Case C‑431/07 P, Bouygues and Bouygues Télécom v Commission

On July 28, 2000, the French government launched a call for applications for the award of four licences for the introduction of UMTS mobile and wireless communications systems in metropolitan France. The final date for lodging applications was set at January 31, 2001, and applications could be withdrawn until 31 May 2001.

Only two applications were received – from Société française du radiotéléphone – SFR (‘SFR’) and from France Télécom mobiles, which a few months later became Orange France SA (‘Orange’).

The French authorities considered that a further call for applications was necessary in order to ensure genuine competition. Without waiting for the launch of the supplementary call for applications, two initial UMTS licences were issued to SFR and Orange by two decrees dated July 18, 2001. Those two licences were granted in return for payment of fees amounting in total to EUR 4 954 593 000, to be paid in installments, the first of which was due on 31 September 2001 and the last on June 30,2016

Following the launch of the supplementary call for applications, the third UMTS licence was awarded to Bouygues Télécom on December 3, 2002, in return for payment of fees consisting of a fixed component in the amount of EUR 619 209 795.27, to be paid on September 30 of the year in which the licence was awarded or at the time of the award if that date fell after September 30, and a variable component to be paid annually before June 30 of each year for the use of the frequencies during the preceding year and calculated as a percentage of the turnover generated through the use of those frequencies. A fourth licence could not be awarded for lack of an applicant.

Moreover, in two further decrees concerning SFR and Orange respectively, the Minister for Industry amended, inter alia, the provisions regarding fees for the provision and operation of frequencies by replacing them with provisions identical to those applied to Bouygues Télécom.

On January 31, 2003, following a complaint from Bouygues and Bouygues Télécom concerning a series of aid measures which the French authorities had adopted in favour of France Télécom, the European Commission initiated the investigation procedure laid down in Art. 88(2) EC with regard to some of those measures, but not the measure aligning the fees due from SFR and Orange with those fixed for Bouygues Télécom.

The Commission eventually decided on the basis of Art. 88 EC not to raise objections to the measure aligning the fees, on the ground that it did not entail aid elements for the purposes of Art. 87(1) EC.

Bouygues and Bouygues Télécom brought an action for annulment of this decision, alleging infringement by the Commission, first, of Art. 87(1) EC inasmuch as the amendment of the fees to be paid by Orange and SFR constituted, in their view, State aid within the meaning of that provision and, secondly, of Art. 88(2) EC inasmuch as the case gave rise to serious difficulties and the Commission should therefore had initiated the formal procedure laid down in that provision.

The Court of First Instance dismissed the action. Bouygues and Bouygues Télécom appealed, alleging, inter alia, breach of the obligation to state reasons and a number of errors of law in the application of Art. 87 EC.

Statement of reasons
The Court first of all held that the grounds stated for the judgment under appeal made it possible, to the requisite legal standard, to understand the reasons for which the Court of First Instance held that, by reason of the general scheme of the system, the reduction in the fees due from Orange and SFR and, accordingly, the waiver of the claims against them could not be regarded as State aid.

The Court furthermore held that the procedure under Art. 88(2) EC was essential whenever the Commission had serious difficulties in determining whether aid was compatible with the common market. The Commission might therefore restrict itself to the preliminary examination under Art. 88(3) EC when taking a decision in favour of aid only if it was able to satisfy itself after the preliminary examination that the aid was compatible with the common market.

The Court reiterated that if, on the other hand, the initial examination led the Commission to the opposite conclusion or if it did not enable it to overcome all the difficulties involved in determining whether the aid was compatible with the common market, the Commission was under a duty to obtain all the requisite opinions and for that purpose to initiate the procedure provided for in Art. 88(2) EC (see, inter alia,
Case C‑521/06 P Athinaïki Techniki v Commission [2008], on which I wrote this post).

Not state aid

In the present case, the French authorities decided to award the UMTS licences by way, precisely, of a comparative selection procedure. The Court of Justice pointed out it was only because of the partial failure of the first call for applications, which did not enable enough licences to be awarded to ensured genuine competition in the market for telecommunications services, that the French authorities considered it necessary to seek further applications.

