currently marketed or to limit it to three months on all future models

iPhone, pending the decision on the merits, appear justified and limited to what

is necessary to cope with the emergency;

Considering that it follows from the foregoing that the appeals are unfounded and

must be rejected;

And considering that there is no need to apply in the cause of the provisions

of article 700 of the code of civil procedure;

FOR THESE REASONS

Attached the procedures registered under the numbers 08/23828 and 09/0003;

Receives the note under advisement filed by the companies Apple Inc. and Apple Sales

International on January 23, 2009, with the exception of annex 2 which is attached to it;

Declares admissible the company SFR and the association UFC-Que Choisir in their

ancillary voluntary interventions;

Dismisses the action of the companies Apple Inc. and Apple Sales International and that of

companies France Telecom and Orange France against the decision of the Competition Council

n ° 08-MC-Ol of December 17, 2008 relating to practices implemented in the

distribution of iPhones;

Rejects the requests based on Article 700 of the Code of Civil Procedure;

Condemns the companies Apple Inc., Apple Sales International, France Telecom and

Orange France at the expense;

Considering article R. 470-2 of the Commercial Code, states that on the due diligence of the clerk

chief of the court, this judgment will be notified, by registered letter with acknowledgment of

reception, to the European Commission, the Competition Council and the Minister responsible

economy ;

THE REGISTRAR, THE PRESIDENT,

Benoit TRUET-CALLU Didier PIMOULLE

Paris Court of Appeal

_______________________________________________________________

FRENCH REPUBLIC

COMPETITION COUNCIL

Decision n ° 08-MC-01 of December 17, 2008 relating to practices implemented in the distribution of iPhones

The Competition Council (section II),

Having regard to the letter registered on September 18, 2008, under the numbers 08/0097 F and 08/0098 M, by which the company Bouygues Telecom referred the Competition Council to the practices implemented within the framework of the distribution of the iPhone on the French market and requested the pronouncement of precautionary measures on the basis of Article L. 464-1 of the Commercial Code;

Having regard to Articles 81 and 82 of the Treaty establishing the European Community;

Having regard to Book IV of the Commercial Code relating to freedom of prices and competition;

Having regard to the observations presented by the companies France Telecom, Orange France and Apple Europe Ltd;

Considering the opinion n ° 2008-1175 of the regulatory authority for electronic communications and posts (Arcep) dated November 4, 2008;

Considering the decisions of business secrecy n ° 08-DSADEC-70 of October 23, 2008; n ° 08-DSADEC-71 of October 23, 2008; n ° 08-DSADEC-73 of October 24, 2008; n ° 08-DSA-177 of October 28, 2008; n ° 08-DSADEC-79 of October 28, 2008; n ° 08-DSADEC-84 of October 30, 2008; n ° 08-DSADEC-83 of October 30, 2008; n ° 08-DSADEC-85 of October 30, 2008; n ° 08-DSADEC-87 of November 14, 2008; n ° 08-DSADEC-88 of November 14, 2008; n ° 08-DEC-14 of November 21, 2008;

Having regard to the other documents in the file;

The rapporteur, the Deputy General Rapporteur, the Government Commissioner and the representatives of the companies Bouygues Telecom, France Telecom, Orange France, Apple France, Apple Sales International, Apple Europe, Apple Europe Ltd, and Apple Inc (USA), heard during the the session of November 27, 2008;

Adopts the following decision:

I. Findings

A. THE COMPANIES CONCERNED

a) Bouygues Telecom

1. Bouygues Telecom is the third largest mobile telephone network operator in France. It has more than 9 million subscribers and in 2007 achieved sales of around 4.4 billion euros.

b) France Telecom and Orange France

2. The France Telecom group is an integrated operator in all electronic communications markets. Present in many countries, it is the incumbent operator and the leading electronic communications operator in France. It is the third largest mobile operator in Europe and the leading ADSL Internet access provider. It is one of the world leaders in telecommunications services to multinational companies. The company announced that it achieved consolidated worldwide sales of 52.9 billion euros in 2007 (39.9 billion euros as of September 30, 2008), including nearly 28 billion euros in France. At the World level,

3. Orange has been the group’s sole brand for Internet, television and mobile since 2006 in most of the countries where the group is present. Fixed line services are offered under the France Telecom brand.

4. France Telecom is the group’s holding company. It owns 100% of Orange France.

c) The Apple group

  1. Apple Inc is the parent company of the Apple group.It is an American multinational corporation headquartered in Cupertino, California.It has historically been active in the computer products sector. Since 2003, Apple has diversified its activity by marketing an MP3 player, the iPod, and by developing an online digital music store, the iTunes Store. In 2007, Apple Inc launched the iPhone, a mobile device, in the United States.
  2. Apple Inc. majority control of Apple Sales International, a company registered in Cork, Ireland, as well as Apple France, registered in France and Apple Europe, registered in the United Kingdom.The company Apple Inc is responsible for the general policy of the group and has negotiated the terms of the launch of the iPhone in Europe.Apple Sales International is the entity responsible for Europe for the sale of all

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Apple products, which signed the various contracts concluded in connection with the marketing of the iPhone in Europe. The role of Apple Europe and Apple France is to facilitate the marketing and distribution of products. Apple France manages the commercial relationship with French distributors.

  1. In the explanations that follow, the name “Apple” will refer without distinction to all the companies making up the group.
  1. THE SERVICES AND PRODUCTS CONCERNED
  2. MOBILE TELEPHONY SERVICES
  1. Three operators have been authorized in France to deploy a mobile telephone network in mainland France: Orange, SFR, Bouygues Telecom.These network operators in turn host virtual operators (MVNOs ormobile virtual network operators ).
  2. According to the monitoring of mobile indicators published by Arcep, the total number of customers at September 30, 2008 stood at 56.4 million, a net increase of 6.4% compared to September 30 of the previous year. .More than 2/3 of these customers subscribe to a post-paid service, with prepaid offers constituting just over 32% of the total.In fact, over the first three quarters of 2008, the growth of post-paid offers remained strong (+ 5.1%) while the number of prepaid customers fell (-4.7%). Orange announced on September 30, 2008 that it had 64.8% of customers subscribed to a package.
  3. The customer base was, on September 30, 2008, distributed as follows among the various operators1: 17.3% for Bouygues Telecom, 33.7% for SFR, 43.5% for Orange France, 5.5 % for MVNOs.
  4. Arcep also publishes, for the metropolitan area alone, indicators on the evolution of gross sales.In the third quarter of 2008, sales of post-paid offers amounted to 1,911,800 and prepaid sales to 2,003,141, or a total of 3,914,141 gross sales, up 7.2% compared to the previous quarter .The decline in prepaid offers within the park is explained by the importance of cancellations: the cancellation rate for prepaid offers reached 13.9% in the third quarter of 2008 compared to 3.1% for post-paid offers, i.e. about 6.6% on average.
  5. The market for mobile telephony services is characterized by high seasonality.Monitoring Arcep indicators shows that in the fourth quarter of 2007, gross sales in mainland France were 36% higher than gross sales in the previous quarter.
  6. Cancellations must be distinguished from ported numbers, ie numbers that customers have requested to keep even though they have changed operator, for which indicators are also published by Arcep.Number porting requests amounted to 300,000 in the third quarter of 2008, compared to 3,576,141 terminations.
  7. The total recurring turnover of mobile telephony services for the metropolitan area published by Arcep for the second quarter of 2008 amounted to 5,555 million euros, or + 5.6% compared to the same period. of the previous year.In particular, it excludes sales of terminals.Average revenue per customer per month is much higher for

1 Volume breakdown of the mobile customer base, source Orange, rating 3857.

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post-paid offers than for prepaid offers: 44.2 euros in the second quarter of 2008 post-paid compared to 15.4 euros prepaid. On the total of offers, post-paid and prepaid, the average income is 35.3 euros.

  1. This income growth is driven in particular by commercial and technological innovations.
  2. On the one hand, since 2004, so-called “abundance” or “unlimited” voice offers, which allow unlimited communication for a fixed price, have developed considerably.The attractiveness of these offers was the primary reason for changing operator for general public customers (cf. opinion of the Competition Council n ° 08-A-16 of July 30, 2008).
  3. On the other hand, the deployment of high-speed mobile networks and the placing on the market of new terminals making it possible to exploit their possibilities are generating strong growth in the use of data or multimedia exchanges.According to Arcep’s monitoring of mobile indicators, in the third quarter of 2008, the active mobile multimedia fleet had nearly 17.4 million users: one in three customers had used a multimedia service at least once during the last month. mobile Internet type (Wap, iPhone-Mode, Vodafone live, Orange World, etc.) or, in broadcast, an MMS or mobile e-mail type service (therefore excluding SMS), regardless of the support technology (CSD, GPRS, EDGE, UMTS, etc.).Orange announced 7.4 million broadband customers as of September 30, 2008,
  4. Since the end of 2007, data exchange offers with unlimited plans have appeared on the market, on the model of voice offers.Since November 2007, SFR has offered a range of packages called “Illimythics” in 3G +, offering mobile Internet access.Orange has launched the “Origami” range. At the end of August 2008, Bouygues Telecom carried out an overhaul of its range of abundant services, launching Neo2 including unlimited sending and receiving of data (see Arcep opinion 2008-1175).
  1. MOBILE TERMINALS
  2. a)The offer of terminals
  1. Samsung representatives explained that “the main manufacturers are Nokia, Samsung, Sony Ericsson, LG, Sagem and Motorola.These are the incumbent operators, established for 15 years. Their customers are network operators and distributors. Their offer relates more to mass distribution. Then come HTC and RIM Blackberry, which are new players. Their offer is different. They have more “B to B” oriented interfaces, that is to say for professional use of the products. Their target is rather the business market. Finally, Apple is a particular manufacturer. Its particularity is to have developed a product which is unusual in its operating system, and extremely user-friendly. It enjoys a very strong reputation in the MP3 (iPods) segment thanks to its design and interface.“.
  2. For LG representatives, “there are two main segments, mobiles and smartphones.The GFK institute records the market shares on these two panels. At my level, I only buy from the range of mobiles. In this segment, there are 7 players. The leader is Samsung. In the mobile market, Samsung has a market share

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of around 33%, Nokia has a market share of 20-25%, Sony Ericsson a market share of around 14-15%, and LG 12-13%. Sagem is almost out of the market, as is Motorola, and Alcatel is focusing on the entry-level segment. The mobile market can be segmented by taking into account the different uses expected by consumers. We distinguish several categories of mobile, for example: (1) the category of “voice” terminals, for customers who only want a mobile allowing them to make telephone calls; (2) the category of multimedia terminals, for customers who wish to use their mobile as a digital or video player; (3) the “design” category, for example we made a phone with Prada; (4) the professional category, category for which internet and mail are important features. RIM (Blackberry) and HTC are very present in the “professional” category. Samsung and Nokia are also players in this category “.

  1. In any event, the terminal sector is characterized by a rapid pace of innovation and a relatively short product life cycle.The representatives of LG specified in this regard that the duration of marketing of the terminals was generally between 9 and 12 months and that “certain products can be stopped after 3 months. The maximum duration observed on an LG product was two years. In this sector, we are witnessing a race for innovation. Positions change very quickly. Three years ago, Sagem was the leader, today they have almost disappeared from the market ”.
  1. b) Smartphones
  1. “Smartphones” are terminals adapted to mobile Internet access.They work with an open operating system and are equipped with a keyboard and / or a touch screen that facilitates Internet browsing.Smartphones also concentrate the functionality of several once separate devices: GPS, game consoles, the camera, etc.
  2. Arcep provided the following definition of smartphones in its opinion: “Smartphones are the result of the convergence, since the early 2000s, of mobile phones and PDAs.They thus combine functionalities (wifi connectivity, GPS, camera, video / MP3 player) that more traditional terminals offer in isolation or without adequate ergonomics, and combine them through a dedicated operating system. Various market studies reveal the specificities of smartphones, in particular due to:

– their physical characteristics (ergonomics, touch screen or keyboard);

– their own operating system;

– the resulting diversity of uses, centered, in addition to telephony, on the mobile Internet (content): listening to music, watching videos, navigation by GPS, PDA. “.

  1. Arcep also underlined the dynamism and strategic nature of this market segment for mobile operators.: “If these products have long been reserved for a restricted circle of informed consumers (professionals, technophiles), it seems that their clientele has grown significantly recently, under the conjunction of several effects tending to make them objects of mass consumption. : launch of data offers for the general public allowing access to the mobile Internet at a flat rate, development of ergonomic terminals, recently based on “all touch” technology (iPhone, Blackberry Storm, HTC Touch).According to studies available to the Authority, smartphones represent between 10% and 13% of global sales, or around 35 million

5

devices sold in the first quarter of 2008, and growth in this segment would be strong (60% per year) and could represent half of the market by 2010-2011. According to the Canalys study, in the second quarter of 2008, 12.6 million smartphones were sold in the Europe, Middle East and Africa zone. The smartphone market therefore appears to be a strategic growth segment for mobile operators ”.

