54 RATLIFF: MAJOR EVENTS AND POLICY ISSUES IN E.C. COMPETITION LAW, 1999-PART 1: [ZOO01 I.C.C.L.R.

In view of the large number of decisions this year, the section on joint ventures and other co- Major Events and operative decisions will be included in Part 2, in Policy Issues in next month's journal. E.C. Competition Law, 1999-Part 1 Overview of major events Legislative developments (adopted and proposed)

Adopted legislatlon/treaty JOHN RATLIFF In May 1999 the Amsterdam Treaty entered into forcea3The main effect for E.C. competition law- Wilmer, Cutler & Pickering, Brussels yers was to renumber the Treaty articles. In most cases, the number of the relevant article drops by four. Thus, Article 85 becomes Article 81 E.C., Article 86 becomes Article 82 E.C. and Article 90 The object of this article is to outline the major becomes Article 86 E.C.4 events and policy issues related to what are now In June 1999 the E.U. Council started the pro- Articles 81, 82, and 86 E.C. (leaving aside merger cess of vertical restraints reform by adopting two control) in the last year.' It is proposed to follow regulations, one changing the legislative frame- the same pattern as previous years.' In other words, work for vertical block exemptions and allowing the article is divided into three sections: (1) a the European Commission ("the Commission") general overview of major events (legislation and only to prohibit "black-listed"'clauses, the other notices, European Court cases and European widening the scope of retroactive exemption under Commission decisions); (2) an outline of current Article 4(2) of Regulation 17/62. policy issues; and then (3) some comments on par- The first regulation, 1215/1999,' provides that ticular areas, meaning this year sport and books. the Commission can exempt categories of agree- In the author's view, the most interesting fea- ments between two or more undertakings, at tures of the year are as set out in Box 1. different levels of the production or distribution

Box 1: Themes of 1999 The "White Paper" on modernisation and decentralisation of competition enforcement including: * a change to ex-post control; * Article 81(3) E.C. powers in national competition authorities and courts; * proposals for taking oral statements The proposed vertical restraints block exemption and guidelines (which should be in force in 2000) The Commission's developing policy on sports broadcasting, in particular the collective sale of football league rights (in the light of varied national decisions) Effect on trade and financial services after Bagnasco An "economic approach" to insurance pools, taking some outside Article 81(1) E.C. An emphasis on the need for a reasonable duration of proceedings (both at Commission and Court level) Considerable emphasis on co-operative joint ventures (with a large number of decisions and Article 19(3) notices)

Again, with many thanks to Ingrid Cloosterin and 3. See, generally, Commission Press Release IP1991269, Flavia Distefano for their help in the production of this April 28, 1999. paper. 4. Art. 3(g) remains the same, Art. 92 becomes Art. 87. Most are now following the practice of quoting the old 1. This is a slightly revised version of a paper given at articles in formal documents as "Article 81 E.C. (ex the IBC E.C. Competition Law Conference in Brussels, Article 85)", as appropriate to avoid confusion. In November 9,1999. The reference period is from November general, the system used here is according to when the 1998 until the end of October 1999. decision occurred, i.e. pre-May Art. 85(1) E.C., post-May 2. For last year's paper, see [I9991 I.C.C.L.R. pages 3 Art. 81(1) E.C. etc. and to explain as appears necessary. and 64. 5. [I9991 O.J. L14811.

