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FILETECH S.A.R.L. v. FRANCE TELECOM

September 15, 1997

FILETECH S.A.R.L. and FILETECH U.S.A., Plaintiffs, against FRANCE TELECOM and FRANCE TELECOM, INC., Defendants.


The opinion of the court was delivered by: HAIGHT

 HAIGHT, Senior District Judge:

 This case presents the question whether a French corporation and its American subsidiary may invoke the antitrust laws of the United States in order to complain of the conduct of an entity of the Republic of France that occurred, and is occurring, almost entirely in France. The case is before the Court on defendants' motion to dismiss the complaint.

 I

 Plaintiff Filetech S.A.R.L. ("Filetech") is a French corporation formed in 1988 by Guy Birenbaum, a resident of France and a citizen of France and Canada. In Filetech's words, its business purpose is "to create a data base which would include virtually every resident person, entity, or business in France, from which innovative marketing services could be created for a worldwide clientele." Complaint, P 18.

 Those "innovative marketing services" consist primarily of the direct mailing of unsolicited communications to French residents, businesses and entities, the mailers having purchased from Filetech that all-inclusive French data base that Filetech hopes to create.

 Filetech formed its subsidiary, plaintiff Filetech U.S.A., Inc. ("Filetech U.S.A."), a New York corporation, to locate and contract with American businesses interested in direct mail marketing to potential customers in France. I will on occasion refer to the plaintiffs collectively as "Filetech."

 Defendant France Telecom is an independent public legal entity created and wholly owned by the Republic of France. France Telecom owns and operates all fixed telephone services in France. Defendant France Telecom, Inc. ("Telecom Inc.") is a wholly-owned subsidiary of Telecom, with its principal place of business in New York. I will on occasion refer to the defendants collectively as "France Telecom."

 A

 France Telecom engages in other commercial activities in addition to its fixed telephonic services business. One of these is the sale of access to its data base of telephone subscribers for the purpose of developing marketing lists. France Telecom engages in that business by means of two services known as "Marketis" and "Teladresses." I will describe them more fully infra. But it is first necessary to describe the genesis and purpose of a compilation, known as the "Orange List," that lies at the heart of this case.

 The genesis and purpose of the Orange List may be traced to a series of French statutes and regulations. Article 7 of France Telecom's charter provides that when marketing the data contained in its directories, France Telecom "must comply with any legislative or governmental regulations protecting human identity, individual and civil rights and privacy." *fn1" There are a number of pertinent laws and regulations.

 In 1978, the French legislature enacted the Data Processing and Individual Rights Law ("the Data Processing Act."). That act created a governmental agency called (in translation) the "Data Processing and Individual Rights National Commission," and popularly known as the "CNIL," reflecting its French acronym. The CNIL regulates public and private data processing activities in France. Before conducting such activities, public entities like France Telecom and private entities like Filetech must apply to and receive from CNIL the requisite permission or acknowledgment. The Data Processing Act prohibits, inter alia, the gathering of data through fraudulent, unfair or illicit means, and empowers any individual to refuse, for legitimate reasons, the processing by computer of personal data about him. Persons processing personal data on a computer must ensure the security of the data and prevent it from being divulged to unauthorized third persons. Breach of the Act's provisions is punishable under the French Penal Code.

 France Telecom's charter from the French government permits it, inter alia, to market its electronic telephone directory, accessible by computer, to third parties. In December 1990, the French legislature amended the Postal and Telecommunications Code ("the PTT Code") to allow the publishing of telephone subscribers or users lists, subject to the filing by publishers of telephone directories of an undertaking to comply with Article R. 10 of the PTT Code.

 France Telecom itself operates under comparable restrictions. Article 7 of its charter provides that "France Telecom, when marketing the data contained in its directories, must comply with any legislative or governmental regulations protecting human identity, individual and civil rights and property . . . " That requirement implicates Article R. 10-1 of the PTT Code, which was amended in December 1990 to provide in pertinent part as follows:

 
"All persons subscribing pursuant to the conditions set forth in Articles D.317 and D.284, may . . . request, without being liable to pay any fee, not to appear on the lists extracted from the telephone book and marketed by [France Telecom] . . .
 