  1. The “open” operating system of a smartphone allows third parties to develop applications that can run on this terminal.This characteristic is essential to distinguish smartphones from aesthetically similar terminals and may be equipped with a touch interface, but operating under a proprietary operating system, not open to external developers.
  1. c) iPhone
  1. Apple launched a first mobile terminal called “iPhone” in the United States in October 2007, then in France in November 2007. The 3G version of this terminal has been available in the United States since July 11, 2008 and in France since July 18, 2008.
  2. The iPhone is a device that combines the uses of a mobile phone, a mobile internet terminal, a personal assistant, a digital music player, a GPS and a portable game console.According to Apple, the device incorporates innovations protected by more than 200 patents.Among the features that distinguish the iPhone from competing products are an interface consisting of a multi-touch screen, replacing traditional buttons or keyboards, light and proximity sensors to optimize the device’s battery and lock the use of the device. touchscreen keyboard when worn over the ear, a large screen whose landscape viewing is automatically detected via a gyroscopic device when the multitouch ”).
  3. iPhone is optimized for internet browsing.Thus, to justify their choice to unbridle 3G only for 3G iPhones, Orange representatives told SVM2 magazine : “ The ergonomics and ease of use of the iPhone mean that its users consume more energy. bandwidth even if they are not particularly tech-savvy ”. Orange’s marketing director clarified that “ Ergonomics has popularized multimedia in mobile telephony. The other manufacturers still have to work in this area ”.
  4. Orange France has also launched, in parallel with the marketing of the iPhone, a range of packages adapted to this terminal, “Orange for iPhone”, as well as “iPhone options” to possibly be combined with previously marketed packages.These specific packages were created at the request of Apple: “it also seemed important to us that Orange could offer a package including the download of substantial data streams in order to avoid consumers being overcharged “.
  5. These packages offer unlimited internet browsing, the ability to immediately receive emails on the iPhone and a visual messaging interface for the following prices:

2 SVM Magazine, November 2008, call numbers 3082-3083.

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source: Orange website

  1. The consumer remains free to choose another package from the range of packages offered by Orange.Conversely, “iPhones” packages are available to consumers who have opted for another terminal.According to statements from the company Orange, 53% of people who bought an iPhone 3G have opted for these plans adapted to the iPhone. The documents communicated by Orange to its distributors recommend: ” to make the most of the possibilities of the terminal, offer a package from the Orange range for iPhones “. Only 10,459 customers who have opted for another terminal have chosen to associate it with a package from the iPhone range.
  1. d) The role of terminal subsidy
  1. In its opinion 2008-1175 of 4 November 2008, Arcep describes the mobile telephony market as a terminal market:

“Among the different distribution methods for mobile telephony offers, offers combining a mobile service and a subsidized terminal occupy a prominent place. This seems to result from the great importance that consumers attach to the characteristics of their terminal, which has become a personal object giving access to a growing number of services (e-mail, Internet browsing, mobile TV, etc.) and which can combine many features (camera, personal digital assistant, MP3 player, radio, etc.).

In view of the very low percentage of terminals bought bare on the French market (around 5%, according to the Authority’s estimates), it seems that the consumer only values ​​a terminal that is subsidized, in association with a service offer.

The mature mobile market is therefore very strongly driven by the speed of renewal of the range of terminals, and to a lesser extent by innovations in standards change (2G / 3G / 3.5G) and services (introduction of the IMS, music download service …).

According to the Use-IT study carried out by IDATE, in 2006, the mobile terminal market was characterized by a strong renewal dynamic: thus, nearly one in three customers indicated their intention to renew their terminal within 12 months. (figure 5). The main reason for the renewal is having a “more modern” terminal.

  1. The Orange company provided3a list of terminal prices “used for mobile Internet” and presented as offering characteristics similar to those of the iPhone, with and without subsidy. This list shows that the subsidies offered on these models are very variable and can reach nearly 700 euros (Nokia N95 Silver Black at Bouygues Telecom).

3 Dimension 5001.

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  1. Orange launched the iPhone 3G on July 17, 2008. On that date, the iPhone 3G was subsidized by Orange according to the type of package chosen by the customer;an 8 GB iPhone was sold at 149 euros for the “Orange for iPhone” plans, from 149 euros for the Origami plans (149 euros with “First” and “Jet”, 199 euros with “Star” and “Zen”) , at 399 euros for blocked packages, at 509 euros for packages without commitment.The naked iPhone was sold on November 11, 2008 at a price of 509 euros for the 8G model and 609 euros for the 16G model. With the exception of the tariffs for “bare” terminals, these prices have been revised by Orange in the run-up to the end of the year holidays, the first price now standing at 99 euros.

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  1. e) iPhone sales
  1. According to statistics communicated by Arcep, Apple’s iPhone 2G was in June 2008 the third best-selling smartphone in the world, with a market share of 5.3% against 13.4% for Rim ( Blackberry) and 46.7% for Nokia.
  2. In the third quarter of 2008, Apple would have sold 7 million 3G iPhones in the world, thus overtaking RIM, which markets the terminals of the Blackberry4brand .

Source: Canalys estimates, @ canalys.com Itd. 2008

  1. The iPhone 3G would also have become in the third quarter of 2008 “the best-selling laptop in the United States”. 5
  2. In France, 35,000 iPhones were sold within four days of its launch on July 18, 2008. As of July 20, stores were out of stock.As of September 28, 20086 , Orange declared that, in less than three months, it had sold 215,635
Global smartphone market
3 Market share rd quarter 2008 3 rd quarter of 2007
3 rd Quarter 2008 3 rd Quarter 2007 Growth in%

3 rd quarter 2008/3 rd quarter of 2007

Provider Deliveries in % Deliveries in %
Total 39 850 100 100 31 156 240 100 27.9
Nokia 15 485 690 38.9 16,025,690 51.4 -3.4
Apple 6,899,010 17.3 1 107 460 3.6 523
RIM 6 051 730 15.2 3,298,090 10.6 83.5
Motorola 2,313,930 5.8 2,058,500 6.6 12.4
HTC 2 308 210 5.8 850,400 2.7 171.4
Other 6,791,530 17 7 816 100 25.1 -13.1

 

4 (“ Apple represents 17.3% of the market, against 38.9% for the Finnish, RIM is third with 15.2% ”): https://www.macplus.net/depeche-20428-l- iphone-and-mac-os-x-mobile-second,

5 La Tribune, 11/10/2008, “The iPhone becomes the best-selling mobile phone in the United States”.

6 In France, on September 28, 2008, Orange had also sold 151,863 2G iPhones, of which 12,000 customers have a plan from the corporate range.

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3G iPhones. In session on November 25, 2008, representatives of the Orange company declared that they had sold 300,000 3G iPhones and specified that sales of 3G iPhones represented 15% of their gross sales. According to statements from the Orange company, 50% of sales of 3G iPhones are to new customers. The Orange company also said that its sales forecast by the end of 2008 was 500,000 sales of 3G iPhones.

  1. THEENVIRONMENTA HIPC
  2. a) The App Store
  1. Since June 2008, Apple has provided users with a dedicated Internet platform, known as the “App Store”, intended to put iPhone users in touch with developers of appropriate software and applications.
  2. The UFC-Que-Choisir describes the App Store as follows: “For example, there are games, dictionaries, applications like Facebook, converters, applications to manage your bank account, applications that allow you to find Velib terminals, etc.There is a whole community of developers who can, under Apple’s control, develop and sell simple applications ” Apple representatives have confirmed 7 that the App Store enhances the attractiveness of the iPhone: “ The App Store is very attractive and makes the iPhone attractive. Moreover, I observe that the other manufacturers are building their own platforms ”.
  1. b) The iPod digital music player
  1. Apple entered the digital music player market in 2001 with the iPod, and would hold more than 70% of the market share in the United States in the first quarter of 2008, ahead of Sandisk (11% of the market), Microsoft (4%). ) and Singaporean Creative (2%), according to research firm NPD Group8.
  2. In France, according to the magazine Confortique9, the market for digital music players was also characterized in March 2008 by Apple’s leadership: “With the exception of the Apple brand, which remains the undisputed leader in music players, players in the computer world formerly unchallenged must face new competitors. Across all product families, the distribution of French market shares leads Apple (with 42.2%), Samsung (7.9%), Arches (7.8%), Creative (6.7%) ), Mpman (5.1%), Philips (3.1%) and Sony (3.2%). “. Representatives of FNAC 10 confirmed during their hearing : “(…) 40-50% of the music players we sell are iPods. In value, their market share is even higher because their products are more expensive. There are no competitors of equal weight to the iPod. We find very far behind, many manufacturers who have a very low market share (less than 10%): these are Sony, Creative, Samsung, etc. But the gap with Apple is enormous ”.

7 Apple Minutes.

8 Call number 1744.

9 Cotes 1736 and 1737, Confortique magazine, March 2008.

10 FNAC hearing minutes.

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  1. c) The iTunes software and the iTunes MusicStore platform
  1. iTunes is proprietary digital media library management and playback software distributed free of charge by Apple.In particular, it allows you to manage transfers of music, photos and videos to Apple’s various multimedia devices (iPod, Apple TV, iPhone).It is available on Mac OS X, and on Microsoft Windows. It also includes direct access to the online music store called “ iTunes Music Store ”.
  2. iTunes Music Storeis an online shopping service for music and other content (music videos, audiobooks, TV series, movies) launched by Apple in June 2004. Since the release of the iPhone 3G , Apple also offers applications for the iPhone and iPod Touch available on the App Store. Music purchased from the iTunes Music Store is protected by Apple’s proprietary digital rights management (DRM) device, FairPlay. According to a study by IDATE in August 2008 on ” new music markets “, the iTunes Music Store platformhas been a major success, becoming in a few years, the leading retailer of music, all media combined: ” What to do after iTunes? The first phase of the development of the digital music market is coming to an end. Initiated at the end of the 1990s by the emergence of illegal downloading platforms, it ended in 2008 with the almost monopolistic success of the iPod / iTunes couple. In the second quarter of 2008, Apple sold 150 million iPods since the first models at the end of 2001 and more than 5 billion songs since the launch of its online service iTunes Music Store in 2003. In January 2008, the download platform operated by Apple has taken the lead among music retailers in the United States (physical and digital combined), snatching the top spot from Wal-Mart. With more than 50 million customers worldwide, iTunes’s market share is estimated to be between 70% and 80%.
  3. During its hearing, the FNAC, also present on the market for the sale of dematerialized music files, confirmed that theiTunes Music Storealso enjoyed a very significant market share in France, this market share being carried by that of the iPod: ” When it comes to online music (sold on computers), the iTunes Store has a market share of around 60-70%, Virgin Mega is second with a market share of around 15%, and FNAC has around 8-15%. % of the market. These figures are very approximate. I would like to point out that the market for music files purchased from a telephone is growing very strongly: 25% in 2007 and 35-40% in 2008. However, these figures need to be verified. The weight of iTunes is proportional to the fleet of iPods. Apple brings simplicity and convenience. The consumer has no interest in leaving this integrated system ”.
  1. d) iPhone is iPod
  1. Now, the only digital music players which can be downloaded on the music ofiTunes Music Storeprotected Fairplay are iPods or iPhones, iPods latter being ” the [s] most successful [s] of the range of Apple, ”according to the CEO of Apple.
  2. In terms of price, Arcep has also observed that the iPhone is fully integrated into the price continuum of iPods: “the subsidy practiced in France by Orange for a customer who simultaneously subscribes to an iPhone plan makes the second version of the iPhone particularly attractive.Indeed, it brings the price of the terminal to a lower level than that of the iPod with the same features (other than telephone) and capacity.

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equivalent: the subsidized iPhone 3G is sold with the iPhone package at 149 euros for the 8 GB and 199 euros for the 16 GB, against 229 euros for the 8 GB iPod Touch and 289 euros for the 16 GB iPod Touch. mobile phone consumer wishing to acquire an iPod-type digital music player therefore seems encouraged to choose an iPhone instead ”.

  1. FNAC representatives confirm: “Songs purchased on iTunes[Music Store] with DRM cannot be placed on an MP3 player other than the iPod or on a smartphone other than iPhone. The more songs that customers have downloaded from iTunes with DRM, the more captive they are to Apple. […]. After 6 months of use, on the basis of one album purchased per month, the customer is de facto captive. I think around 1 million iPods are sold in France per year ”.
  1. e) iPhone activation on iTunes
  1. Apple provided in the contract concluded with Orange11that the activation of the iPhone would be done on iTunes, which allows it to register new customers directly. This specificity was also highlighted by Arcep: “ The partnership between the equipment manufacturer Apple and the operator Orange is quite unusual from several points of view. (…). In this diagram, the equipment manufacturer, and no longer just the operator, now has a direct link with the end customer, Apple having made its iTunes software essential in the process of activating and unlocking (unlocking) the iPhone. In addition, this terminal benefits from exclusive access to Apple’s online music platform, the iTunes Store ”.
  1. THE DISTRIBUTION OF MOBILE TELEPHONY TERMINALS AND SERVICES
  1. The Council underlined, in its decision n ° 07-D-37 of November 7, 2007, the strategic role played by the distribution channels of mobile telephony services.This can be done either through distribution networks integrated within each operator, or through independent distribution networks which sometimes distribute the services of several operators, sometimes those of an exclusive operator: “Orange’s services are therefore distributed exclusively in the agencies of the France Telecom group (around 700 points of sale) as well as by the network of independent Mobistore shops (around 150 points of sale). SFR’s services are distributed exclusively in a network of around 700 ‘SFR Spaces’ operated by independent companies of which SFR is sometimes a reference shareholder. Bouygues Telecom’s services are distributed exclusively through a network of just under 500 stores, half of which are ‘Bouygues Telecom Clubs’ owned by the operator. These exclusive distribution networks, which constitute the bulk of single-brand distribution, represent almost half of the sales acts in the market.

In addition, the services of the three main operators are also distributed through independent multi-brand distributors. Among the multi-brand distributors, the food and specialty retail chains represent the most dynamic channel with nearly a quarter of sales in the mobile telephone services market. Thus, more than 10% of the acts of sale are carried out in the only chains of the large food distribution. At the same time, in addition to small independent shops, networks of independent multi-brand distributors, the most

11 Cf. key contract between Orange and Apple: “ key terms agreement ”.

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often franchisees, do most of the rest of the non-exclusive distribution. Thus, the 280 stores under the The Phone House brand are a major player in independent distribution. Multi-brand distribution still represents a little more than half of the market’s sales acts ”.