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Box 2: Legislative Developments (adopted) Amsterdam Treaty (May 1999, article renumbering -4) New enabling regulation for vertical restraints block exemption (Regulation 121511999) * market share cap principle accepted * broader legislative base Extension of retroactive exemption to all vertical agreements and some IP agreements (Regulation 121611999) E.U./Canada Co-operation Agreement New hearings regulation (2842198) Transport notifications alignment (Regulatio~2843198) Amended joint co-ordinationljoint operations air transport block exemption (Regulation 1083199) chain, where the agreements concerned involve categories of vertical and IP agreements. The two the conditions of purchase, sale or resale of goods regulations entered into force on June 18, 1999. or services. The Commission can also exempt It was a little surprising that the regulations categories of agreement relating to the acquisition were adopted when they were (i.e. before the draft or use of industrial property rights where they block exemption and the draft guidelines had been are between no more than two undertakings. The published). It was quick for the extension of retro- Commission can stipulate the conditions in which active exemption. However, it is clear that the parallel networks of similar agreements may be Commission wants to reduce the number of noti- excluded from the block exemption, depending fications as quickly as possible and also wanted to on the market coverage rate of such networks. secure agreement to the core principles of its pro- Such exclusion is to be by the regulation and with posed reform before entering into the final phase. at least six months' notice. National competition The key point as regards Regulation 1216/1999 authorities ("NCAs") are also to have the right to is to remember that it will now not be necessary withdraw the benefit of the block exemption to notify vertical agreements to ensure enforce- where agreements have effects incompatible with ability, provided that the agreements fully comply Article 81(3) E.C. in a "distinct market", being the with Article 81 E.C. In cases of doubt (e.g. where territory of a Member State or part thereof. fines are an issue), notification may still be advis- Importantly, the E.U. Council also accepted the able to obtain immunity. On the other hand, the principle of market-share caps to such a block change will prevent technical challenges to an exemption and the Commission's approach that agreement in a national court, when an agree- the coming vertical restraints block exemption: ment is caught by Article 81(1) E.C. and, if not notified, is procedurally incapable of exemption, - should not involve "white" and "grey" because exemption cannot antedate notification, lists of exempted clauses; even though substantively it may qualify for such - will not cover certain severe anti-com- exemption. petitive vertical restraints, like minimum In April 1999, the E.U. Council and the Com- and fixed resale prices and absolute terri- mission concluded a Co-operation Agreement with torial protection; Canada in similar terms to that with the United - will apply to all vertical agreements, in- States.' The Agreement provides for: notification cluding those between more than two of enforcement activities which may affect the undertakings, franchising and selective important interests of the other party; consult- distribution agreements, agreements con- ations between the parties; co-ordination of cerning services, and agreements for goods enforcement activities (so that the party best or services related to processing or incorp- placed to act may do so); "positive comity" co- oration; and operation (whereby one party may ask the other to - that group agreements between small and intervene in cases where its important interests medium-sized retailers and an association are affected); and exchange of information and of such retailers, and between such an confidentiality. association and its suppliers can be char- The text is not identical to the E.U.1U.S. Agree- acterised as vertical agreements. ment and, in places, there has been an evolution. For example, Article VI on avoidance of conflict The second regulation, 1216/1999,6 extends the in the E.U.lCanada Agreement, includes a list of scope of Article 4(2) of Regulation 17/62 to the same ten elements to which the parties are to have regard

6. [I9991 0.J.L148/5. 7. [I9991 O.J. L175/49.

[2000l I.C.C.L.R.,ISSUE 2 0 SWEET & MAXWELL LIMITED [ANDCONTRIBUTORS] 56 RATLIFF: MAJOR EVENTS AND POLICY ISSUES IN E.C. COMPETITION LAW, 1999-PART 1: [2000] I.C.C.L.R. in the event of competing interests. In common with the E.U./U.S. Agreement these include the Box 3: Legislative Developments (proposedl relative significance of the anti-competitive activi- coming) ties in each party's territory and the degree of Draft vertical restraints block exemption conflict or consistency between the enforcement Draft vertical restraints guidelines activities and the other party's laws or policies, Insurance block exemption report (aviation but the E.U./Canada Agreement goes a little further pools) and mentions: where relevant assets are located; Liner shipping consortia block exemption whether persons will be placed under conflicting report requirements by the parties; and the degree to Horizontal agreements review (still which a remedy, in order to be effective, must be coming) carried out within the other party's territory. White Paper on modernisation/decentral- In December 1998 the Commission adopted a isation of E.C. competition enforcement new hearings regulation replacing Regulation 99/63 and equivalent legislation in the transport sector so that there is now just one hearings regulation for all cases.' The main practical change is that They were published for public comment in Sep- procedural rights are differentiated and structured tember 1999.'3 The draft block exemption opts as between (1) parties to which the Commission for a single 30 per cent market share cap (instead has addressed objections, (2) rights of applicants of two levels of cap as discussed last year) and and complainants? and (3) rights of other third restructures last year's discussion draft accord- parties. The Regulation is seen as one of various ingly. Of particular interest in the Draft Guide- steps the Commission is pursuing to streamline lines is the Commission's position on agency the processing of cases." In December 1998 the agreements. Commission also adopted a regulation modifying the form and content of applications/notifications Draft block exemption in the transport sector (essentially aligning these procedures on Regulation 17)." The regulations The main features of the draft block exemption came into force on February 1, 1999. ("BE") can be summarised as follows: First, the In May 1999 the Commission adopted a BE follows the expected format of applying to all regulation, 1083/1999,removing agreements on vertical agreements, i.e. between undertakings at joint planning and co-ordination of schedules, different levels of the production or distribution and agreements on joint operations from the air chain for the purchase and resale of goods and transport block exemption Regulation 1617/93.12 services (with certain defined exceptions).'* The Commission considers that such agreements, Secondly, the BE reflects the "graded" approach "particularly in the case of alliances", involve a to competition review, e.g. that restraints in more wider commercial consultation on tariffs which competitive markets are not considered serious should be dealt with by individual exemptions. and can be exempted by category, but where a Otherwise, the block exemption is extended until supplier starts to have significant market share, June 2001 for tariff consultations for passengers and therefore may have market power, more indi- with baggage and slot allocation at airports while vidual review is required. Agreements where the the Commission further reviews their impact. market share of the supplier is not more than 30% are covered by the BEt5;in the case of exclusive Proposals supply obligations, the buyer's market share is Vertical restraints reform-the final phase considered (insofar as the latter may have market power through its own position or the cumulation During the year the Commission has been prepar- of several distributorships). Above this, individual ing its draft block exemption on vertical restraints review is required. and related guidelines ("the Draft Guidelines"). Thirdly, the BE does not apply, if the agreement contains certain severe anti-competitive vertical