According to the Court, in such a situation the French authorities had three options open to them: to re-commence the procedure ab initio; to launch a new call for additional applications without retroactively amending the amount due from Orange and SFR by way of UMTS licence fees; or to launch a new call but with a retroactive amendment of those fees.

The Court argued that the option of re-commencing the procedure ab initio would have made it impossible to meet the 1 January 2002 deadline fixed by Art. 3(1) of Decision 128/1999 as the date on which Directive 97/13 had to be implemented by the Member States with regard to the coordinated and progressive introduction of UMTS services in their territory.

Similarly, the option of requiring Orange and SFR to pay fees substantially higher than those charged to Bouygues Télécom, even though none of the three operators, for reasons not entirely of their own making, had yet entered the market and even though the characteristics of the licences were identical, would have constituted discrimination against Orange and SFR.

The Court thus argued that the application of one of those two options would not have enabled the French authorities to comply with the requirements of Community law.

The Court held that in those circumstances, in the context of the option ultimately chosen by the French authorities, waiver of the claims at issue as a result of the retroactive alignment of the UMTS licence fees due from Orange and SFR with those charged to Bouygues Télécom was inevitable.

The Court found that only that option could, at the material time, reduce the risked, on the one hand, of a late launch of UMTS services, since it ensured that at least two of the licences had been awarded by the date fixed in Art. 3(1) of Decision No 128/1999. On the other hand, that option also excluded the possibility that the three operators might suffer discrimination, since the very purpose of the alignment of the fees was to take account of the fact that, at the time that the licence was awarded to Bouygues Télécom, none of the three operators had entered the market – for reasons not of their own choosing – with the result that their situation was, for that reason, comparable.

It followed that, in those circumstances, the Court of First Instance did not err in law when it held that the Community framework for telecommunications services and, in particular, the principle of non-discrimination, required the French authorities to align the fees due from Orange and SFR with those charged to Bouygues Télécom.

The Court reiterated that categorisation as aid required that all the conditions set out in Art. 87(1) EC be fulfilled. As was well known, Art. 87(1) EC lays down four cumulative conditions: (i) there must be an intervention by the State or through State resources; (ii) the intervention must be liable to affect trade between Member States; (iii) it must conferred an advantage on the recipient; and (iv) it must distort or threaten to distort competition.

Since the Court of First Instance did not err in law when it held that the waiver of State resources was not sufficient to prove the existence of State aid inasmuch as the abandonment of the claims against Orange and SFR was inevitable because of the general scheme of the system, the first of these conditions was not satisfied.

No discrimination
The Court furthermore reiterated that discrimination could arise only through the application of different rules to comparable situations or the application of the same rule to different situations. In the present case, the fact that UMTS licences were awarded to Orange and SFR at an earlier date could justify, or even required, that the related fees be set higher than the fees charged to Bouygues Télécom only if the economic value of those licences could be regarded, by dint merely of having been awarded earlier, as being of greater value than the licence awarded to the latter undertaking.

The Court held that it was clear that that was not so in the present case. Although it was true that a licence had an economic value, that value depended on the time when each of the operators concerned entered the market (see also
Case C‑462/99 Connect Austria [2003]). In other words, the economic value of a licence derived, in particular, from the possibility for the licence holder to make used of the rights attached to the licence which, in the present case, meant the possibility of occupying public wireless space in order to use UMTS technology.

The Court held that the fact that the licences were awarded to the three operators concerned at different dates did not lead to the conclusion that, at the date on which the licence was awarded to Bouygues Télécom, the operators were in a different situation in relation to the objective of Directive 97/13, namely that of ensuring that operators obtain access to the UMTS market under the same conditions. Consequently, the Court of First Instance did not err in law by holding that the three operators concerned were in the same situation.

The Court of Justice also dismissed the last ground of appeal, alleging errors in the legal characterisation of the facts, and therefore dismisses the appeal.

Text of Judgment