  1. CONTRACTS TERMINATED BY THE SEIZURE
  1. The Bouygues Telecom company argues in its referral that it was excluded from the marketing of the iPhone although it requested to distribute it from May 14, 2008, Apple having opposed the fact that Orange had been designated the only network operator responsible for the distribution of the iPhone in France.It also questions the anti-competitive nature of the selective distribution network set up by Apple in France for the distribution of the iPhone.According to Bouygues Telecom, the distribution system in question constitutes a prohibited cartel in so far as it imposes minimum resale prices on consumers, it restricts the freedom of resale of authorized distributors and it partitions national markets. The complainant also denounces the unjustified nature of certain selection criteria and their discriminatory application. He criticizes the tied selling of iPhones and Orange services.
  2. The system set up by Apple in France for the distribution of the iPhone is based on several contracts:
  • the network partnership contract (“key terms agreement”), concluded between Apple and France Telecom on October 12, 2007 and amended in May 2008, by which Orange is designated as the exclusive network operator;
  • the distribution agreement, concluded in October 2007 between Apple and Orange and amended in May 2008, which designates Orange as the exclusive wholesaler for France and defines the criteria to be met by Orange stores for the distribution of the iPhone;
  • contracts by which Apple approves other retail distributors;
  • distribution contracts concluded between Orange and retail distributors approved by Apple.
  1. Each of these contracts containing stipulations called into question by the referral will be presented successively.
  1. L’ EXCLUSIVE AGREEMENT PARTNERSHIP NETWORK
  2. a) The conditions under which Apple has chosen its partner network in France
  1. Apple Inc. has explained the circumstances and the reasons for choosing Orange as Apple’s exclusive partner for the distribution of the iPhone in France.The company said that Apple Inc. wanted to limit the number of its partners in Europe in order to deploy the iPhone as quickly as possible.After the failure of its negotiations with Vodafone, which would have given it access to many European countries, the Apple company chose to select an exclusive partner in each of the

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the first three countries in which it wished to deploy, namely France, the United Kingdom and Germany. In other European countries, Apple has chosen more than 12 partners .

  1. The operators were selected on the basis of qualitative and quantitative criteria such as: “technological factors (network capacity, EDGE coverage or 3G network), brand reputation.We examined whether the brand was in line with Apple’s image. We looked at their stores and the size of the distribution network. We also looked at their presence in different countries, the average revenue per client, the range of services offered to clients, the satisfaction indices, the “churn” rate . We also compared the number of operators’ customers. The quality of contact with the network operator teams was also important ”.
  1. b) Presentation of the first agreement, “Key terms agreement”, of October 2007
  1. The agreement designating Orange as a partner network for France was signed between Apple Sales International and France Telecom SA on October 12, 2007.
  2. Under the terms of this agreement13, Orange becomes the exclusive mobile operator for iPhone products in several countries (France, Belgium, Romania), and obtains co-exclusivity in Austria, Poland and Slovakia. The exclusivity was on the iPhone 2G and all of its successors. In return 14 , Orange undertook to pay Apple 30% of the sums invoiced to each Orange iPhone customer. Orange has also pledged to reimburse 50% of advertising expenses incurred by Apple as part of the promotion of the iPhone, an amount capped at 10 million euros.
  3. The agreement provides that Apple would be released from its exclusivity obligations once 40% of the total number of iPhones customers have unlocked their phone and changed operator.Clause 2.2 of this contract prohibits Orange from entering into a similar partnership with another mobile manufacturer.
  4. The blocking of the telephone is also contractually provided for15: “ To the extent authorized by the laws, regulations and decrees in force, all iPhone Products sold by Orange or any of the Affiliated Companies of Orange in Europe and all iPhone Products sold by Apple in any of the Annex 1 countries will be sold with a blocked SIM that will only allow use on the Orange network in accordance with Orange network and SM specifications . Apple will inform customers that iPhone Products are SIMlocked and, if applicable law so requires, that customers can request unblocking. “. The unlocking methods are set out in article 7. Apple and Orange will unlock iPhone Products in accordance with applicable laws, regulations and decrees. If the laws, regulations and decrees in force authorize either Party to invoice the Orange iPhone Customer for the costs of unlocking its iPhone Product, Orange will pay Apple, for each of the Orange iPhone Customers concerned. , the higher of the following two amounts: (i) 100% of the unlocking fees received by Orange, less VAT or (ii) 100 EUR less VAT . “

12 Apple, letter of October 24, 2008, call number 1612 et seq.

13 Clause 2.1.a.

14 Article 3 of Annex 3 of the “ key terms agreement ”.

15 Clause 7.6.a.

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  1. c) The duration of the exclusivity
  1. The contract is concluded for a period of 5 years from the date of the launch of the iPhone 2G, ie November 29, 2007. Apple benefits from an exit clause without compensation at the end of a period of three years.During her hearing, the vice-president of Apple Inc. clarified: “In our mind, it is more of a three-year contract. This point was central in the negotiations. Apple would have preferred a shorter period than three years for this exit option . “. Apple also undertakes not to implement, for a period of 2 years from the expiration of the contract, a marketing action targeting ” Orange iPhone customers ” and who ” would aim to encourage them to leave the Orange mobile telephone service in favor of the telephone service of another operator ”.
  2. These declarations were supplemented byApple’sobservations 16 : “ the special rights granted to certain operators, including the one linking Orange to Apple for the iPhone in France, are therefore residual but do not correspond to an absolute and necessary model. for Apple, which on the contrary does not wish to grant new ones in the current configuration. (…) Given the changes in the general economy of the contract with operators, Apple has decided to no longer grant exclusivity to operators and therefore has not introduced any in the contracts signed for the launch in other countries. of the European Union.

However, for certain countries including France, Apple had committed under the terms of its first 2G agreement to maintain Orange’s right of first presentation with the iPhone 2G and its successors for the duration of the contract; Apple was therefore not in a position to terminate the agreement signed with Orange in France ”.

  1. d) The modifications made by “the amendment to the contract relating to the key conditions”
  1. On May 15, 2008, Apple Sales International and France Telecom signed a first amendment to the partnership contract concluded in October 2007.
  2. The new agreement modifies17the economic balance of the partnership, the parties abandoned the model of “revenue-sharing” in favor of a more traditional model of grants on the terminals ” In consideration of the exclusive rights granted , Orange will grant a subsidy to customers who subscribe to a specific iPhone service offer or any post-payment service offer from Orange when acquiring [an iPhone 3G] […] Consequently, Orange will not be bound to share the invoiced sums ”.
  3. At the end of this new contract, Orange will be able to distribute 3G iPhones in Switzerland and Portugal, but without benefiting from exclusivity.
  4. The contract provides18also a minimum level from Orange subsidy for 3G iPhones, as well as a “reporting” strict these subsidy levels to check the “respect for the average grant” :

16 Observations p. 45.

17 Call number 3472.

18 Appendix 1 of appendix 3 “Average subsidies in France”, reference 3481.

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“Orange will grant customers who purchase a P3 or Successor accompanied by an Orange Postpayment Service Offer an iPhone Average Subsidy per referral (SKU) defined on the first day of the Evaluation Period as follows:

(i) If the Wholesale Price of an iPhone reference is greater than or equal to 345 EUR, the Average Grant for such an iPhone reference will be equal to the greater of the following amounts: (a) 310 EUR or (b ) an amount at least 20% higher than the highest subsidy that Orange offers or provides on any other telephone in France.

(ii) If the Wholesale Price of an iPhone reference is less than 345 EUR, the Average Subsidy for such an iPhone reference will be equal to the greater of the following amounts (a) the Wholesale Price of the reference d ‘iPhone concerned minus EUR 50 or (b) an amount at least 20% higher than the highest subsidy that Orange offers or grants on any telephone in France whose subsidized price is between 0 and 150 EUR ”

  1. THE DISTRIBUTION AGREEMENT, CONCLUDED BETWEEN A PPLE AND O RANGE IN OCTOBER 2007, MODIFIED IN MAY 2008
  1. The distribution agreement signed between Apple Sales International and France Telecom on October 12, 2007 provided that Orange could buy iPhones directly from Apple and not from other sources and that Orange could only distribute them in authorized points of sale in certain countries (France, Belgium, Romania, Austria, Poland, Slovakia).It is concluded for a period of five years.
  2. A first amendment to this contract was signed between Apple Sales International and France Telecom on May 15, 2008. It organizes the distribution of the iPhone within a selective distribution network.Orange is a wholesaler and delivers to distributors approved by Apple.Annex 3 of this addendum specifies, in the section “Addendum Authorized Country: France”, in article 5.1 that “ Apple designates Orange as an exclusive wholesaler authorized to purchase Authorized Products for distribution to Authorized Points of Sale in Authorized Countries ”(code 3526).
  3. This contract provides that only companies that have signed a “membership contract with Apple and Orange” will be able to place orders for iPhones with Orange.The conditions for the resale of iPhones by Orange to authorized distributors are set out in article 5.2 of contract19 . This clause provides in particular that the maximum selling price of the iPhone will be the price enjoyed by Orange, increased by 8.5% 20 . Orange also undertakes not to give its own points of sale an advantage, to the detriment of third parties 21 .

19 Call number 3518.

20 Article 5.2 of the contract “Orange will be solely responsible for setting the price at which it invoices its customers during the distribution of Authorized Products, subject only to the provisions of this present. Within the limits authorized by applicable laws and regulations, for Authorized Products sold without an offer of Orange Services, the maximum selling price of any Authorized Product will be the Wholesale Price plus 8.5%. If Orange considers that this Article 3.10 is contrary to applicable laws or regulations. Orange will inform Apple without delay. For the purposes of this Section, “Wholesale Price” means the price charged by Apple or an Apple Affiliate to Orange or an Orange Affiliate for a specific Approved Product ”.

21 “Orange will sell the Authorized Products to the Authorized Points of Sale in accordance with non-discriminatory provisions and conditions, so as not to unfairly favor the Authorized Points of Sale held by Orange over the Authorized Points of Sale of third parties. Without limiting the scope of the above. Orange will be solely responsible for the allocation of Authorized Products delivered by Apple to Authorized Points of Sale and must do so in a non-discriminatory manner. ”

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  1. On the other hand, Orange undertakes to favor the distribution of iPhones over other terminals: “Orange agrees that, when selling Authorized Products to any of its Authorized Points of Sale for distribution purposes, it will observe provisions and conditions which will be the same or more favorable than those it offers at the same Points of Sale. Sale Authorized under any other mobile phone, including discounts, rebates, rights of return and incentives to sell.Orange further agrees to offer all sales staff who sell or activate Authorized Products sales commissions or other sales incentives that are the same or more favorable than all sales incentives. that it offers to sales staff who sell or activate any other mobile phone ”.
  2. In addition, Apple intends to limit exports: “To the extent permitted by applicable law, Orange will take all necessary measures to ensure that neither Orange nor any Authorized Point of Sale sells Authorized Products to a buyer who intends export these for sale outside the Authorized Country” 22 .
  3. This provision was supplemented by article 5.2 of the membership contract which provides that: “In view of the fact that the Authorized Country is part of the European Economic Area (“EEA”), the parties recognize that Orange may sell the Authorized Products to customers in another EEA country unless Apple has reserved or has reserved for another distributor, on an exclusive basis, the other country of the EEA concerned.If Apple has reserved or has reserved for another distributor, on an exclusive basis, another country of the EEA, the restrictions imposed on sales of Authorized Products to that other country concerned: (i) s’“.
  1. THE CONTRACTS CONCLUDED BETWEENA PPLE AND AUTHORIZED RETAIL DISTRIBUTORS
  1. The first iPhone (2G) was only distributed within Orange’s single-brand network.
  2. On the occasion of the launch of the iPhone 3G, distribution was extended to a selective distribution network set up by Apple and comprising, in addition to the France Telecom branches, the Orange stores (Mobistores) and the Photostation stores and Photoservice, as well as multi-brand distributors: FNAC, Darty, The Phone House, Boulanger, Auchan, Carrefour and Tel and Com stores.Apple therefore signed a selective distribution contract with each of them.These contracts have a duration of one year.
  3. These distributors obtain their supplies from Orange, Apple’s exclusive wholesaler in France.
  4. They must meet the selective distribution criteria defined by Apple.These points of sale sign a distribution contract specific to the iPhone with Apple.Apple informs Orange of the points of sale admitted to its selective distribution network. Representatives of the Apple company declared that this choice was the result of a desire to protect the Apple brand and had been desired because of “ the technical nature of the product ”. The

22 Call number 3518.

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criteria relating to the legal person are reproduced below, in their version of May 2008 annexed to the Orange / Apple 23 distribution contract :

1.1. The legal person must:

  1. be an existing Apple Authorized Reseller;and
  2. 70% of its revenue in each of Apple’s previous quarterly fiscal years, as regularly reported, must come from sales of Apple products and Apple accessories or said Apple Authorized Reseller must purchase Apple products from Apple at least € 5 million in each Apple quarterly fiscal year;or

1.2 The legal person must be a Network Operator or a wholly-owned subsidiary and this subsidiary must bear exclusively the brand of the Network Partner concerned; or

1.3 The legal person must:

  1. have generated at least 70% of its turnover during the previous quarterly financial year, as regularly declared, thanks to Telecom products and services;and
  2. have national coverage;and
  3. always have the full range of service offerings from the network operator available with the iPhone;or

1.4 The legal person must participate in one or more iPhone Distributor Programs; or

1.5 The legal person must sell iPods, Apple Macs and mobile telephony products and services of the Network Operator in France; and

  1. at least 30% of the legal entity’s regularly reported revenue in the previous quarterly financial year on MP3 players must come from the sale of Apple iPods;and
  2. at least 30% of the turnover of the legal person regularly declared during the previous quarterly financial year on mobile telephony services or products must come from the sales of a Network Operator;and
  3. have national coverage;and
  4. always have the full range of Network Operator service programs available with the iPhone.
  5. These criteria relating to the legal person are supplemented by criteria relating to the points of sale, the site, the layout of the store, promotional elements, staff, etc.
  6. The “Authorized iPhone Reseller Agreement”, signed between Apple Sales International and FNAC on July 25, 2008, appears in file 24 . The selection criteria are presented there in a slightly different way from those set out above. FNAC representatives were asked about this contract: “ This contract assumes that we sell a certain number of Orange subscriptions and a certain number of iPods. This type of contract is totally unusual. No other manufacturer has implemented such a selective distribution system. The 30% thresholds which appear in the selective distribution criteria are much lower than the actual weightings of the two brands in our sales, and this

23 Dimensions 3528 and following.

24 Dimensions 1620 and following.

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criterion does not pose a problem to us and has not modified our behavior, or our commercial actions . (…) Regarding Orange, their market share (in volume) is 40-50%. A distributor who offers Orange subscriptions and iPods easily reaches the 30% thresholds for each of these brands ”.