The use by anyone, of information extracted from the telephone book concerning persons mentioned in the previous paragraph, for commercial purposes or for public diffusion, is prohibited."

 This law requires France Telecom to honor the wishes of subscribers who do not want their names to be revealed to anyone for marketing purposes. The record reveals that significant numbers of French residents hold that preference; a sentiment not unknown in the United States, where unsolicited direct marketing mailings frequently fill mailboxes to overflowing.

 Obedient to Article R. 10-1 of the PTT Code, France Telecom maintains a list of French telephone subscribers who, prompted by a desire for privacy, have directed an Article R. 10-1 request to France Telecom. For reasons not revealed by the record, this is known as the "Orange List."

 There is another color-coded French regulatory act upon which France Telecom relies. On May 12, 1992, the CNIL adopted Resolution No. 92-049 approving the "Saffron List." The Saffron List contains the names of France Telecom subscribers who do not wish to be bothered by advertisements sent by fax or telex. The CNIL stated in its resolution that:

 
communicating the Saffron List would amount to making public a behavioral database devoted to persons hostile to commercial canvassing and could be detrimental to said persons. As such, the Saffron List can only be communicated indirectly, either via transmission of the entire list of telex/fax subscribers cleansed of the Saffron subscribers or by cleansing of those lists which will be communicated to France Telecom. (In translation; see Henrot Decl. at P 17).

 France Telecom says that this resolution of a French regulatory agency, although dealing with a different protected list, declares policy considerations that also resonate in the case at bar.

 B

 The effect of Article R. 10-1 as originally promulgated was to prohibit France Telecom from providing the names and addresses of subscribers included in the Orange List to any third party for any purpose. Another company, wishing to publish its own telephone directories, brought an action in the French courts invoking the antitrust rules contained in the European Union treaty. In February, 1994 the Court of Appeals of Paris decided CMS v. France Telecom, a case commenced by a non-party to the instant action which competed with France Telecom by publishing telephone directories. In CMS the Court of Appeals of Paris held that notwithstanding Article R. 10-1 of the PTT Code, the European Union treaty antitrust rules embodied in the Treaty of Rome obligated France Telecom to make its entire non-cleansed directory of telephone subscribers (that is to say, including names and addresses contained on the Orange List) to competing independent publishers of telephone directories.

 At the time of the briefing of the instant motion, an appeal from this decision was pending before the French Supreme Court of Appeal. In an judgment pronounced on May 6, 1996, the Supreme Court affirmed the holding of the Court of Appeals. The Supreme Court looked to the Treaty of Rome as establishing "the primacy of the principles of community law over national law," and, "without assessing the legality of article R. 10-1 of the [PTT]," concluded inter alia that "the Court of Appeal rightly ruled that the regulation could not hinder the free exercise of competition with respect to the publication of lists of subscribers by publishers of directories in competition with that published by the public company [France Telecom], which includes the names of persons appearing on the orange list." (Translation from the French text furnished by Filetech.)

 While this appeal to the French Supreme Court was pending, the French government responded to the decision of the Court of Appeals of Paris in CMS v. France Telecom decision by modifying Article R. 10-1 of the PTT, effective May 6, 1994. The article's first paragraph reiterates the right of a telephone subscriber to request, without payment of fee, "not to be mentioned on the excerpts of the subscribers' lists marketed by [France Telecom]." The second paragraph of Article R. 10-1 as modified reads:

 
"It is forbidden for anyone to use for commercial purposes or to divulge to the public the personal data extracted from the subscribers' lists mentioned in the preceding paragraph. However such data may be used for the sole purpose of publishing lists of users mentioned at article R. 10."

 France Telecom contends on this motion that the combined effect of the CMS decision and the 1994 modification of Article R. 10-1 of the PTT Code is to permit *fn2" France Telecom to communicate data containing the Orange List subscribers to third parties for the limited purpose of "publishing telephone directories." Main Brief at 14. But the Orange List data thus communicated "is communicated only embedded in the complete data base (that is, there in [sic] no separate communication of the Orange List as such)." Id. In France Telecom's view, under French law "neither France Telecom nor anyone else may use or communicate the Orange List or data in it for any other commercial purpose." Id. Those restrictions are said to arise from the modified version of Article R. 10-1, viewed in the larger context of the Data Processing Act, CNIL regulations, and the Penal Code.

