Competition Council tears up Orange iPhone exclusivity deal

18 Dec 2008

The French competition watchdog has ordered Orange France and Apple to suspend the exclusivity deal they brokered in France which allowed the mobile operator to control the sale of the much-hyped iPhone 3G device in the country. The Competition Council said the decision would take effect from today (Thursday) at the latest, allowing customers to buy the phone with a contract from rival operators SFR and Bouygues Telecom in time for the pre-Christmas sales push. The council’s ruling follows a complaint filed by Bouygues Telecom which argued the exclusivity deal breached local competition laws. It is understood the Competition Council’s edict is temporary while the matter is investigated further, although the watchdog is concerned that the contract may undermine price competition, network quality and customer service.

France Telecom (FT) immediately released a press statement in which it said it intended to appeal a decision it claims ‘places France in a radically different position’ than the US, the UK, Germany and Spain, where Apple has also entered into strategic deals. It went on to say that the launch of the iPhone in France was largely based on an industrial partnership in which Orange has heavily invested. ‘This partnership has enabled a large number of people in France to benefit from innovative services at an attractive price,’ the statement reads.

FT goes on to say that the council’s decision ‘also undermines Orange’s efforts to develop high speed mobile services in France. It is ironic that the operator which is most behind in terms of rolling out its 3G network initiated this complaint. It should also be noted that it has taken over a year to request these ‘urgent’ conservative measures, which have finally been processed just before the end-of-year commercial period. Orange notes that the plaintiff, instead of offering genuine competition based on innovative offers, systematically turns to independent administrative authorities to maintain its privileged situation and curb commercial and marketing innovations offered by its competitors.’ Although the Competition Council argues the five-year exclusivity deal with Apple is ‘clearly excessive’, FT counters that the ruling is ‘a serious blow. It calls into question the economic structure of the market and in particular, the different partnerships made between mobile operators and handset manufacturers working in the best interests of consumers and promoting innovation.’ France Telecom has sold 450,000 3G iPhones to date as well as 150,000 first generation iPhones.

France, Orange France, Orange Group