  1. THE DISTRIBUTION CONTRACTS CONCLUDED BETWEENO RANGE AND THE INDEPENDENT DISTRIBUTORS APPROVED BY A PPLE
  1. Distribution contracts have been signed between Orange France and independent distributors approved by Apple.Orange provided, as part of the investigation, several copies of these contracts were entered into the file by Orange25 . Their validity extends from the date of their entry into force until 1 st July 2009. They may be renewed by agreement of the parties.
  2. Clause 3 of the distribution contract requires the distributor to only obtain supplies “exclusively and directly from Orange.The reseller may not purchase the authorized Products from other sources of supply without the prior written consent of Orange, and must resell them exclusively at authorized points of sale located in the territory [France] ”.
  3. In addition, article 5.4 stipulates that:“the reseller will not market the terminals with a telephony offer that is not that of Orange.Notwithstanding what has just been specified, the Reseller may sell Bare Terminals but whose SIM card will be blocked on the Orange network ”.
  4. The representatives of Orange26justified this stipulation by technical considerations: “ For technical reasons, the price includes a subscription to a mobicarte line which is offered. To activate the phone, you must register with iTunes. For reasons of technical compatibility, you need an Orange SIM card to activate the phone. We connect the phone to the Apple site. Once this connection is made, you can request unlocking. This explains why the mobicarte is compulsory. Once the phone is activated, it is possible to request unlocking. 100 euros are charged for unlocking. Unlocking is more expensive because of the complexity of the manipulation which is also carried out by Apple. These 100 euros are donated to Apple. This mechanism is provided for in the contract ”.
  5. These statements have not been confirmed by Apple, which observed in its submissions27that : “ in the new system, and despite a pen error in the contract, Apple is able to formally confirm that it does not is no longer paid in practice the amount of unlocking carried out by authorized dealers. Indeed, in the new business model put in place, Apple no longer bears the risks justifying the repayment of the unlocking costs ”.
  6. Furthermore, when the iPhone 3G was released, consumers who wished to purchase a terminal without a subscription to Orange services may have been refused a sale on the grounds that the terminal was no longer available and noted that the terminals were however distributed to new Orange customers.This state of affairs has not been contested by Orange.

25 Annex 3 to the letter of October 28, 2008, numbers 2533 and following.

26 Orange company hearing minutes of October 2, 2008, number 797.

27 Call number 4852.

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whose representatives said in their hearing, “[ n ] e do not have the desire to reserve the iPhone to new customers. Locally, there have unfortunately been examples of shops where sellers have been able to “slip”, but in a localized way. However, we had circulated instructions to prevent these practices ”. SFR also declared: “ During the launch of the iPhone 3G, we received numerous alerts informing us of the outright refusals of sales experienced by customers when they requested to acquire a bare terminal. Likewise, it seems that the most sought-after model (iPhone 3G 16 Gb) is also more difficult to obtain on sale ”.

  1. In addition, the company SFR transmitted to the Council an exchange of correspondence with the company Orange, from which it appears that the latter has given notice to the company SFR to end its policy of subsidizing iPhones sold without an Orange subscription for consumers who wanted to associate the iPhone with the telephony services offered by SFR.On this point, the company Orange declared28 : ” Orange was surprised with SFR by this practice of parasitism of its exclusivity and its investments, by calling on it to explain itself “.
  2. Clause 5.8 completes the device by providing for an alert mechanism relating to imports of iPhones: “the reseller will promptly inform Orange of all Authorized Products imported or supposedly imported by a third party bearing Apple’s brands and which have not not been distributed or manufactured by Apple for sale in the Territory [France], as soon as it becomes aware of the import” 29 .
  3. Finally, Orange provides its distributors with recommended retail prices for the iPhone.However, no contractual stipulation requires compliance with these recommended prices.The contract provides 30 that the dealer remains free to determine the resale price of the 3G iPhone. Resellers are only constrained by a maximum resale price communicated by Orange and which they cannot exceed.
  1. Discussion
  2. ON THE PROCEDURE
  1. The company Apple Europe Ltd considers that the request for provisional measures is inadmissible on the ground that it is directed against the company Apple Europe Ltd, which is unrelated to the agreements relating to the iPhone.It considers that the Competition Council cannot, on its own initiative, extend the request for precautionary measures to other subsidiaries of the Apple group or to the parent company Apple Inc, these companies not having been regularly cited by Bouygues Telecom in its initial referral.
  2. However, the means of the company Apple Europe Ltd are in fact lacking since the seizure, which could not know before the instruction and the opening of the adversarial

28 Call number 3862.

29 Call number 2651.

30 Clause 5.11 of the distribution contract between Orange and independent resellers.

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the precise identity of the subsidiaries of the Apple group signatories of the disputed agreements, explicitly requested, in a letter of October 27, 2008, that the investigation and the request for precautionary measures be extended to the companies Apple France, Apple Sales International, Apple Europe and Apple Inc.

  1. In any event, in application of the provisions of Article L. 464-1 of the Commercial Code, the Competition Council, which is seized in rem, may, after having called the parties in question in a position to defend themselves within the framework of the adversarial debate, take the precautionary measures which appear necessary.It follows that the Council is not bound by the nature of the applicant’s requests, whether it concerns the qualification of the practices complained of, the scope of the analysis or the identity of the parties implicated in the proceedings. the initial referral.The fact that the referral was initially aimed only at Apple Europe does not therefore preclude the Council, which communicated it to the companies Apple France, Apple Sales International, Apple Europe and Apple Inc. and heard them in session,
  2. The companies Apple, France Telecom and Orange France still denounce the timetable for the procedure and the volume of observations filed by the applicant.They consider that they did not have the necessary time to respond to Bouygues Telecom’s written observations of November 10, 2008. They ask for the withdrawal of these writings as well as the documents filed by the applicant on November 19, 2008.
  3. It should however be recalled that, according to constant case law of the Council, confirmed by the Paris Court of Appeal, in particular in its decisions of February 12, 2004 and January 28, 2005, the procedure implemented to examine a request for protective measures must be adapted to the emergency while respecting the principle of adversarial proceedings.The investigation must make it possible, in a necessarily limited time, to gather as many elements as possible in order to examine the merits of the request.As a result, the volume of observations filed by the parties cannot in itself justify their being discarded, once the parties have had sufficient time to respond.
  4. In the present case, Bouygues Telecom filed its observations on November 10, 2008 in accordance with the timetable set by the general rapporteur.Orange France, France Telecom and Apple have had sufficient time to respond, within the contradictory deadline and the rights of the defense, the date for filing their own observations having been initially set for November 17, then postponed, at their request, by the general rapporteur, on November 19, 2008. There is therefore no reason to exclude from the file the observations filed by Bouygues Telecom on November 10.As for the documents filed by Bouygues Telecom on November 19, Orange France, France Telecom and Apple had sufficient time before the date of the board meeting of November 25 to respond by written or oral observations during the meeting. There is therefore no reason to exclude from the file the additional documents filed by Bouygues Telecom on November 19.
  1. THE APPLICABILITY OF COMMUNITY LAW
  1. According to the guidelines of the European Commission relating to the concept of the effect of trade appearing in Articles 81 and 82 of the Commission Communication Treaty (OJEC n ° C 101 of 27 April 2004),“Articles 81 and 82 of Treaty apply to horizontal and vertical agreements and to the abusive practices of companies which are

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“Liable to affect trade between Member States”. To be taken into account, this assignment must be capable of being sensitive.

  1. The Council likewise recalled, in its decisions n ° 06-D-09, n ° 06-D-37 and n ° 07-D-27, that three elements establish that practices are likely to significantly affect the intra-Community trade: the existence of trade between Member States relating to the products covered by the practice, the existence of practices liable to affect such trade and the sensitive nature of this possible effect.
  2. As regards agreements covering a single Member State, the aforementioned guidelines point out that they have, by their very nature,“the effect of consolidating national divisions, thus hampering the economic interpenetration desired by the Treaty.The ability of these agreements to partition the internal market is due to the fact that, normally, undertakings which participate in cartels in a single Member State must protect themselves against competitors from other Member States (…). In principle, these agreements may also, by their very nature, significantly affect trade between Member States, taking into account the market coverage required to ensure the effectiveness of such agreements ”.
  3. In the present case, the contracts in question grant Orange exclusivity over the whole of French territory and contain clauses aimed at preventing any circumvention of this exclusivity by means of imports from other countries, among which include the other member states of the European Union, and to protect, in the same way, the exclusivities granted by Apple in the other countries.Thus, it is stipulated, in the contracts signed between Orange and the authorized distributors, that the latter will buy the iPhones “exclusively and directly from Orange. The reseller may not purchase the authorized Products from other sources of supply without the prior written consent of Orange, and must resell them exclusively at authorized points of sale located in the territory [France] ” 31 . A clause providing for an alert mechanism relating to imports of iPhones completes the device: ” the reseller will promptly inform Orange of all Authorized Products imported or supposedly imported by a third party bearing Apple’s brands and which have not been distributed or manufactured by Apple for sale in the Territory [France] , as soon as it becomes aware of the import ”32 .
  4. In the state of the investigation, those contracts therefore appear capable of appreciably affecting intra-Community trade.They must be assessed with regard not only to national law but also to Community competition law.
  1. ON THE RELEVANT MARKETS AND THE POSITION OF THE COMPANIES INVOLVED IN THESE MARKETS
  1. Four markets are likely to have been affected by the practices complained of:

– the market for mobile telephony services;

– the upstream and downstream terminal markets;

– the market for digital music players;

– the market for paid online music downloads.

31 Article 2 of the contract between Orange and the distributors.

32 Article 5.8 of the contract between Orange and the distributors.

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  1. ON THE MOBILE TELEPHONY SERVICES MARKET
  1. The Council has already considered, in particular in decision n ° 05-D-65 of November 30, 2005, that mobile telephony services constitute a relevant market.This delimitation is not discussed by the parties and there is no need to call it into question at this stage of the investigation, despite recent developments, in particular the importance taken by the exchange of data by compared to voice communications and the development of mobile broadband.
  2. At the end of September 2008, Orange France estimated that 43.5% of the customer base of a mobile telephone service subscribed to its network33against 17.3% for Bouygues Telecom and 33.7% for SFR. Orange France is the subsidiary of the incumbent telecommunications operator in France and belongs to a world-class group, present not only in the mobile telephone services market but also in many related electronic communications markets (Internet access, Internet television, fixed communications, etc.). However, the same is true for SFR. At this stage of the investigation, it is moreover not maintained that Orange France occupies a dominant position on this market.
  1. SURL ES TERMINAL MARKETS
  1. The Bouygues Telecom company considers that the iPhone 3G belongs to the category of smartphones and that these must be distinguished from other terminals because of the objective material peculiarities of the product (multimedia functionalities, keyboard and / or touch screen; ‘open operation), and its specific functions (use of e-mail and mobile internet functions, downloading of applications).In addition, the startling argues that there is, within smartphones, a significant price difference between entry-level products and high-end products, and that the latter could constitute a relevant market on their own.
  2. As regards the geographical definition of the market, the striking one explains that the market mentioned in the previous paragraph is national in scope, insofar as distributors operate nationally under homogeneous conditions (price, advertising, GTC ).In addition, it observes that the terminals are mainly distributed within the framework of a subscription to service offers from operators, distributed nationwide for a service covering essentially the national territory.On the national market for high-end smartphones, Bouygues Telecom estimates 34 that Apple’s market share was 53% as of August 15, 2008 and that it could reach 68% at the end of 2008.
  3. For Apple, the economic report produced by Bouygues Telecom is marred by numerous methodological errors.In the first place, it considers that the study erroneously applies the hypothetical monopolist test in that it analyzes the 10% price differentials statically and not dynamically, whereas it is

33 Breakdown by volume of the mobile customer base, source Orange.

34 Market study carried out by the firm Tera consultants on the basis of data transmitted by the GFK institute.

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indeed a dynamic analysis, tending to capture the reactions of consumers to a price increase of 10% which would be at the center of the hypothetical monopolist test. The companies Apple, France Telecom and Orange France then show that the authors of the study based themselves on the price and the sales volumes of bare terminals while most of the terminals are sold associated with a mobile telephone offer and with a grant. This criticism was also formulated by Arcep.

  1. Apple maintains that the relevant market is that of all mobile terminals.Its dimension would be global or European.In support of its analysis, it refers to recent decisions issued by the European Commission in the context of merger control 35 . France Telecom and Orange France also underline that the Commission did not distinguish, in its Nokia / Navteq decision of 2 July 2008, a market for smartphones, but on the contrary retained a global market for mobile telephony terminals. In this market, Apple observes that it is a new entrant which would only have a market share of less than 1%. Apple further specifies 36 that in any case, the iPhone represents only 12 to 14% of sales of terminals which it could be considered that they belong to the category of smartphones.
  2. The Council regularly recalls (cf. in particular decisions n ° 06-D-03 and 07-D-44) that when it is demonstrated that the final consumer systematically uses intermediary distributors, it is relevant to distinguish between upstream market for the supply of the downstream market for the distribution of these products.
  3. In the present case, the first puts the manufacturers in contact with the distributors of terminals, whether they are independent distributors or mobile telephone operators.The latter have as suppliers the distributors of the terminals in the various national territories and as applicants the end consumers.

On the upstream market

  1. On the upstream market, distributors, who represent demand, must be able to offer a diverse range of products to end customers.It cannot therefore be excluded, at this stage of the investigation, that from their point of view, there is a category of terminals which, due to the objective technical characteristics which are specific to them, must necessarily be included in their offer to end consumers.
  2. As stated in paragraph 23, terminals resulting from the convergence of mobile phones and PDAs, referred to as “smartphones” by the seizor and other market participants, or “communicating PDAs” by others, for for example by the panelist GfK, accumulate, as Arcep explains in its opinion of November 4, 2008, functionalities (wifi connectivity, GPS, camera, video / MP3 player) that more traditional terminals offer in isolation or without adequate ergonomics, and combine them through a dedicated operating system.Various market studies share the specificities of these smartphones, relating in particular to their physical characteristics (ergonomics, touch screen or keyboard), their own operating system, and the resulting diversity of uses, centered,in addition to telephony, mobile internet (content), listening to music, watching videos, GPS navigation, and PDA management. These characteristics, likely to induce a differentiated use, seem specific enough to make this type of terminal non-substitutable for other less sophisticated ones, even if a manufacturer like Nokia stresses that it is difficult to

35 Nokia / Trolltech Commission decisions of June 4, 2008 and Nokia / Navteq of July 2, 2008.

36 p. 37 of the observations of the Apple company.

