• Issue No. 421 Report No. 311, February 11, 1977 IN THIS ISSUE page Connnunity: Concern over Patent Licensing Draft .•.....• 1 Proposal on Cancelling Door-to-Door Sales Deals •....•. 2 Briefs: Court of Auditors; Fishing Licenses .•...•....• 3 Italy: 'Social Pact' Skirts Wage Cost Issue •........•. 3 Ireland: Budget Raises Speculation on Elections ....... 4 Britain: Modest Upturn Inspires Hopes, Caution ........ S France: Employers Want Shift in Social Cost Burden ..•. 6 Germany: Labor Costs Now Higher Than in USA .•.•••••••• 7 Euro Company Scene •••......•.....•.••..•.•..•....•. , •. 7 &unity: The European Connnission is going to great lengths to alle­ Business Fears viate the concern of the European business connnunity, es­ over Patent pecially in Germany and the U.K., over a preliminary draft Licensing Draft regulation that would exempt en bloc from the Article 85(1) ban any licensing agreements containing certain restrictive clauses. The Connnission and national experts were sched­ uled to discuss the document again this month, before in­ viting connnents from national business associations. In the meantime, however, Brussels has been taken by surprise by the publication of the confidential preliminary draft in a respected German financial newspaper. Connnission offi­ cials are now trying to counter criticism of business rep­ resentatives, who have described the draft as being "too narrowly conceived, contradictory, and impractical." The regulation would relieve the parties both from no­ tifying the Connnission and from applying for an exemption for a restrictive licensing agreement (as they are required to do now) if the latter meets the criteria set out in the draft regulation. A block exemption would greatly ease the Connnission's work load because the applications for exemp­ tions have been piling up by the tens of thousands. The backlog has created legal uncertainty in the business com­ munity, although the EC executive's exemption practice over This Issue Is In two parts, consisting of 168 pages. This Is Pa.rt I. COMMON MARKET REPORTS, Issue No. 421, February 11, 1977. Published weekly by Commerce Oearing House, Inc., 4025 W. Peterson Ave., Chicago, Illinois 60646. Subscription rate $490 per year. Second-class •postage paid at Chicago, Illinois. Printed in U. S. A. All rights reserved . EUROMARKET NEWS - p. 2 Licensing the past two years has given some indication as to the kind (cont'd) of agreement that would be subject to exemption (Common Market Reports, Pars. 9761, 9776, 9801, and 9814). Businessmen have said that, in one way, the draft re­ flects a liberal philosophy in that it would exempt many more licensing agreements than would have been expected, such as exclusive licensing, territorial restrictions of licensing within the EEC, restrictions on the part of the licensor and other licensees to market products in the li­ censee's territory, restrictions on sublicensings, quality obligations, an obligation to keep business secrets, and arbitration. On the other hand, the draft indicates that the Commission would exempt such clauses only if the terri­ tory involved has a population of not more than 100 million, Export prohibitions could not last longer than 10 years. There would be curbs on continued payment of fees after the expiration of patents. The rules on arbitration are con­ sidered especially detailed and burdensome. The Commission wants arbitration clauses to provide for reasoned awards, although in many states awards are given without the grounds being stated. The parties would be entitled to take an award only to a member state court for judicial review. Draft Proposal In its efforts to extend more protection to consumers, t­ on Cancelling Commission has proposed that a buyer have the right to c Door-to-Door eel a contract concluded outside the seller's business Sales Deals premises. Under a recent draft directive submitted to the Council of Ministers, the buyer could back out within seven days after signing. If he exercises his right, he may de­ mand the return of his down payment, and he would return the purchased item at the seller's expense and risk. The buyer could cancel all contracts except those in­ volving daily-use items valued at under 25 units of ac­ count, real estate contracts, contracts negotiated solely in writing, and contracts entered into exclusively on his own initiative. These exceptions are based on either the low value of the item or absence of the "surprise element" that normally works for the seller when he shows up at the house door or sells at a,neutral place. It is this sur­ prise element that often leaves the buyer without enough time to consider whether he needs the offered item and whether the price is right. Several member states have legislation that is identi­ cal to the core of the proposal, In Belgium, France, and Germany, the buyer may cancel a contract within seven