8. Reg. 2842198 119981 O.J. L354118. 9. e.g. including access to a non-confidential version of the Statement of Objections. 10. The Commission is clearly concerned about the duration of proceedings and noted, for example, in its 13. Draft block exemption, [I9991 O.J. C270/7 (Member latest Competition Report that the average length of pro- States were consulted in April); Draft Guidelines, [I9991 ceedings for the 11 formal decisions described therein O.J. C270112. The Commission's Communication on the was four years and ten months (ranging from two years Green Paper on Vertical Restraints was published in and one month to eight years). 1998 E.C. Commission November 1998, (19981 O.J. C36513. Competition Report at point 32. 14. Art. 1, and see further, the account of Reg. 1215/ 11. Reg. 2843198 (19981 O.J. L354122. 1999 above. 12. 119993 O.J. L131127. 15. Art. 2.1.

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Box 4: Vertical restraints reform-the final phase Draft block exemption ("BE") * Black-listed clauses * Exclusive territories or customer groups protected by active sales bans OK * No activelpassive sales bans in selective distribution (but location clauses) * Non-competes for five years or tenure of owned premises (no "specific brand bans") * 30% market share cap * Withdrawal of cumulative effect (50% threshold) Draft guidelines on * Agency (focus on risk of goods and the outlet) * The interpretation of the BE (e.g. software distribution, franchising etc.) * Market definition in vertical cases * Specific cases (with economics and examples)

restraints, irrespective of market share.16 The - the restriction of sales of spare parts to "black-listed" restraints are: independent repairers and service pro- viders, if agreed between a supplier of - resale price maintenance provisions (how- such parts and a buyer which incorpor- ever, maximum prices can be fixed and ates and resells those parts. non-binding price recommendations can be made, provided these do not result in As the Commission notes in the Draft Guidelines, practice in price fixing or resale price this "black-listed clause" approach therefore maintenance as a result of pressure or leaves far greater freedom in most cases to deter- incentives by the parties); mine what contract provisions businessmen wish - certain types of territorial protection to include. restrictions on active resales into the Fourthly, the BE does not apply to certain specific exclusive territory or exclusive cus- obligations contained in vertical agreements." tomer group allocated by the supplier Inclusion of such clauses does not take an agree- to another buyer, where such restric- ment outside the BE, but the provisions are not tions are imposed by the supplier on exempt. Those obligations include: its direct buyers (this is a radical change insofar as it allows more than direct or indirect non-compete obligations one exclusive distributor by territory, (i.e. for more than 80 per cent of a buyer's so that different distributors can be purchases) for more than five years; appointed for different sales channels); unless the buyer's premises are owned by restrictions on resales to unauthor- or leased from the supplier, in which case ised distributors by members of a the non-compete clause can be for the selective distribution system; duration of the buyer's occupancy (so restrictions on resales of goods or automatic renewal or "tacit reconduc- services which are supplied for the tion''-as it is often called-is treated as purposes of incorporation; (so "field indefinite duration (as was the case with of use" type restrictions are still not Regulation 1984183)); exempt in the distribution context, post-termination non-compete obligations although they may be allowed in for more than one year, where such an transfer of technology); obligation is indispensable to protect - the restriction of active or passive resales know-how transferred by the supplier to to users by members of a selective distri- the buyer; or unlimited in time for know- bution system (so selective distribution, how which has not fallen into the public combined with territorial restrictions, is domain; (this does not reverse the policy not exempt; this is a provision much in Regulation 1983183 against such debated by franchise systems, as discussed post-termination non-competes, rather further below); this is designed as a solution to cover - the restriction of cross-supplies between some franchise systems which need such distributors within a selective distribution protection); it is not clear on the text what system; the position is on geographical scope on