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segment the market and say they do not differentiate between the smartphone category and other phones.

  1. On the other hand, a more detailed segmentation according to the selling price of the terminals on that market could only be carried out according to the wholesale prices negotiated by the distributors, which are not available in the file.Moreover, no issue is attached to this question in the present case.
  2. Furthermore, it cannot be excluded, at this stage of the investigation, that the upstream market is, given the nationality of the various manufacturers and the observation that the terminals are sold without distinction in many countries around the world, at least of European or even global dimension.In the decisions recently taken in this sector in the context of merger control (Nokia / Trolltech of 4 June 2008 and Nokia / Navteq of 2 July 208), the Commission therefore considered that the geographic market to be taken into account extended to less to the European Economic Area (EEA).
  3. Arcep notes that five publishers offer software used by mobile terminals: Symbian, Microsoft, Linux, RIM and Apple.The estimates by Canalys presented above in paragraph 36 show Nokia, Apple, RIM, Motorola, HTC as the main suppliers of smartphones.Apple’s share (which is present in both the software publishing and terminal markets) in the smartphone market is estimated at 17.3% in the third quarter of 2008, against 3.6% a year before. The market leader would be Nokia, with 38.9% of global smartphone sales in the third quarter of 2008 against 51.4% in the third quarter of 2007.
  4. These estimates highlight the dynamism of a market characterized by a rapid pace of innovation.Apple did not manufacture terminals before the release of the iPhone 2G in October 2007. The iPhone 3G has only been on the market for five months37 . Several terminals with similar characteristics, called “ iPhone killers ”, have been on sale even more recently, and more are expected to be released in the coming months. If Apple overtook RIM, maker of the Blackberry, in the third quarter of 2008, the latter saw its share of a smartphone market drop from 10.6% to 15.2% at the same time.
  5. In such an evolving context, punctuated by constantly renewed innovations, technical or commercial, the Council has already noted how difficult the delimitation of relevant markets is (cf. in particular decisions n ° 04-D-54 and 08 -D-10).Likewise, the position of players in such markets is likely to change very quickly.The European Commission, in the recent decisions cited by the parties, Nokia / Trolltech of June 4, 2008 and Nokia / Navteq of July 2, 2008, noting the rapid evolution of the main functions of terminals and the market positions of the main players, preferred to leave open the delimitation of the relevant markets in question.
  6. In the present case, however, it may be noted that at this stage of the investigation, it is unlikely, given the figures set out above, that Apple currently occupies an upstream market for mobile terminals, relevant from the point of view of the practices complained of, a dominant position which it would be liable to abuse.

37 July 11, 2008 in the United States and July 18, 2008 in France.

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On the downstream market

  1. On the downstream market, terminals are sold to the end consumer almost exclusively in association with a mobile telephone service.This point is noted by most market players, in particular by Orange.Arcep argues in its opinion that the share of terminals sold “bare” would be less than 5%. As a result, in most cases, consumers are led to compare the characteristics of “system goods” made up of the terminal and the associated service offer; it is these sets which are considered as substitutable or not from the point of view of the applicants. The downstream market for terminals is therefore difficult to separate from the market for mobile telephony services and has a national dimension,
  2. The European Commission and the Minister of the Economy have ruled in several decisions on the contours of a market for the distribution of mobile telephony products and services and have adopted a global market without distinguishing according to the type of products and services distributed neither according to the type of distributor (GSA, specialists, single-brand, multi-brand)38. In his letter on the France Telecom / CET operation dated January 4, 2008, the Minister explains that “ While subscriptions and terminals can be purchased separately, a very large majority of commercial acts involve the simultaneous acquisition, as part of a set, of a mobile communications service (prepaid offer or package) and a terminal, the terminal then being offered at much more attractive pricing conditions than if it were sold separately (“bare terminal”) ”.
  3. Only the GfK study on the “communicating smartphones and PDAs” segment produced by the striking company estimates, in this segment of PDAs and smartphones, the share of terminals sold without a SIM card at nearly 20%.This contradiction could however be explained by the absence, in the sample taken into account by GfK, of the integrated distribution networks of the three mobile operators.
  4. The characteristics of the terminals themselves are, of course, an element of consumer choice.The latter arbitrate, on the one hand, between the operators themselves, the range of terminals offered by each operator may present certain differences.They also choose, within the offer of the same operator, the formula that suits them the most. In the opinion issued for the present case, Arcep cites a study which places the choice of terminal in fifth place among the consumer choice criteria. However, the characteristics of the mobile telephony service offers of the various operators interfere with this choice of terminals, given their specificities. Likewise, the existence of operator change costs linked to packages with commitment and loyalty programs may restrict the choice of a terminal if it is not offered by all operators. On the other hand, within the offers of the same operator, the substitutability of one terminal with another does not depend on the offers of mobile services insofar as these are not linked exclusively to a terminal. For example, it was seen above that the packages designed specifically for the iPhone 3G were nevertheless accessible to buyers of other brands of terminals. the substitutability of one terminal with another does not depend on the offers of mobile services insofar as these are not linked exclusively to a terminal. For example, it was seen above that the packages designed specifically for the iPhone 3G were nevertheless accessible to buyers of other brands of terminals. the substitutability of one terminal with another does not depend on the offers of mobile services insofar as these are not linked exclusively to a terminal. For example, it was seen above that the packages designed specifically for the iPhone 3G were nevertheless accessible to purchasers of other brands of terminals.
  5. However, the elements noted above on communicating smartphones or PDAs suggest that, from the point of view of consumers, there is a category of terminals which present specific objective technical characteristics such as

38 Commission n ° COMP / M.1760 of December 20, 1999, Mannesmann / Orange; letters from Minister SFR-Somart / Débitel of 23 November 2007 and France Telecom / CET of 4 January 2008.

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consider that they cannot be substituted for other terminals. It cannot therefore be excluded, at this stage of the investigation, that the fact that a distributor would be the only one to offer, on the downstream market, a telephone with such characteristics, would have an effect on its market power, even if this is also a function of the competitiveness of its offer of mobile telephony services. The appearance on the market of long-term exclusivity agreements between a manufacturer and an operator, such as that between Orange and Apple implicated in the present case, is moreover likely to encourage changes in the criteria for determination of consumers in the choice of an operator and a distributor.

  1. A more detailed segmentation of the market on the basis of the selling prices of ‘bare’ terminals, on the other hand, is not very relevant given that specificity of the market.The prices thus displayed are intended for only a small number of applicants, almost all of them being determined according to the subsidized price associated with a mobile telephony package.However, significant subsidies, which greatly reduce the selling price of terminals, have the counterpart of high monthly plans and long commitment periods (24 months).
  2. According to the panelist GfK, whose data exclude, however, as has already been pointed out above, the France Telecom agencies, the Espaces SFR and the Club Bouygues Telecom, the main brands of communicating PDAs sold in France from April as of September 2008, are HTC, Apple, Samsung, Blackberry, Nokia, Palm.On the market thus delimited, Apple’s share would have fallen from less than 1% in April 2008 to 33.4% in September 2008, just behind HTC which went from 58% to 35.8% over the same period.Moreover, according to an article published in “Le Figaro” on November 18, 2008, forecasts from the GfK institute published the day before show a growing share of this type of telephone in the total number of terminals sold in France: “ While last year only 700 smartphones were sold in France, 1.8 million should be in 2008, of which 80% with a touch screen, the most emblematic being Apple’s iPhone 3G (…) For 2009 , GfK forecasts a 55% increase in sales of this type of terminal, with 2.8 million units sold, in a global market that grew by nearly 4% to 25.2 million mobile phones. (…) In value at 420 million euros, smartphones represented 25% of the total turnover of the French market at the end of 2008 ” 39. Apple, for its part, advances the estimates of the company Canalys, according to which its share of the smartphone market in France would be 12.5% ​​on average from October 2007 to September 2008 and points out that in the GfK panel, the share of Samsung’s market fell from 5.9% in August 2008 to 15.2% in September 2008.
  3. With regard to France Telecom’s position on the market for the distribution of mobile telephony products and services, it was estimated in the aforementioned decision of the Minister of January 4, 2008 at between 20% and 30% on a global market.At this stage of the investigation, it is not possible to estimate France Telecom’s share in a market that would be limited to offers linked to smartphones or communicating PDAs.The elements in the file show that it would be likely to evolve quickly, depending on the exclusivities negotiated between manufacturers and operators and the releases of new models.
  1. IN THE DIGITAL PLAYERS MARKET
  1. Bouygues Telecom maintains that, whatever the scope of the relevant market, whether it is the overall market for digital music players or the market for portable music players.

39 Article from 11/18/2008 on the site www.lefigaro.fr

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flash memory, Apple is in a dominant position with market shares in France estimated at 48% on the first and 47% on the second.

  1. The Council had noted, in its decision n ° 04-D-54 dated November 9, 2004, that there were three types of digital music players:flashmusic players whose storage capacity did not exceed, on the date of the decision, 258 million bytes (MB), ” small hard disk ” players, with a capacity varying from 1.5 GB to 5 GB, and hard disk players with a capacity ranging from 20 GB to 80 Go. He noted that the capacity of portable flash players was increasing rapidly and that the intermediate segment of portable players with a capacity of a few GB should therefore quickly include hard disk players and flash players.
  2. Despite the dynamism of competition observed in these markets, with price reductions, the arrival of new entrants and numerous technological innovations, the Council did not rule out, at the stage of examining the request for precautionary measures, that the Apple company had a dominant position in the market for digital music players with hard drives.
  3. In the opinion delivered on the present case, Arcep notes that the success of the iPod in these markets has since been confirmed, but does not put forward any other data on Apple’s position than those already mentioned. above and from the study commissioned by Bouygues Telecom.However, the declarations of FNAC which appear in the file confirm these estimates (see paragraph 77 above).
  4. In addition, the growth in the capacity of portable flash players has been confirmed and the strong position noted by the Council in 2004 has been maintained.It cannot therefore be excluded, in the state of the investigation, that Apple occupies a dominant position in the market for digital music players.
  1. ON THE ONLINE PAY MUSIC DOWNLOAD MARKET
  1. Bouygues Telecom maintains that according to the SNEP (National Union of Phonographic Publishing), theiTunes Music Storeis by far the leading paid online music download platform in France with 60% of total turnover, ahead of Virgin Mega whose market share would be estimated at 19% and Fnacmusic which would be at 17%.
  2. In its decision n ° 04-D-54 already cited, the Council had considered, at the stage of the examination of the request for precautionary measures, the existence of a national market for downloading music online, excluding exchange networks and direct listening.Noting that it was at the time a nascent market, in which multiple entries were noted and expected, and that Apple’s entry into this market only dated back a few months, the Council had also not excluded, given the success of its offer, that Apple occupied a dominant position in this market.
  3. Four years later, the success of the online paid music download platform has not been denied and it cannot therefore be ruled out, in the state of the investigation, that Apple occupies a position in this market. dominant position.

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  1. ON THE PRACTICES DECLARED
  1. Bouygues Télécom essentially denounces its exclusion from the marketing of the iPhone, the unjustified nature of the selection criteria defined by Apple and the restrictions imposed by Apple and Orange on the freedom of resale of these authorized distributors.However, the set of restrictions is justified by the companies questioned by the fact that Apple has designated Orange as the exclusive operator for French territory.
  2. The Council will therefore first examine this set of restrictions organizing and locking in the exclusivity granted to Orange and then secondly, the other restrictions of competition contained in the contracts denounced but unrelated to the exclusivity itself.
  1. OUR THE EXCLUSIVE GRANTED BYA HIPC At O RANGE AS A ‘ OPERATOR AND WHOLESALE NETWORK FOR DISTRIBUTION OF ‘ I P HONE
  1. The initiating company considers that the exclusivity granted by Apple to Orange distorts the free play of competition in the market for mobile telephony services, in violation of Article 81 of the EC Treaty and of Article L. 420- 1 of the Commercial Code.
  2. Apple claims on the contrary that the exclusivity granted to Orange is justified and pro-competitive.She recalls that her choice of a single network partner stemmed from an imperative of speed in the launch of the iPhone 2G: “multiplying the partners would have had the effect of multiplying and increasing the tasks that Apple, a new entrant. , could not afford under penalty of seeing its activity slowed down and its projects potentially compromised, weakened or delayed ”. It specifies that it only turned to Orange after the failure of negotiations with Vodafone / SFR and after noting that Bouygues Telecom had “not shown any intention to deploy its 3G network “; “ Bouygues Telecom’s reluctance to fully enter 3G and its technological wanderings when Apple was in the process of selecting a new partner disqualified it automatically ”.
  3. In any event, Apple maintains that, given its very low market share on the upstream market for terminals, the agreements it has concluded with Orange are covered by Block Exemption Regulation No 2790 / 1999 of December 22, 1999 which exempts supply and exclusive distribution agreements when the supplier’s market share does not exceed 30%.It adds that it should even benefit from the presumption of legality of agreements of minor importance for market shares below 15%.
  1. a) On the application of the exemption regulation on vertical restraints
  1. It is apparent from the findings made above, first of all, that Orange is the exclusive network operator selected by Apple for France.This restriction results mainly from the stipulations of the partnership contract signed between Apple and Orange on October 12, 2007. Orange is not the exclusive distributor of the iPhone, other independent distributors may be approved by Apple.But the exclusivity granted to it as a network operator is reinforced in the selective distribution contracts offered by Apple to authorized distributors, which include, among the criteria for selecting points of sale, the obligation to offer for sale the full range of telephony services

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mobile for iPhone ” from each authorized network operator within the selective distribution territory “, that is to say, Orange for France, and to be able to activate its services 40 . The exclusivity is finally locked by the stipulation of the distribution contracts signed between Orange, as a wholesaler, and the distributors approved by Apple, according to which ” the reseller will not market the terminals in a telephony offer which is not that of Orange. Notwithstanding what has just been specified, the reseller will be able to sell bare terminals but whose SIM card will be blocked on the Orange network ” 41. Finally, it emerges from article 5.1 of appendix 3, “French approved country addendum” of the first addendum, dated May 15, 2008, to the distribution contract signed between Orange and Apple on October 12, 2007, that ‘Orange is the exclusive wholesaler for France of the iPhone. Distributors authorized by Apple can therefore only obtain supplies from it, under the conditions specified above.

