· Cosmetic giant fined for recruitment campaign · First big French firm to be convicted of racial bias

Part of the cosmetics giant L'Oréal was yesterday found guilty of racial discrimination after it sought to exclude non-white women from promoting its shampoo.

In a landmark case, the Garnier division of the beauty empire, along with a recruitment agency it employed, were fined €30,000 (£20,300) each after they recruited women on the basis of race. The historic ruling - the first time a major company has been found guilty of systematic race discrimination in France - saw a senior figure at the agency given a three-month suspended prison sentence.

The French campaign group SOS Racisme brought the case against L'Oréal, the world's largest cosmetics firm, over the campaign in 2000. Garnier France sought saleswomen to demonstrate the shampoo line Fructis Style in supermarkets outside Paris. They sought young women to hand out samples and discuss hairstyling with shoppers.

In July 2000, a fax detailing the profile of hostesses sought by L'Oréal stipulated women should be 18 to 22, size 38-42 (UK size 10-14) and "BBR", the initials for bleu, blanc, rouge, the colours of the French flag. Prosecutors argued that BBR, a shorthand used by the far right, was also a well-known code among employers to mean "white" French people and not those of north African, African and Asian backgrounds.

Christine Cassan, a former employee at Districom, a communications firm acting for Garnier, told the court her clients demanded white hostesses. She said that when she had gone ahead and presented candidates "of colour" a superior in her own company had said she had "had enough of Christine and her Arabs".

One woman working in the recruitment firm involved said foreign-sounding names or photos showing a candidate was of Moroccan, Algerian, Tunisian or other African origin would ensure candidates were eliminated. Another said: "I once had a good woman candidate but she was non-white. I had to ask someone to pretend that our list was full. It was hard."

One experienced candidate said she realised she was not eligible because she was of mixed race. In a normal sample of women recruited for similar sales work, around 40% would be non-white. For the Fructis project, less than 4% were of "non-European" origin.

SOS Racisme said hundreds of jobs had been subject to discrimination in the case. Garnier and the recruitment company were initially acquitted last year, but the appeal court yesterday overturned the ruling. A former Garnier head and a senior recruitment agency executive were acquitted.

Anti-racism campaigners in France hailed the ruling. Racial discrimination in employment is a huge problem in France with a recent survey finding three out of four firms preferred white workers.

President Nicolas Sarkozy's new justice minister, Rachida Dati, the first woman of north African origin to hold a ministerial post, has ruled that special departments in prosecutors' offices should be set up to deal with race discrimination.

Samuel Thomas of SOS Racisme told the Guardian: "This ruling is an enormous victory for everyone currently suffering race discrimination in France. It shows that economic interests cannot be put before the law and morality. Companies here clearly thought that racism was in their financial interest."

He said consumers of L'Oréal products in the UK and the US would be horrified to learn about the racial discrimination.

L'Oréal owns brands ranging from Lancôme to the Body Shop, which it bought last year. It said yesterday it would immediately appeal against the decision, which it found "incomprehensible".

"We believe that diversity and difference are a source of richness and we do not tolerate any form of racism or discrimination," the statement said.

The company was hoping for an altogether different type of publicity in France this weekend when it created a special lipstick for the Paris wedding of Desperate Housewives' star Eva Longoria to the French basketball player Tony Parker.

Century of beauty

L'Oréal was founded in 1907 by a French chemist who invented one of the first synthetic hair dyes.

It is the world's biggest beauty products company and owns brands from Maybelline to Helena Rubinstein and the Body Shop. In the 90s L'Oréal was hit by claims over past links to fascism, anti-semitism and the giving of jobs to Nazi collaborators after the second world war. It went some way to satisfy its critics with a boardroom change and other measures. Liliane Bettencourt, L'Oréal's major shareholder, is the wealthiest woman in France. Two years ago L'Oréal's slogan was softened from "Because I'm worth it" to "Because you're worth it" after concerns in France that the original appeared too money-oriented.