16. Art. 3. 17. Art. 4.

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the current wording (i.e. whether the non- - market definition issues in vertical cases; compete should only be for the buyer's - the framework for analysis of vertical re- previous territory or any part of the sup- straints, including much of the general plier's distribution network, as with Regu- economic discussion in the Green Paper, lation 4087188); "general rules" for evaluation of vertical - any direct or indirect obligation imposed restraints, an outline of methodology and on the members of a selective distribution focus on specific vertical restraints with system to sell or not to sell specified examples. brands of competing suppliers (this does not exclude ordinary non-competes from The Draft Guidelines are some 39 pages of the the BE; it appears that the provision is dir- Official Journal, so only some of the main features ected at manufacturers "clubbing together" will be noted here. to exclude certain brands (presumably low-cost products)), The drafting is not (1) Agency. The Commission proposes a new yet clear and appears to need some text to replace the 1962 Agency Notice." The cen- refining. tral idea is not new, that arrangements with agents whose activities are auxiliary to or integrated with Fifthly, the Commission may withdraw the benefit a principal fall outside Article 81(1) E.C. How- of the BE in individual cases.'' This is where ever, such agents are defined narrowly. Arrange- vertical agreements have effects incompatible ments with an agent not in that category are with the conditions in Article 81(3) E.C. in par- considered as being with an independent trader ticular where access to the relevant market or and fall into the general scheme (i.e. the BE). competition therein is significantly restricted by As in the 1962 Notice, the key factor deter- cumulative effects of parallel networks of similar mining whether arrangements with an agent come vertical restraints practised by competing sup- within Article 81(1) E.C. is who bears the finan- pliers or buyers. cial and commercial risks of the transactions con- Sixthly, a NCA may withdmw the BE if such cerned. If it is the principal, Article 81(1) E.C. effects are identified in the territory of a Member does not apply. The Commission lists various State or in a part thereof which has all the char- activities which the agent must not do, if Article acteristics of a distinct geographic market.19In both 81(1) E.C. is not to apply-notably, contribute to cases of BE withdrawal a decision is required. advertising budgets, maintain stocks at his own Seventhly, the Commission may also declare risk, or organise a distribution network with that the BE will not apply to vertical agreements market-specific investment in equipment, premises containing specific restmints in a relevant mar- or ket." This is where parallel networks of simiilar The last requirement is important because it vertical restraints cover more than 50 per cent of narrows the category of "integrated agents" con- that market. Such a regulation is only to enter into siderably. It is not enough that the principal takes force six months after its adoption. the risk of the goods sold, if the agent still takes The BE is to enter into force on June 1, 2000 the business risk of the outlet through which it and to expire on June 1,2010. Regulations 1983183, is sold. The Draft Guidelines also confirm that if 1984183 and 4087188 continue to apply until Article 81(1) E.C. does not apply, this is the case then. There is a transitional period for agreements for all the pricing and territorial restrictions con- which meet the conditions of the new BE until ~erned.'~This was a matter of debate in the Draft December 31,2001. 1990 Agency Notice, where the Commission seemed to suggest that only active sales bans could be imposed on "integrated" agents. The Draft Guidelines Draft Guidelines emphasise, however, that if The Draft Guidelines are divided into various sec- non-compete obligations on an agent lead to tions. Notably, there are sections on: foreclosure on the market for agency services they fall within Article 81(1) E.CSz4It would be - agreements falling outside Article 81(1) useful to clarify this further (i.e. how much E.C. (which focuses amongst other things foreclosure?). on agents); - interpretational guidance on the BE (2) Software distribution. Obligations not to the Commission's previous notice on infringe copyright (on the reseller or end-user) are Regulations 1983183 and 1984183); 21. Paras 12-21. 18. Ad. 5. 22. Para. 17. 19. Art. 6. 23. Para. 19. 20. Art. 7. 24. Para. 20.

