Is the European Commission right to question the E5 group?


The anger expressed by France Telecom CEO Stéphane Richard at the request from the European Commission (EC) for information on the meetings between Europe's top operators seems to be understandable.

The four meetings--attended by senior executives from Deutsche Telekom, France Telecom, Telecom Italia, Telefónica and Vodafone (collectively known as the E5 group)--were reportedly discussions on shared issues and challenges, with the outcome being communicated to Neelie Kroes, the European Commissioner for the Digital Agenda, in a private letter.

However, this request from the EC seems to indicate that the information provided to Kroes was not considered adequate by European competition officials.

Of note, when the E5 meetings first started, industry sources suggested that the five telcos were aware that these exclusive get-togethers could lead to accusations of collusion or anti-competitive behaviour. Given this potential, perhaps Richard's outburst would seem lacking in political awareness to the EC's intentions, and even more so given that the European Union has the power to fine those that infringe its policies up to 10 per cent of group worldwide revenue.

One observer, Robert Vidal, head of competition, EU and trade at international law firm Taylor Wessing, commented that meetings between competitors would always be of potential interest to competition authorities and should be treated with extreme caution.

"Meetings between competitors are especially risky in a concentrated market where the participants are restricted to a few, major players. It can give the wrong impression to customers as they may assume the telecoms companies are up to no good," Vidal said.

To make matters worse for European operators, this request for more detailed information comes within days of the EC rejecting an appeal by telcos for a regulatory holiday. The justification behind this call was to allow the embattled telecoms industry time to invest in new infrastructure.

What is becoming apparent is the growing level of distrust between the EC and telcos. The members of the E5 group, with the exception of Vodafone, are all former state-owned telcos and are likely to retain fond memories of the "good old days" when a monopoly was the norm.

Altogether, the E5 group appears to have misread the EC's growing uneasiness, and then bungled how they chose to communicate their intentions.--Paul

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