  1. This combination excludes any marketing of the iPhone in the single-brand networks of network operators competing with Orange, since these, by definition, do not offer Orange services.Both Apple and Orange therefore cannot usefully argue, as they do, that Bouygues Telecom has not applied to become an authorized distributor.In addition, a consumer can only access the services of an operator competing with Orange by purchasing an iPhone not associated with a package with a commitment period with Orange, that is to say “naked”. , and by requesting the “unlocking” of the SIM card “blocked on the Orange network” for the sum of 100 euros.
  2. Secondly, unless otherwise stipulated in the “Approved Country Addendum”, Orange can only buy the iPhone from Apple and not from other sources42. The “France Approved Country Addendum” does not modify this clause and adds “ Apple reserves the right to distribute Approved Products directly to customers in Approved Countries and to designate other distributors ” and “ given that the Approved Country does part of the European Economic Area (“EEA”), the parties acknowledge that Orange may sell Authorized Products to customers in another EEA country unless Apple has reserved or reserved with another distributor, exclusively, the other country of the EA concerned“. In the latter case, it is specified that only so-called “active” sales are concerned and not so-called “passive” sales 43 . The same contract also provides: ” to the extent permitted by applicable law, Orange will take all necessary measures to ensure that neither Orange nor any Authorized Point of Sale sells Authorized Products to a buyer who intends to export them to for purposes of sale outside the Authorized Country ” 44 .
  3. Likewise, as already noted above, it is stipulated in the contracts signed between Orange and the authorized distributors that the latter will purchase iPhones “exclusively and directly from Orange.The reseller may not purchase the authorized Products from other sources of supply without the prior written consent of Orange, and must resell them exclusively at authorized points of sale located in the territory [France] ” 45 . A clause providing for an alert mechanism for imports

40 Clause 2.2 of the approval criteria for the contract signed between Apple Sales International and FNAC, reference 1639.

41 Article 5.4 of the contract between Orange and the distributors.

42 Article 2 of the first amendment to the Orange / Apple distribution contract of October 12, 2007, reference number 3516.

43 Articles 5.1 and 5.2 of the “Addendum Pays Agréé-France”, reference number 3526.

44 Article 5.3 of the first amendment to the Orange / Apple distribution contract of October 12, 2007, reference number 3518.

45 Article 2 of the contract between Orange and the distributors.

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of iPhones completes the device: “ the reseller will promptly inform Orange of any Authorized Products imported or supposedly imported by a third party bearing the trademarks of Apple and which have not been distributed or manufactured by Apple for sale in the Territory [France ] , as soon as he becomes aware of the import ” 46 .

  1. The effect of these clauses is to avoid any circumvention of the exclusivity granted to the network operator Orange through imports from other countries and to protect, likewise, the exclusivity granted by Apple in the other countries.
  2. All in all, the agreements concluded between Apple and Orange, as well as the distribution contract offered by Apple to authorized distributors, on the one hand, and by Orange to the same distributors, on the other hand, combine several vertical restrictions which affect resale of the iPhone to end consumers: exclusive distribution at the wholesale stage;exclusive supply by allowing only one network operator to associate its services with the terminal concerned;selective distribution of the product at the retail stage; the prohibition of cross-selling between authorized wholesalers and between authorized retailers.
  3. As they stand and subject to a substantive investigation, these restrictions cannot be regarded as qualifying for the block exemption established by Regulation No 2799/1999, for several reasons.
  4. First, the restriction on cross-deliveries between distributors within a selective distribution system is one of those which exclude the application of the exemption to the whole of the contract concerned, in this case the contract of distribution signed between Orange and Apple, as well as the contracts signed between Orange and authorized distributors (Article 4 of Regulation No 2799/1999).
  5. Second, if the block exemption regulation creates a presumption of legality for vertical agreements when the market share held by the supplier or the purchaser is less than 30%, it should be noted that, in the event that the agreement contains an exclusive supply obligation, as defined in Article 1 (c) of the Block Exemption Regulation, it is the buyer’s share of the market in which he buys contractual products or services which must not exceed the 30% threshold for the block exemption to apply47. Article 1 st c, specifies that “Exclusive supply obligation means any direct or indirect obligation requiring the supplier to sell the goods or services designated in the agreement only to a buyer within the community for a specific use or for resale “. The guidelines also specify that exclusive supply is part of a category of restrictions that they present as “limited distribution”, and defines it as an express obligation or an incentive mechanism according to which the supplier does not sell exclusively or mainly than to a buyer in a given market 48 .
  6. In the present case, Orange’s share, as a purchaser of the exclusivity of a network operator, was 43.8% in September 2008, in fleet data.In the 13th report on the markets for electronic communications in 2007, the European Commission noted the relative stability of the market shares of operators, with 44.3% for Orange. These are figures that exceed the 30% threshold.

46 Article 5.8 of the contract between Orange and the distributors.

47 paragraph 21 of guidelines 2000 / C291 / 01 of 22 October 2000.

48 paragraph 109 of guidelines 2000 / C291 / 01 of 22 October 2000.

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  1. In any event, the presumption of legality conferred by Block Exemption Regulation No 2790/1999 can be set aside if a vertical agreement falls within the scope of Article 81 (1) of the processed and does not meet all the conditions laid down in Article 81 (3). This may be the case where a supplier, or a buyer in the case of exclusive supply agreements, who has a market share not exceeding 30%, concludes a vertical agreement which does not give rise to advantages of objectives such as to compensate for the damage it causes to competition49.
  1. b) Analysis of the effects of exclusivity granted to Orange
  1. The Council recalled on numerous occasions that the exclusivities of distribution or purchase were not anti-competitive in themselves.They may, for example, be necessary to ensure the profitability of an activity, in particular because of the existence of specific investments that the company would not undertake if it did not benefit from an exclusivity.As underlined in the thematic study published in the annual report for 2007, the Board therefore proceeds on a case-by-case basis: it is attentive to concrete market circumstances in its analysis of exclusivity agreements.
  2. In practice, the foreclosure or foreclosure effect that such exclusivity clauses may have depends on many factors, including the scope and extent of the exclusivity, the proportion of related demand, the duration or the combination of contracts over time, the conditions for termination and renewal, the geographical dispersion and the atomicity of demand.In its decision n ° 08-D-10 dated May 7, 2008, the Council thus noted the main elements to be taken into account in order to assess the anti-competitive nature of exclusivity clauses: “it is necessary […] to ensure that the exclusivity clauses do not establish, in law or in practice, an artificial barrier to entry into the market by assessing all of their constituent elements: the scope of application, duration, existence of a technical justification for the exclusivity, and the economic consideration obtained by the customer ”.

On the supplier’s position

  1. As Apple points out, its entry into the mobile terminal market is recent and its market share, even limited to communicating smartphones or PDAs, remains, evaluated on average over the last twelve months, very modest.In addition, Apple is only present in this market with one model, the iPhone 2G then the iPhone 3G, available in 8 GB or 16 GB.
  2. The release of this new product launched by Apple was nevertheless eagerly awaited and is proving, particularly since the release of the iPhone 3G, a great success.The specifics of the iPhone compared to other comparable phones have been underscored by numerous statements on the record.
  3. In fact, the growth in sales of 3G iPhones since its launch has been spectacular, as shown by the Canalys panels for the world market or GfK for sales in France only.Orange claimed to have sold, between July 18 and October 30, 2008, 216,000 3G iPhones.During the meeting, the operator announced 301,000 sales on November 7.
  4. Apple and Orange argue that only a few months can be observed, that this phenomenon is usual in the event of the launch of an innovative product and that the iPhone will soon be copied by Apple’s competitors in the terminal market. .In particular, they highlight

49 paragraph 71 of guidelines 2000 / C291 / 01 of 22 October 2000.

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before the competition of the manufacturer RIM with the Blackberry brand and its Curve, Pearl, Bold and Storm models, the latter equipped with a touch screen and available exclusively at SFR since the end of November. Nokia is also expected to add a touchscreen 5800 Xpress Media model to its E71, N96 and N95 models. HTC offers a Touch Diamond model and is due to launch a Dream touchscreen model in association with Google in early 2009 in France. Many press articles are produced to put the merits of the iPhone into perspective.

  1. The observation period available is admittedly very short and the market is showing a certain dynamism.It should be noted, however, that the duplication of Apple’s innovations is less obvious than the latter company claims.Apple observed that the iPhone would be protected by more than 200 patents. In addition, Apple may be a new entrant in the mobile terminal market, but it has significant advantages. The first is the possession of a well-known mark. According to documents communicated by Orange: “ Apple’s greatest strengths are the brand and the marketing strategy. Apple is one of the most sophisticated brands of modern times, on par with Nike. It excels in attracting the attention of the media, traditional or online, in a promotion that greatly exceeds its market share. She succeeds in creating a special relationship with her clients, who frequently turn into proselytes of the brand ”. In addition, according to the terms of the partnership contract signed between Orange and Apple, “ Apple is an undisputed leader in the computer and consumer electronics industries, leading the industry in innovation with its award-winning computers and the Mac OS X operating system and at the forefront of the industry. digital multimedia revolution thanks to its iPod music and video players, as well as its iTunes online store. This year, Apple will enter the mobile phone market with its revolutionary iPhone ”.
  2. In fact, Apple’s strong position in the digital music player market noted above could have a leverage effect on its position in the mobile terminal market, especially since the iPhone offers, between others, the functions of an iPod.The same is true of Apple’s strong position in the market for paid online music downloads, given the ease of use that iPod / iPhone users enjoy in purchasing protected online music. by DRM on theiTunes Music store .
  3. The iPhone therefore appears to be a particularly attractive product supplied by a player which has indisputable advantages on the market.

On the duration and scope of exclusivity

  1. Regarding the duration, that of the partnership is five years from the signing of the initial contract in October 2007. Apple, however, has the option of terminating the contract without compensation after three years.The Apple representative said: “[t] he initial contract is for 5 years but Apple can terminate it after three years. In our mind, it’s more of a three-year contract. This point was central in the negotiations. Apple would have preferred a shorter period than three years for this exit option“. A period of five years, even with the possibility of early retirement at the end of three years, is exceptionally long with regard to the practices of the sector as they emerge from the declarations of other manufacturers as well as with regard to the average lifespan. terminals on the market, which would not exceed one year (see above paragraphs 21 and 32). The exclusivity also covers all Apple terminals, including the new models released after the iPhone 2G. This is how Apple explained that although it launched the iPhone 3G without exclusivity in many countries, it had not been able to do so in countries where it was still bound by the contract. In progress,

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as in France, where the iPhone 3G was launched under the contract signed in October 2007, amended in May 2008.

  1. Arcep confirms, in the opinion delivered in the present case, that the exclusivity in question“goes far beyond the usual practices of the mobile telephony sector, which grants exclusive distribution rights limited to a few months and a specific terminal.It is generally observed that the contracts concluded between operators and equipment manufacturers set exclusivity for a period of 3 to 6 months for a given terminal ”.
  2. Regarding the scope of exclusivity, Orange explains, however, that this exclusivity is not total, insofar as customers are able to purchase a “naked” iPhone and then subscribe to the services of the operator of their choice.It thus states that on September 15, 2008, it counted 20,076 2G iPhones and 5,797 3G iPhones which had been unlocked or “unlocked”, mainly active on the SFR network but also on the Bouygues Telecom network.Apple confirms, with the same arguments, that this is only a “first presentation exclusivity”.
  3. However, it was seen above that the iPhone distribution criteria required that the product always be offered with an Orange service and, at least, an Orange Mobicarte on which the device is locked or “simlocked”.Orange claimed that this card, worth 10 euros, is provided free of charge.If consumers request the unlocking of the device for use on a network other than that of Orange before a period of six months, they must pay a sum of 100 euros.
  4. Of course, locking the SIM card is, as the DGCCRF explains on its website, a process authorized in France to deter fraudsters and thieves from selling terminals in France or abroad.It prevents a terminal from being used on a network other than the one that provided the SIM card: it is only after six months that consumers can request the unlocking of the device free of charge.
  5. Nevertheless, the constraints imposed by Orange on consumers, directly or indirectly through the intermediary of authorized distributors, do not correspond to the analysis made by the Minister of the application of Article L. 122-1 of the Code of consumption, prohibiting tied sales, sales of mobile telephone boxes since, on the contrary, it asked operators to always ensure that alongside the packs, they offer, when technically possible, offers making it possible to acquire separately terminals and services50.
  6. Orange explains these constraints (see paragraph 81 above) by the need to allow the activation of terminals on its network.This activation must however be ensured by Orange only insofar as the terminal is intended for use on its network and not when the customer wishes to purchase a truly “bare” terminal for use on another network.The systematic locking of the device on an Orange SIM card and the resulting obligation for consumers to pay Orange a sum of 100 euros to have it unlocked can therefore only be explained by Orange’s desire to avoid that the exclusivity of network operator on the iPhone from which it benefits be bypassed by means of sales of “bare” terminals. If despite these obstacles,

50 Conclusions of the round table between operators and consumers of September 27, 2005, number 54.

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competing operators to match the rates offered by Orange. Indeed, they must compensate for the expense of 100 euros borne by their customers to have their terminal unlocked.