120001 I.C.C.L.R..ISSUE 2 O SWEET & MAXWELL LlMITED [AND CONTRIBUTORS] RATLIFF: MAJOR EVENTS AND POLICY ISSUES IN E.C. COMPETITION LAW, 1999-PART 1: [20001 I.C.C.L.R. 59 covered by the BE (when falling under Article meeting the market share cap, but not those over 81(1) E.C.). The same is true for "shrink wrap" the cap.2g licences for software (restrictions on use accepted by the end-user on opening such a package and (7) Economic assessment. Up to this point in the obligations not to make copies and resell soft- Draft Guidelines most is familiar territory to com- wareluse software with other hardwarez5).These petition lawyers. There are new principles and are welcome clarifications in an area where there policy directions, but the style is similar to the pre- has been no full decision yet. vious Commission notices and distribution guide- lines which the text will replace. The same cannot (3) Know-how/franchising. Restrictions on know- be said for the final section of the Draft Guidelines, how related to vertical agreements are also dis- where the Commission develops a systematisation cussed, in particular in relation to franchising. of the economic principles applicable to vertical The Commission indicates that most franchise restraints above and below the 30 per cent market agreements are necessary for and directly related share cap. to the sale of goods or services. The Commission then lists various clauses which it considers to be For many lawyers the economic terminology is so covered, to the extent that they fall within less familiar, and needs some absorbing, although Article 81(1) E.C., such as: most of the concepts were explained in the Green Paper. Helpfully, the Commission outlines what it - a non-compete obligation on the franchise; sees as the negative and positive effects of the - a know-how confidentiality obligation; main vertical restraint^.^^ There is also a set of ten - a non-exclusive know-how grant-back general rules for evaluating vertical restraints obligation on the fran~hisee.'~ such as "the more the vertical restraint is linked to investments which are relation specific and (4) Internet advertising. The Commission states sunk, the more justification there is for certain that advertising through an Internet website is con- vertical restraint^".^' sidered to be a passive sale but that unsolicited There is a suggested methodology for agreement e-mail to individual customers is considered as review, and an outline of relevant factors for active el ling.'^ assessment of the application of Article 81(1) E.C. and Article 81(3) E.C. clearance. For example, if (5) Selective distribution. The Commission states effective market entry is likely to occur within that dealers in a selective distribution system can- one or two years, barriers can be said to be not be restricted in the users to whom they may If an undertaking would become dominant sell. In other words, no active or passive sales ban through a vertical agreement, exemption is, in can be imposed. A non-compete obligation on the principle not possible. However, interestingly the selected dealer is still block exempt. However, Commission points out that an agreement can still restrictions can be imposed on the location of a fall outside Article 81(1) E.C., for example, when dealer's premises which, in many cases, will in necessary for the protection of client-specific fact operate to give dealers territorial protection. investment or for the transfer of substantial know- This has been a source of much debate in the how without which the supply or purchase of cer- franchising sector where franchisees, as selected tain goods or services may not take place. In short, dealers, will now have less contractual protection an interesting linkage of the fourth limb of Article of their territories. Where a dealer's outlet is 81(3) E.C. and dominance and the "rule of reason" mobile (e.g. a shop on wheels, or English milk approach.33 round) an area may be defined outside which the The Commission also emphasises that specu- mobile outlet cannot be operated. Selective dis- lative claims of economic benefits will not be tribution cannot be combined with an exclusive accepted: "efficiencies have to be substantiated purchasing obligation, insofar as this may prevent and must produce a net positive effect".34 cross-supplies within the network.'" The Commission then works through different vertical restraints, discussing how they should be (6) One agreement, several products. The Com- reviewed with principles and examples. In rela- mission also deals with the practical issue of a tion to franchising, the Commission notes that the single distribution agreement covering several more important the know-how transferred, the products with different market shares. In this case, the BE applies to the goods and services 29. Paras 58-59. 30. Paras 95-110. 25. Para. 34. 31. Para. 111. 26. Paras 35-37. 32. Para. 118. 27. Para. 42. 33. Para. 128. 28. Paras 43-45. 34. Para. 129.