days, and for these states the proposal would not bring any new rights for the buyer, 'although all three states would have to amend their laws to conform to the requirements of a contract's content and other criteria. Dutch law gives the buyer eight days to can,cel, and the proposal would not in­ terfere here. The U.K., whose law grants the buyer a five-• •EUROMARKET NEWS - p. 3 Sales Deals day period for cancellation, would have to raise this time (cont'd) limit. Ireland and Italy have no rules on the matter what­ soever and would have to start from legislative scratch. The Commission estimates the total volume of products sold door-to-door in the Common Market at between S2.5 and S5 billion. (Corrunon Maxoket Reports, Par. 9911,) In Brief ••• The 1975 accord amending several provisions of the treaties establishing the European Communities has been ratified by all national parliaments except that of Luxembourg. The treaty provides, among other things, for the establishment of a Court of Auditors that will scrutinize revenues and expenditures of the EC and will assist the European Parlia­ ment and the Council of Ministers in applying their budget control powers+++ In a follow-up action to the Dec. 31 move setting temporary quotas for Poland, East Germany, and the Soviet Union, the Council of Ministers has estab­ lished in a regulation the number of fishing licenses that may be issued for vessels of those three nations that want to fish in the Community's 200-mile zone (five for Poland, six for East Germany, and 27 for the Soviet$), This mea­ sure, communicated· to the three governments through diplo­ matic channels, is valid until March 31 in order to grant these East Bloc nations an opportunity to negotiate for re­ ciprocal rights. •Italy: Union concessions on various issues not strictly involving 'Social Pact' wage cost red,uctions have produced what has been termed a Skirts Wage "partial social pact" between Italy's labor syndicates and Cost Issue the Confindustria employers' federation. The compromise, announced on Jan. 26 after three months of stop-and-gone­ gotiations, was clinched only after the unions and the Soc­ ialists had wrenched from the government a pledge not to interfere with the automatic wage escalator system. Rome had, in fact, considered securing wage cost cuts beyond the minimal ones provided for in the accord. Administration acceptance of the union "dictate" had political consequences for Prime Minister Giulio Andreotti who found himself severely criticized, even by leaders of his own Christian Democrats. The head of the Republicans and ex-treasury minister Ugo La Malfa rejected the results of the employer-labor talks as "wholly insufficient" to re­ duce Italian wage costs and openly threatened to withhold his party's support from the government. The Christian Democrats urged Andreotti to seek a retroactive "correction" of the agreement, with the aim of limiting this year's wage cost increases to 16% rather than 22%. (In its subsequent Jan. 31 session, the cabinet - while not touching the escalator system as such - did elim­ • inate some of its outgrowths by placing a three-year freeze EUROMARKET NEWS - p. 4 Social Pact on extra inflation allowances so far granted to about 1 mil­ (cont'd) lion employees, mostly in the public services and the bank and insurance sectors. Also, the scala mobile no longer will have an effect on the amount of severance pay. Those individuals who collect unemployment insurance benefits while holding down another job (some 2.5 million, according to Labor Minister Tina Anselmi) will face stiff penalties in the future. Finally, the cabinet voted to raise the state railway fares and tariffs by 20% as of March 1 and to cut back the number of reduced or zero fares.) The unions' concessions in the social contract involve limits on holiday pay in addition to the above-mentioned cuts in severance pay in cases of dismissal, more job mo­ bility within companies, better controls on absenteeism, and more flexibility in allowing overtime work and shift work. Also, leave may be scheduled throughout the year rather than be concentrated on the traditional mid-summer vacation period. The most significant aspect of the deal, however, is seen in the fact that the Italian unions for the first time ever have agreed to accept at least some in­ comes restraints over a longer term. For the employers, ·on the other hand, the road toward the compromise had been paved with the assurances of the government to absorb at least partially the social cost. burden on industry. This extra strain on the budget, es mated at between 1,500 and 2,500 billion lire, will have to be compensated by a raising of value-added tax rates and the introduction of surtaxes on incomes. Rome must avoid additional budget deficits under any circumstances, so as not to endanger its chances of obtaining further !MF and EC credit facilities.