  1. It is therefore confirmed that the exclusivity, of a particularly long duration, covers a very wide field.

On the buyer’s position and the competitive situation on the market concerned by the exclusivity

  1. The exclusivity granted to Orange by Apple relates essentially to the operator’s network on which the iPhone will operate.The instruction has not confirmed at this stage the existence of interoperability issues that would prevent iPhones from working on a competing network once the initial locking issue on the Orange SIM card supplied with the terminal has been resolved.However, it appears from the contracts concluded between Orange and Apple, as well as between Orange and the authorized distributors, on the one hand, and Apple and the authorized distributors, on the other hand, that the distribution is organized in such a way that the iPhones can only be sold in conjunction with Orange mobile telephone services. On the other hand, Orange does not benefit from an exclusive distribution,
  2. It is therefore on the market for mobile telephony services that the effects of exclusivity must be mainly analyzed.In the market for the distribution of mobile telephony products and services, the distributors excluded from the distribution of offers integrating an iPhone are SFR or Bouygues Telecom single-brand distributors, whether or not they are subsidiaries of these operators, for whom the sale of iPhones associated with Orange services is of no interest.The cross-selling bans within the distribution network are essentially designed to protect the exclusivity enjoyed by Orange as a network operator.
  3. In the market for mobile services, Orange has a leading place with 43.8% of subscribers, whose position the Commission noted stability in the 13threport on the electronic communications markets. It is therefore necessary to examine to what extent the exclusivity granted to it by Apple could be likely to strengthen its position and generate exclusionary effects vis-à-vis its competitors, or to weaken the competition that mobile operators engage among themselves.
  4. Compared to the indicators available on the mobile telephony market, the data on sales of iPhone 3G since its launch confirm the strong attractiveness of the product.216,000 terminals sold from July 18 to September 28, 2008, a little over two months, represent 11% of the total gross sales of post-paid offers in mainland France in the third quarter 2008 and 50% of Orange’s net sales on the same period.In session, Orange said the iPhones sold represented about 15% of its gross sales. On the other hand, given the volatility of operators’ market shares in net sales from one quarter to another,
  5. The figures for actual and anticipated sales of 3G iPhones can be put into perspective with the sales made by Bouygues Telecom and SFR51on terminals

51 SFR questionnaire p. 7.

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close to the iPhone 3G, and often presented as “iPhone Killers”. Thus, Bouygues Telecom declared 52 having sold 12,000 copies of the HTC Touch Diamond since July 2008; 3,000 copies of the Blackberry Bold since September 2008, and 4,000 copies of the Samsung Player Addict since October 2008.

  1. The effect on the market can be all the more important as the acquisitions of iPhone are associated with relatively expensive plans and with significant consumption of mobile Internet and multimedia uses: they therefore concern subscribers to more. high value for operators.
  2. Apple and Orange note, however, that this phenomenon is usual in the event of the launch of an innovative product and that the iPhone will soon be copied by Apple’s competitors in the terminal market.In particular, they highlight the competition of the manufacturer RIM with the Blackberry brand, and the fact that SFR exclusively launched the latest Blackberry Storm model, placed in the category of “iPhone killers”.Likewise, SFR announces an exclusivity for the launch of the Google G1 in France at the beginning of next year.
  3. The durations of these exclusivities negotiated between SFR and certain manufacturers are not known.As seen above, exclusives, other than that granted by Apple to Orange, are generally launch exclusives, for a period of one to six months.However, if it turned out that the duration of the exclusives negotiated by SFR was longer, this would show that the market is moving towards greater differentiation of the offers of mobile telephone operators, which are now based not only on the offer of a volume of communication or data exchange at a certain price and the amount of the subsidy of the terminals, but also on the models of terminals offered.
  4. However, the Council has already had the opportunity to note that competition on the French mobile telephony market presented, compared to the situation observed on the main European markets, several handicaps (see opinion 08-A-16 of July 30, 2008):
  • France is the only European country of its size to have only three network operators;
  • the entry of MVNOs is relatively recent and the competitive pressure they exert remains weak and confined to niches neglected by network operators;the market shares of MVNOs recorded elsewhere on the European markets are all the higher the earlier they entered (in 2006, nearly 25% of the customer base in Germany, more than 22% in Norway, 15% in the United Kingdom). United and the Netherlands);
  • France remains the country with the lowest mobile penetration rate in Europe, a characteristic which had already been noted by the Council for the beginning of the 2000s (see decision n ° 05-D-65 of November 30, 2005);
  • subscriptions with a long-term commitment are predominant, France being the European country where prepaid is the least developed, with 33% of the total fleet in the first half of 2008. Within the post-paid offers, preference is given to those with a commitment of 12 or 24 months.These long-term commitments are obtained from consumers in exchange for very attractive prices offered on terminals subsidized by operators; in

52 Call number 5155 and 5156.

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On the other hand, the costs of changing operators are high and contribute to the rigidity of the market. Loyalty programs offered by operators add to this further. These operator change costs reinforce the locking effects of any type of exclusivity accompanying the entry into the market of a new product. Exclusivity has the effect of artificially reinforcing these costs of changing operator, a danger that the Council had already mentioned in the thematic study it had devoted to “Exclusives and long-term contracts” in the annual report for the year 2007.

  1. Orange claims that the market is highly competitive, driven by the proliferation of so-called abundance offers which allow consumers to make telephone calls or exchange data for an increasingly low unit price.However, as the Council noted in the opinion cited above, if the average prices per minute are sharply downward, it is because of the increase in the volumes consumed within the framework of the unlimited offers, while the face prices of offers, that is to say the effective monthly bill of consumers, does not fall and has even tended to increase with the arrival of so-called“abundance” offers, the prices of these packages being higher than those marketed previously, which have disappeared from the catalog of operators’ offers.
  2. Consequently, the elements gathered at this stage of the investigation show that the duration and extent of the exclusivity, as well as the attractiveness of the product concerned by the exclusivity, are likely, due to the position held on the market for mobile telephony services by Orange and the low intensity of competition which is already observed in this market, to strengthen this position or directly weaken the competition between mobile operators in this market.

On efficiency gains

  1. Apple, Orange France and France Telecom argue that the exclusivity is justified by Apple’s concern to simplify the launch of the iPhone and reduce its marketing costs.They also highlight the need to ensure the amortization of investments made by Orange and stress that exclusivity allows the iPhone 3G to be sold at a more attractive price for consumers.Orange claims to have taken a risk by marketing a new product supplied by a new entrant on the market.
  2. The guidelines published by the European Commission on vertical restraints do not exclude that an exclusive distribution system can produce efficiency gains, in particular when distributors have to make investments to protect or build the image of the brand and also notes that in general, the efficiency gains argument is more convincing for new products, complex products or even products whose qualities are difficult to assess before consumption53.
  3. In the thematic study devoted to exclusives, already cited, the Council detailed the various considerations likely to justify the restrictions of competition linked to exclusives.A first series of justifications relates to the need for companies to ensure the profitability of their investments.The profitability of an investment depends on the comparison between an immediate expenditure and a flow of expected future income, discounted by an adapted interest rate (weighted average cost of capital), taking into account the risk. Large investments may not be

53 paragraph 174 of guidelines 2000 / C291 / 01 of 22 October 2000.

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profitable only on the condition that the investor has visibility over a sufficiently long period, allowing him to hope for a return on investment under economically reasonable conditions. Long contract terms can be a way to ensure such visibility. Other justifications relate to the achievement of efficiency gains that benefit the parties concerned and consumers and to technical reasons related to the organization of the production process.

  1. Two pro-competitive scenarios were raised by the parties and discussed during the meeting.First, France Telecom highlighted the specific investments linked to the marketing of the iPhone, and justifies the duration of the contract by the need to make this investment profitable.Secondly, the parties argued that the exclusivity contract included, in its version of May 2008, a commitment by Orange to heavily subsidize the terminal, this subsidy conditioning the success of the iPhone penetration. These two arguments, which may support the pro-competitive nature of the exclusivity contract, will be examined in turn.
  2. When the final product or service offered on the market requires specific investments on the part of one of the suppliers, a contract of a certain duration can protect the investor against the risks of opportunism on the part of the supplier. other part.Such a risk would in fact discourage investment and the duration of the engagement then has a pro-competitive effect.It is therefore necessary to examine whether, in the light of the elements collected in the current state by the investigation, the amount of the specific investment justifies the duration of the exclusivity.
  3. At the meeting, the representatives of France Telecom thus pointed out that the specific investments made under the partnership since October 2007 amounted to 86.5 million euros, broken down as follows:
  • 40 million euros retroceded to Apple as part of the revenue sharing provided for in the initial contract,
  • € 30 million for the 3G iPhones subsidy,
  • 4 million euros for the advertising fund created by the partnership contract until July 18, 2008, to which were added 3.8 million euros for the launch of the iPhone 3G, the fund having been times increased by 10 million,
  • 2 million promotional expenses and 1 million for the training of dedicated personnel,
  • 1.7 million for the development of network elements linked to Voice Vocal Mail specific to the iPhone,
  • expenses related to patent development.
  1. However, the sums paid to Apple for the sharing of income on consumption generated by the iPhone 2G cannot be analyzed as specific investments since they are income and are by definition variable. .In addition, the subsidization of terminals is, as was said above, a common practice, which is not specific to the iPhone.The argument that exclusivity would allow a higher level of subsidy will be discussed below.
  2. The investments that can be considered as specific to the iPhone, made for advertising, the training of dedicated personnel and the technical developments necessary to adapt the network to the functions of the iPhone, must be compared. the time needed for their amortization.In this case, the sums advanced, namely

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16.5 million, part of which was invested for the launch of the iPhone 2G, appears relatively small compared to the turnover that Orange derives from the sale of iPhones and the plans associated with it. These revenues were not specified by Orange but it can be noted that the 301,000 iPhones already sold from July 18 to November 5, 2008 represent guaranteed revenues for Orange of around 177 million euros if the average amount of the packages subscribed is 49 euros with a 12-month commitment, to which is added the income related to the sale of the boxes, or 222 million in total if the average income is 149 euros per box.

  1. It is therefore necessary to balance on the one hand a specific investment amount of 16.5 million euros backed by an exclusivity of five years, if Apple does not apply the exit clause after three years, and secondly, a turnover of 222 million euros already guaranteed with sales made in three and a half months.This comparison clearly establishes the disproportion between the amount of the investment granted and the duration of the exclusivity.
  2. The representatives of Orange argued during the meeting that the specific investments should only be able to be made profitable by the only income linked to exclusivity, that is to say the income from sales that would have been made by competitors if Orange had not benefited from exclusivity, ie only half of actual sales given the market shares of the various operators.This reasoning cannot be accepted insofar as the competitive analysis aims to determine whether the harm to competition can be justified by the fact that the marketing of the product requires specific investments, which without exclusivity could not be amortized.
  3. Furthermore, the concept of risk put forward by Orange cannot be distinguished from that linked to investments specific to the launch of the product.
  4. It should also be noted that this risk was very relative in this case insofar as, although Apple was a new entrant in the mobile terminal market, it held a global brand whose reputation is not debated (cf. . above paragraph 153) and that the electronic products which it has been launching over the past few years have enjoyed considerable success.As already mentioned above, the iPhone was eagerly awaited during the negotiations between Apple and Orange.
  5. Second, Orange and Apple argue that France Telecom’s contractual commitment to subsidize iPhones substantially, in a higher proportion than what is practiced for other terminals, benefits consumers: it would be made possible by the exclusivity.
  6. Apple and Orange have, in fact, contractually organized the subsidy for iPhones so that it is greater than that for other terminals by at least 20%: it is at an average level of 310 euros (see above). at paragraph 65).
  7. It is nevertheless possible to question the causal link between exclusivity and the level of the subsidy.The fact that a manufacturer grants exclusivity on his product to a network operator exposes him to the risk of this operator marketing this product at a monopoly price.In this context, clauses fixing a minimum amount of subsidy constitute a means for the manufacturer to impose a maximum resale price. It is therefore the exclusivity and the absence of competition that justify the manufacturer’s setting the level of the subsidy to guard against the risk of an excessively high resale price to the consumer. It has not been shown that the absence of exclusivity, and therefore the free play of

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competition on the selling price to the consumer, does not allow a similar result to be achieved.

  1. Another justification could consist in the fact that the sale of the iPhone associated with the services of the sole operator Orange makes it possible to withdraw from consumers a maximum amount of surplus which is then used to finance a high subsidy.It would be instructive to be able to compare the subsidy levels offered, on the one hand by a monopoly operator and, on the other hand, competitively.Several types of data could theoretically be used for this comparison.
  2. However, it is very difficult to compare the selling prices of terminals to consumers and therefore to compare the prices of terminals sold with and without exclusivity.Indeed, as has already been explained above, consumers acquire a system good, consisting of a terminal and a telephone package.The considerations which determine operators to attract the consumer to one of the elements rather than the other are not known. The representatives of Orange thus pointed out during the meeting, and rightly so, that international comparisons were not enlightening, insofar as, in some countries, the terminals are usually not very subsidized and where in others, they are. a lot. Mostly, the comparison of the purchase prices of the boxes does not make sense if we do not compare the packages to which these prices are associated. The table provided by Orange and reproduced in paragraph 33 shows, however, that terminals sold by a single operator do not benefit from a higher level of subsidy than those offered by several competing operators. Of course, to be perfectly rigorous, this comparison should include the characteristics of the packages accompanying the terminals. However, it results from this comparison that when two or three operators offer the same terminal associated with their services, they engage in “subsidy” competition which results in often higher levels of subsidization than when a terminal is offered as a monopoly. This finding therefore does not validate the thesis according to which exclusivity makes it possible to subsidize the iPhone at a level higher than that of the terminals sold in competition and would make it possible to accelerate the penetration of a new terminal model.
  3. In any event, the Council accepts that Apple itself explains that it no longer wishes to grant exclusivity54: “ the special rights granted to certain operators, including the one linking Orange to Apple for the iPhone in France, are therefore residual but do not correspond to an absolute and necessary model for Apple, which on the contrary does not wish to grant new ones in the current configuration ”. The exclusivity initially granted to certain operators was the consideration for the 30% retrocession initially requested by Apple from certain operators but is no longer justified since Apple abandoned this revenue-sharing model.
  4. Thus, the elements gathered at this stage of the investigation are capable of showing that the harm to competition on the market for mobile telephony services resulting from exclusivity is not offset by efficiency gains at the consumer benefit.To this extent, the denounced exclusivity is likely to contravene Articles 81 of the EC Treaty and L. 420-1 of the Commercial Code.
  5. It is recalled that this exclusivity is organized by a set of clauses contained in the contracts concluded between Apple and Orange as well as by the distribution contracts concluded between Apple and the authorized distributors, on the one hand, and Orange and the authorized distributors,

54 p. 45 of the observations of 3 November 2008.