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more easily the vertical restraints fulfil the con- catastrophic risks, this may mean that no indi- ditions for exemption and that a non-compete vidual insurer can go it alone. In such cases the obligation on the goods or services purchased by pooling of capacity is considered not to restrict the franchisee is likely to fall outside Article 81(1) competition (i.e. to fall outside Article 81 E.C.), E.C., when the obligation is necessary to maintain even though there may not be two in the market. the common identity and reputation of the fran- The Commission considers that similar principles chised network and the franchisor does not have apply to non-catastrophic risk, where small a dominant position. In such cases the duration of insurers may need to group together in institu- the non-compete obligation is irrelevant under tionalised pools in order to attain the necessary Article 81(1) E.C. provided it is not longer than minimum dimension.37 The Commission has the agreement itself.35 applied this new economic approach to Pbl Clubs These examples need careful review. The openly and aviation risk insurance pools already, and economic way of analysing distribution agree- states that it is now investigating environmental ments is, at first, more complex and will require and nuclear risk pools. some learning for many. However, it should It is perhaps an important development at a be more rewarding in competition terms and a time of horizontal co-operation review, insofar as welcome departure from the situation that one it broadens the principle in the 1968 Co-operation did not even have to ask for the market shares of Notice that an "ad hoc" grouping for a particular the parties and competitors to assess compliance! purpose, beyond the individual capacity of each The immediate task, no longer to be delayed, is member of the grouping, fell outside Article 85(1) to see how existing agreements are affected, with E.C. It will be interesting to see whether the new liberties for those with less than 30 per cent principle may be applied outside the context of market share and new constraints for those with insurance pools (alongside the principles on co- higher market share. For many, the change will operatives in the Danish Cooperatives case). remain a difficult trade-off because the price of the In January 1999 the Competition Directorate also "effect based" appraisal is the consequence that in produced a working paper on Regulation 870/95 different national markets in the European Union, for liner shipping consortia.38Again, the report different distribution formats may be permissible. describes the Commission's practice. The Com- mission advocates renewal of the block exemption, Coming issues with some possible minor modifications. One may also mention the Commission's review During the year the Commission has also pro- of policy on horizontal agreements. This seems to duced two reports on block exemptions, with a have been overshadowed by the vertical restraints view to future review of the regulations concerned. review and the White Paper (on modernisation Thus in May 1999 the Commission issued a report and decentralisation). It appears that the Commis- on the application of the rules on competition to sion is thinking of a set of horizontal guidelines in~umnce.~~The report is essential reading for accompanied, if necessary, by revised block exemp- those involved in this sector, mainly for the dis- tions andlor a general block exemption (with a cussion of market definition issues and various "black-list" approach, conditions for application cases in the Commission's practice in the last six and market share caps).39The White Paper on mod- years. The Commission deals in turn with the four ernisation and decentmlisation is discussed below. categories of agreement covered by Regulation 3932192: agreements on the calculation of pre- miums, standard policy conditions, common cov- European Court Cases (ECJ and CFI) erage of certain risks, and safety equipment. A point of particular interest is the Commis- Dominance and third party access sion's approach to institutionalised (as opposed to In November 1998 the European Court of Justice ad hoc) joint co-insumnce or co-reinsumnce pools, ("ECJ") made an important ruling concerning access where the Commission has focused, in cases to facilities developed by a dominant firm in Oscar exceeding the relevant market share thresholds of Bronner v. Mediap~nt.~~In 1994 an Austrian daily the block exemption (10 per cent for co-insurance; newspaper company, Oscar Bronner ("Bronner"), 15 per cent for co-reinsurance), on whether a pool sought an order under Austrian competition law is necessary to allow its members to operate in a requiring another, larger Austrian daily newspaper specific market. The Commission notes that company, Mediaprint, to give it access to the insurers need a certain minimum dimension of activity in order to be present on a market without 37. Para. 28 of the report. incurring excessive risks. In the case of certain 38. Published on the DG IV Website. 39. See the White Paper at point 71, described in 35. Para. 199. Part 2; 1998 E.C. Commission Competition Report, 36. Commission Press Release IP/99/360, May 27,1999; points 54-55. COM (1999) 192 final. 40. Case C-7/97, Judgment of November 26, 1998.

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Box 5: Main European Court Cases Bronner Rival newspaper cannot force its way into dominant rival's home delivery service, unless not economically viable to create alternative (difficult is not enough) Baustahlgewebe/Zrish Sugar/UPS CFI and Commission under a duty not to take too long with proceedings (but some cases just take a long time!) Bagnasco Foreign participation in national banking conditions is not "effect on trade" by itself-closer, quantitative appraisal required Steel beams, PVC, Polypropylene, Cartel appeals generally rejected Woodpulp Eco Swiss China/Benetton Courts enforcing arbitration awards should annul for failure to comply with Article 81(1)E.C. Riviera/UPEX Commission complaints have to have a public interest and need a Community level remedy Albany and Others Compulsory participation in exclusive sectoral pension funds pursuant to collective bargaining contrary to Articles 86(1) and 82 E.C., but defensible under Article 86(2) E.C. latter's nationwide early morning home delivery The Court then focused on whether the denial scheme (the only one in Austria) against payment of access deprived Bronner of a means of dis- of reasonable remuneration. Mediaprint had 46.8 tribution essential for the sale of its newspaper. per cent of circulation and 42 per cent of total The Court defined a high standard for this assess- advertising revenues through its daily news- ment (applying Commercial Solvents and Magill): papers Neue Kronen Zeitung and Kurier. Bronner had 3.6 per cent of circulation and some 6 per the denial of access had to be likely to cent of advertising revenues in the Austrian daily eliminate all competition in the daily newspaper market through its paper Der Standard. newspaper market from Bronner; Bronner argued that Mediaprint was in a domin- the denial had to be incapable of being ant position and therefore had to allow access to objectively justified; and its delivery scheme to competing products sug- the home delivery service had to be gesting that such home delivery was a separate shown to be indispensable to Bronner so market. Bronner argued that postal delivery in the that there was no actual or potential late morning was not equivalent and that, in view substitute. of its small number of subscribers, it would be unprofitable for Bronner to organise its own home Holding that this was "certainly not the case", the delivery service. Court noted that other methods of distribution for The Higher Regional Court of Vienna, sitting daily newspapers existed, even though they might as Kartellgericht, decided that before considering be less advantageous. There were no technical or Austrian law, it needed to resolve whether the economic obstacles making it impossible or even conduct of Mediaprint infringed (what was then) unreasonably difficult for another publisher alone, Article 86 E.C. and asked whether Mediaprint's or in co-operation with others, to establish its denial of access to its rival was, in the circum- own nationwide home delivery service. Moreover, stances, an abuse. in arguing that the creation of an alternative sys- The ECJ found that the conduct was not an tem was not a realistic potential alternative, abuse. The ECJ first noted that the national court Bronner had to establish that it was not eco- had to decide whether home delivery schemes nomically viable to create a second home delivery constituted a separate market, or whether other scheme with a comparable circulation and could methods of distributing daily newspapers, such as not argue that it could not do so just because of its sale in shops or kiosks or delivery by post were smaller circulation. Not surprisingly, the case has sufficiently interchangeable to have to be taken been heralded as encouraging innovation and into account. The possible existence of regional investment by dominant companies. home delivery schemes, also had to be considered. If there was a separate market in home delivery Unduly long proceedings schemes, not substitutable with regional schemes, This issue has come up in various cases this year then Mediaprint would hold a dominant position. (both at Court and Commission level). In December