 In this regulated world, as it professes to perceive it, France Telecom says that it tries "to make its subscriber data base available to providers of marketing lists and at the same time comply in good faith with all of the above statutes and regulations." Main Brief at 15 (citing affidavits submitted by France Telecom in support of its motion). Under the procedure adopted to achieve that proclaimed goal, which France Telecom describes as "the fairest permissible approach," France Telecom "prepares a data base of its subscribers 'cleansed' of the Orange List, and it sells that 'cleansed' data base to all on equal terms (with a 15% discount for brokers) through the Marketis and Teladresses services." Id. France Telecom concludes, on a note of self-approval:

 
"By this method France Telecom avoids any prohibited use or communication of the names or persons or entities on the Orange List, and keeps their privacy sacrosanct. At the same time, France Telecom makes available to all who desire it, on comparable commercial terms, the maximum amount of permitted information." Id.

 C

 It is now necessary to describe France Telecom's Marketis and Teladresses services.

 Marketis is a service accessible through a personal computer with a modem, or through the "Minitel," a small computer terminal made available to France Telecom customers on request. A France Telecom customer, using Marketis through a private computer or a Minitel, can create a marketing list on his own computer, and that list will be cleansed of names on the Orange List. A France Telecom officer expresses the view that generally, Marketis is suitable only for creating relatively small or specialized marketing lists. Rimbault Decl., P 5.

 Teladresses is a non-electronic service which enables a customer to order from France Telecom a list with specified desired characteristics. France Telecom generates the list (again, cleansed of Orange List names) and sends it to the customer with a bill for its services. The Teladresses service is suitable for generating lists of hundreds of thousands or millions of names. Rimbault Decl., P 7.

 Filetech does not share France Telecom's self-portrait of an entity trying in good faith to balance the interests of individual privacy and commercial competition. In Filetech's view, France Telecom's protestation of concern for French citizens' privacy is hypocritical; its true motive is to profit from an anti-competitive control over the Orange List.

 Filetech's discontent arises in this manner. Filetech wishes to obtain a French telephone directory cleansed of Orange List names to use in its dealings with customers in the direct marketing business. In order to copy France Telecom's electronic directory, Filetech accessed the directory through the Minitel method, previously described. The first three minutes of Minitel use are free; France Telecom charges for the service thereafter. To copy the entire France Telecom electronic directory and its periodic updates at minimum cost, Filetech has programmed a number of its computers to access Minitel, turn off after three minutes, and then re-engage the service. See Complaint, PP 31-32. That stratagem worked reasonably well, although Filetech adds in a plaintive footnote 2 to its complaint that while Filetech "is able to efficiently take advantage of the three minute threshold, the compilation of the entire data base and its updating, is still costly to it, since the time limit is often exceeded."

 But Filetech's problem is that it cannot use the full directory, thus obtained, because that uncleansed directory contains names on the Orange List, with no way of identifying them. That circumstance destroys the utility of the directory for direct marketing purposes since, Filetech alleges in its complaint at P 3, "without the 'Orange List' no one can use the telephone directory as a data base source for creating marketing lists because that directory contains the names of people whom it is illegal to solicit." Filetech aptly analogizes the uncleansed directory to a mined field, with the Orange List constituting "the map setting out the location of those mines." Id. France Telecom does not have this marketing problem because it has the map.

 Filetech alleges that in an effort "to level the playing field," Filetech has "repeatedly asked" France Telecom to either give it the Orange List, or sell to Filetech "from time to time at a competitive price" updated lists "of all the telephone subscribers from whom the Orange List people and entities have been deleted." Complaint, P 4. France Telecom has refused these requests; it will only make cleansed lists available to Filetech (and to all others) through the Marketis and Teladresses services. Filetech alleges that France Telecom pursues that course "knowing full well that no competitor could possibly survive or exist if it has to acquire its data base at the cost of many millions of dollars." Id. Filetech alleges that France Telecom "is determined to drive [Filetech] out of business"; hence this action in an American district court, filed in March 1995, invoking the remedies of American antitrust law.

 D


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