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on the other hand. These clauses, presented above in paragraphs 136 to 139, are all covered by the preceding paragraph.

  1. It should also be noted, at this stage of the investigation, that cross-selling bans are also likely to restrict competition on the market for the distribution of mobile telephone products and services, in particular violation of Articles 81 of the EC Treaty and L. 420-1 of the Commercial Code.
  1. SUR THE OTHER RESTRICTIONS OF COMPETITION ACCOMPANYING THE DISTRIBUTION OF’ I P HONE
  2. a) On the imposed selling prices
  1. Bouygues Telecom maintains in its referral that the retail price of the iPhone is imposed on authorized distributors.
  2. The companies Apple and Orange argue that no contract mentions the existence of an imposed minimum price, and that the resale price of iPhones to end users is freely set by authorized resellers.Apple explains that distribution is organized by Orange, “the exclusive wholesaler of iPhones” and that no mechanism for monitoring retail prices and reporting price information is organized within the framework of selective distribution.Finally, they consider that the proof of a significant application by resellers of prices possibly desired by Apple has not been provided.
  3. An examination of the contracts shows that no stipulation requires authorized distributors to comply with the minimum prices recommended by Orange.On the contrary, the distribution contracts between Orange and the distributors provide55 that resellers remain free to determine the resale price of 3G iPhones. Only compliance with a maximum resale price communicated by Orange is provided for (clause 5.11 of the distribution contracts between Orange and the distributors).
  4. In addition, appendix 1 to the standard contract between distributors and Orange provides that resellers send sales reports to Apple.However, these reports only relate to sales volumes and exclude any feedback on sales prices.Subject to the elements that may be provided during the investigation on the merits, no imposed sale price practice could therefore be updated at the stage of examining the request for provisional measures.
  1. b) On the selection criterion which requires authorized resellers to sell at least 30% of “iPod” digital music players
  1. Among the criteria for selecting authorized distributors of the iPhone as reproduced above in paragraph 75 is the obligation to sell iPods, Apple Macs and mobile phone products and services from the iPhone. ‘Network operator in France, ie Orange, and to achieve at least 30% of its turnover in MP3 players with Apple iPods (clause 1.5).
  2. This clause is justified by Apple for the sake of ensuring that distributors of iPhones are familiar with Apple products.However, as shown by reading all the alternative criteria relating to the legal entity of the resellers, reproduced above in

55 Clause 5.11 of the distribution contract between Orange and independent resellers.

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paragraph 75, Apple provides for the possibility of authorizing distributors who only sell iPhones in the range of Apple products. Clauses 1.2 and 1.3. are targeting distributors specializing in mobile telephony, Orange single-brand or multi-brand without requiring them to sell Apple products. This is also the case for the first authorized distributor, Orange with the Orange stores.

  1. In view of the position held by Apple on the digital music player market, it cannot be excluded, subject to a substantive investigation, that this clause may be contrary to the provisions of Articles 81 and 82 of the EC Treaty, as well as than Articles L. 420-1 and L. 420-2 of the Commercial Code.
  1. ON THE REQUEST FOR PROVISIONAL MEASURES
  2. THEC ONSERVATORY MEASURES REQUESTED BY B OUYGUES T ELECOM
  1. Bouygues Telecom is requesting, as a precaution, that Orange France, France Telecom and Apple be ordered to take a series of measures which, according to it, will put an end to the serious infringement it denounces.She asks the Council:
  • to order the companies Apple, France Telecom, and Orange France to no longer force the distributors of the iPhone 3G terminal to associate the Orange service with the sale of the iPhone 3G when the latter is sold with a mobile telephone service. ;
  • to order the companies France Telecom and Orange France to oblige the France Telecom stores and the distributors of the Orange network to offer the naked iPhone 3G for sale, independently of any telephone service;
  • to order Apple Europe to integrate Bouygues Telecom into its distribution network in the same way as Orange as a “network operator” and reseller on the basis of objective and non-discriminatory qualitative criteria and pending these criteria ;
  • to order Apple Europe to grant requests for delivery of iPhone 3G terminals from Bouygues Telecom at non-discriminatory prices compared to other resellers;
  • to urge the Apple group to maintain the absence of any branding of mobiles by Orange;
  • prohibit the companies Apple Europe, France Telecom and Orange France from imposed pricing practices relating to sales of iPhone 3G terminals;
  • prohibit the companies Apple Europe, France Telecom and Orange France from any restriction on the freedom of sale, both active and passive, of distributors;
  • to prohibit the companies Apple Europe, France Telecom and Orange France from any restriction on exchanges between Member States”.
  1. SUR L’ SERIOUS INFRINGEMENT AND IMMEDIATE TO THE ‘ GENERAL ECONOMY , TO THAT SECTOR , THE INTERESTS OF CONSUMERS AND TO ‘ PLAINTIFF NOW
  1. Article L. 464-1 of the Commercial Code gives the Board the power to “take the precautionary measures which are requested of it or those which it deems necessary.These measures can only be taken if the practice denounced causes serious harm and

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immediate to the general economy, to that of the sector concerned, to the interests of the consumer or to the complainant company […] They must remain strictly limited to what is necessary to face the emergency ”.

  1. According to Bouygues Telecom, the practices complained of have detrimental effects on intra-brand and inter-brand competition on the smartphone market and would affect competition on the market for telephony services.It asserts that the practices complained of would harm the interests of consumers, who would be deprived of the possibility of benefiting from a more competitive offer from an operator other than Orange.These consumers would also suffer from the high cost of “unlocking”.
  2. Apple considers that there is no risk that a possible generalization of exclusive partnership agreements may have a cumulative effect of foreclosure or foreclosure of certain mobile Internet operators insofar as “exclusivity is imposed on the manufacturer and not on the telecommunications operator, the number of manufacturers of mobile terminals greatly exceeds the number of telecommunications operators on the market“.It adds that it is not conceivable to think that the denounced agreement would have the effect of leading to Orange’s monopoly on the mobile Internet segment, since SFR is currently the leader in this segment. For Orange, intra-brand competition is not affected by the practices denounced insofar as more than 1,300 points of sale market the iPhone. Then it indicates that inter-brand competition is very keen. Finally, it considers that the hypothesis according to which the partnership would have the effect of inducing the development of exclusive contracts has not been demonstrated.
  3. Apple considers that consumers’ freedom of choice is not restricted insofar as it is still possible to buy a bare iPhone and choose its operator and that the subsidy granted by Orange actually allows consumers to purchase the iPhone. iPhone 3G at a great price.Finally, she believes that the establishment of the selective distribution system has enabled consumers “to discover and familiarize themselves with the iPhone 3G »And train specialist salespeople. Orange considers that no infringement can be attributed to the conditions of sale and unlocking of bare iPhones. It observes in particular that the iPhone has democratized the smartphone for the general public and considers that this result is the result of the operator as much as the manufacturer.
  4. It emerges from the competitive analysis made above that the exclusivity obtained by Orange as network operator for the iPhone, blocked by the conditions imposed on distributors, is of nature, because of its duration and its scope, as well as the attractiveness of the iPhone, to strengthen Orange’s pre-eminent position in the market for mobile telephony services and directly weaken the competition between operators in this market.This exclusivity is therefore likely to seriously harm the market for mobile telephony services and therefore consumers.
  5. The argument above was discussed in particular according to which the possibility left to consumers to have the iPhone unlocked against payment to Orange of a sum of 100 euros put the scope of exclusivity into perspective.This circumvention of exclusivity can only remain marginal and cannot moderate the damage to the market and consumers.
  6. The infringement is all the more serious since the Council, like Arcep and the European Commission, have already had several occasions to deplore a lack of competition in the mobile telephony market (cf. . the above developments and the opinion of the Council n ° 08-A-16 of July 30, 2008).However, at a time when the development of mobile Internet and the launch of unlimited data exchange offers by

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operators could animate the market, the exclusivity of Orange on the iPhone is likely to introduce a new factor of rigidity targeted on this new segment of the market. This effect is all the more worrying given that, as recalled above, several characteristics of the mobile telephony offer in France, the preponderance of offers with duration commitments, the existence of loyalty programs, and more. generally, factors raising the costs of switching operators are already tending to reduce the competitive game in this market.

  1. The recent announcement by SFR of the conclusion of partnerships with two manufacturers, Blackberry and HTC, does not lead the Board to put into perspective the effects of Orange’s exclusivity on the market.On the contrary, this response would confirm, if it were found that the exclusivities negotiated by SFR exceeded a few months, the risk of a cumulative effect of the type of partnership involved, which would lead operators to differentiate themselves through the models of terminals offered. and promote vertical partitioning of the market.Such a development would have the effect of further reducing competition between operators on prices, on the quality of networks and infrastructures, as well as on the quality of customer services. It is also likely to further increase the costs of changing mobile operators. For example, the iPhone works under a specific operating system (Mac OS X). Apps downloaded and purchased from the App Store, as well as music purchased from the iTunes Store (with DRM) cannot be transferred to another smartphone running another operating system. Thus, the change costs specific to the telecommunications market are aggravated by the change costs specific to smartphones, linked to the lack of interoperability of operating systems, which means that consumers cannot change their smartphone brand without lose their music library or any apps they may have purchased.
  2. Such a structuring of the market can only be done to the detriment of the operator who holds the lowest market share, the latter being by nature the operator the least attractive for manufacturers.There is therefore a risk that Bouygues Telecom will eventually be excluded if this type of exclusivity becomes generalized.
  3. As regards the immediacy of the infringement, the importance of iPhone sales since its launch on the market should be taken into account.Orange announced at the meeting that 301,000 iPhones had been sold as of November 5, 2008. In addition, as Arcep points out in its opinion, sales of telephone boxes are particularly dynamic for the end of year holiday period: “the end of year holiday season is a pivotal period for mobile operators as evidenced by the number of mobile numbers ported during this period. In fact, since the launch of so-called single-window mobile number portability (May 21, 2007), there has been a peak in the number of mobile numbers ported in December 2007 (around 150,000 ported numbers), i.e. around 60%. more than the previous months. Consequently, we can estimate that for the 2008 end-of-year celebrations, the combination of the seasonality of the terminal market and the explosion of the smartphone market could have a significant cumulative effect for operators ”.
  4. However, not only has the preponderance of offers with a long-term commitment been noted overall, but it is even more marked in the case of terminals for which the prices, excluding subsidies, are relatively high.The current base price of the iPhone, 99 euros, comes with a 24-month commitment.It is therefore probable that a very

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large number of iPhone buyers commit to 12 or 24 months, which gives a certain irreversibility to the market damage.

  1. The exclusivity, direct and certain cause of the infringement, was granted to Orange by Apple in October 2007, for the marketing of the iPhone 2G.The marketing of the iPhone 3G benefited from the same partnership.At the date of this decision, the duration of the exclusivity will therefore amount to 14 months for the iPhone 2G and 5 months for the iPhone 3G. In view of the justifications provided by Orange and Apple, it is therefore not disproportionate to order, as a precaution, the suspension of this exclusivity until the Council has ruled on the merits.
  2. On the other hand, in the event that Apple is preparing, before the substantive investigation is completed, to put new iPhone models on the market, this suspension should not prohibit an exclusive “first presentation”. »Within the limit of what is usually observed on the market, ie three months.It has, moreover, been seen above, that the turnover guaranteed to the operator by three months of exclusivity was already of a considerable order of magnitude compared to the specific investments put forward by Orange for the launch of ‘a new model (cf. above in paragraph 183).

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DECISION

Article 1 : Apple Sales International, Apple Inc. and France Telecom are ordered, as a precaution and pending a decision on the merits, to suspend, upon notification of this decision, the application for France of the stipulations making Orange the exclusive mobile operator for iPhone products. They are also enjoined not to introduce into any contracts which may be concluded for the marketing of future iPhone models of exclusives of the same nature for a period exceeding three months. The first injunction has the effect of suspending:

  • article 2-1 a) and the reference to France in appendix 1) of the contract signed on October 12, 2007, “contract relating to key conditions”;
  • article 3.1 a) of the first amendment to this contract signed on May 15, 2008.

Article 2 : Apple Sales International, Apple Inc. and France Telecom are ordered, as a precaution and pending a decision on the merits, to suspend, upon notification of this decision, the application of stipulations designating Orange as a wholesaler exclusively authorized to purchase iPhone products for distribution. This injunction has the effect of suspending article 5.1 of appendix 3, “Model Addendum Country Approved – France” of the first amendment, dated May 15, 2008, to the distribution contract signed on October 12, 2007.

Article 3 : France Telecom is ordered, as a precautionary measure and pending a decision on the merits, to suspend, upon notification of this decision, the application of the stipulations of Article 3 of the distribution contracts signed with multi-brand distributors in France, which requires the distributor to only obtain supplies “ exclusively and directly from Orange. The reseller may not purchase the authorized Products from other sources of supply without the prior written consent of Orange, and must resell them exclusively at authorized points of sale located in the territory [France] . “And of article 5.4 of the same distribution contracts according to which “The reseller will not market the terminals in a telephony offer that is not that of Orange. Notwithstanding what has just been specified, the reseller will be able to sell bare terminals but whose SIM card will be blocked on the Orange network ”.

Article 4 : Apple Sales International, and Apple Inc. as a precaution and pending a decision on the merits, are ordered to suspend, upon notification of this decision, the application of the following clauses included in the selective distribution contract concluded with authorized distributors in France:

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  • clause 2.2 obliging each point of sale to offer for sale the full range of mobile telephone services for iPhone from each authorized network operator within the selective distribution territory and to be able to activate these services;
  • any reference to the “Network operator” insofar as it relates exclusively to Orange.

Deliberated on the oral report of Ms. Mac Namara by Ms. Perrot vice-president, chairperson, Ms. Béhar-Touchais, Mr. Honorat, members.

 

 

The session secretary,

Véronique Letrado

 

The vice-president,

Anne Perrot

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