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1998 the ECJ essentially dismissed the appeal had adopted many measures during that period brought by Baustahlgewebe GmbH ("BStG") (including three Statements of Objections and against the Court of First Instance's ("CFI") judg- dealing with various complaints). ment upholding fines on BStG for its participation in the Welded Steel Mesh cartel. However, the Standard banking conditions and effect ECJ reduced the amount of the fine imposed by on trade ECU 50,000 in view of the excessive duration of In January 1999 the ECJ made an important ruling the proceedings before the CFI. concerning the application of E.C. competition law The duration of the proceedings before the CFI to standard banking conditions in Carlo Bagnasco had been five years and six months. The case had v. Banca Popolare di N~vara,"~concerning both involved 11 appellants and three different lan- what constitutes a restriction and the apprecia- guages. The ECJ emphasised that the sort of close bility of "effect on trade" in financial services cases. examination of complex facts which the CFI had The case arose in the context of proceedings for to do took some time. Nevertheless, the ECJ found the repayment of loans granted by two Italian that the period of 32 months between the end of banks. Bagnasco had defaulted and was being the written procedure and the decision to open the required to repay the debt balance (subject to some oral procedure, and the period of 22 months 17 per cent interest). Calls were also being made between the close of the oral procedure and the on related guarantees. Bagnasco and his sureties delivery of the CFI's judgment could only be justi- argued that the claims were unenforceable insofar fied by exceptional circumstances which did not as they were in pursuit of standard conditions exist in the case." agreed by Italian banks, which were, in effect, The issue also came up in October 1999, in concerted practices for the determination of inter- Irish Sugar, when the CFI essentially upheld the est rates contrary to (what were then) Articles 85 Commission's decision but reduced the fine from and 86 E.C. ECU 8.8 million to 7.8 million.42In a judgment of The Genoa District Court referred various ques- some 72 pages the CFI rejected almost all of the tions concerning the standard banking conditions various challenges raised by Irish Sugar, finding that the Italian Banking Association imposes on its only that the Commission had failed to show that members when contracts are concluded for current Irish Sugar had granted selectively low prices to account credit facilities and the provision of general the customers of an importer of French sugar for guarantees. In particular, the Court wished to know two years as the Commission had found in its whether a banking rule allowing banks to change decision. the interest rate, could be a restriction on compe- In the process, the CFI upheld the Commission's tition effecting trade between Member States. claim that Irish Sugar jointly held a dominant The Court found that such a rule was not an position with Sugar Distributors Ltd, a related appreciable restriction. The opening of a current company. The CFI rejected Irish Sugar's view that account credit facility is a banking transaction companies in a vertical relationship could not which, by its nature, is linked to the right of the bank jointly hold a dominant position43 and the idea to change the agreed rate of interest by reference that Irish Sugar's inability to afford a general price to factors such as the conditions for refinancing of reduction could justify the selective nature of its the loans by banks. The right of the bank means border rebates (to do otherwise would have "made that bank interest rates may increase but also de- a dead letter" of the prohibition in Article 86 crease. Since, in this case, any variation in interest E.C.). The CFI also confirmed that the grant of rate depended on objective factors, such as changes target rebates by a dominant company with the occurring in the money market, a concerted prac- effect of building up stocks with customers tice to exclude the right to adopt a fixed interest amounted to a restriction on the normal develop- rate could not appreciably restrict competition. ment of competition. Standard banking conditions which envisaged that The CFI reviewed the overall length of the Com- banks would vary interest rates were not restric- mission proceedings, which had occurred in three tions within the meaning of Article 85(1) E.C. phases and amounted to some 80 months in total The Court also asked whether standard banking (September 1990 to May 1997), to see if it could conditions relating to the provision of general be said that there had been a lack of diligence by guarantees to secure the opening of a current the Commission in pursuing the case. The CFI account credit facility were caught by Article found that there had been none. Although the 85(1) E.C. It was argued that since these rules are procedure had taken a long time, the Commission binding on the members of the Italian Banking Association, they prevented banks from offering 41. Case C-185195P Baustahlgewebe v. Commission, more favourable conditions for the guarantee con- Judgment of December 17, 1998, [I9981 E.C.R. 1-8417. tract associated with opening a credit facility. See also UPS, below. 42. Case T-228197, Judgment of October 7,1999. 44. Joined cases, C-215196 and C-216196, Judgment of 43. Para. 63. January 21, 1999, [I9991 E.C.R. 1-0135.

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The ECJ focused on whether such conditions million for an exchange of confidential informa- appreciably affected trade between Member States, tion, price fixing and market sharing through the and found that they did not. The Court accepted so-called "Poutrelles Committee".'" that the banking conditions might restrict com- The context was Article 65 of the European petition insofar as they would apply to the sub- Coal and Steel Treaty. Conscious perhaps that it sidiaries or branches of foreign banks of other had taken some five years to rule on the case, the Member States, and might restrict consumer Court noted that it had received some 11,000 docu- choice in Italy insofar as such rules applied to the ments from the Commission. The Court reduced great majority of banks there. some fines, partly finding that the practices con- However, the ECJ noted that the Commission cerned had lesser anti-competitive effects and had found (in a parallel procedure) that such partly finding that the Commission had incorrectly credit services had very limited impact on trade characterised the conduct of some undertakings between Member States and that the participation as recidivist when the undertakings in question of the subsidiaries or branches of non-Italian banks had not been penalised for similar infringements was limited. When notified of the standard bank- before they acted. The reductions in fines ranged ing conditions, the Commission considered that from 9.47 to 37.5 per cent. the only agreements falling within its jurisdiction A feature of the case was the claim that the were those for current accounts incorporating a Commission had been aware of, and indeed in- foreign currency credit facility and the conditions volved in, the infringements. The CFI rejected it, governing the collection or acceptance of negoti- finding instead that the undertakings had set up a able instruments or letters of credit payable in screen to protect themselves from the scrutiny of Italy or abroad. In response to a question from the the DG 111 officials responsible for monitoring the Court, the Commission had explained that market. In other words, the cartel had submitted recourse by the main customers of foreign banks relatively general and imprecise information to (i.e. large undertakings and foreign economic the Commission, whilst engaging in very precise operators) to such credit facilities was not great and detailed discussions, individualised at the and that this was not a decisive factor for foreign level of the undertakings in pursuit of their anti- banks when deciding whether or not to establish competitive agreements. The existence and con- in Italy. Such customers rarely used these con- tent of these agreements had been hidden from tracts. There was no other evidence before the both DG 111 and DG IV. Court suggesting that the restriction of customer's As regards recidivism, which was a major fea- choice, because of the standard condition on ture of the Commission's press announcements guarantees, appreciably affected trade between when the decision was taken, the CFI noted that Member States. It followed that the practices con- this implies that a person commits a fresh in- cerned "taken as a whole" did not infringe Article fringement after he has been penalised for similar 85(1) or 86 E.C. infringements. The only relevant "previous" case The case has provoked discussion because the was that of a sister company being penalised in conditions, effectively excluding fixed interest the Stainless Steel cartel decision. Yet most of the rates, do appear to be restrictions on banks as infringement period in question was prior to that undertakings. Moreover, this appears to have been decision. That decision could not therefore be a the position of the Bank of Italy when the Com- ground for increasing fines on the basis of mission declined jurisdiction over the relevant recidivism. terms. It is argued that the Court has taken a In April 1999 the CFI considered the second narrow view of "effect on trade". Others argue round of appeals in the PVC cartel cases." It will that, on the contrary, the previous practice was be recalled that the Commission's first decision too wide and welcome the detailed assessment was annulled for procedural errors. The Commis- here, as a more realistic division of jurisdiction sion adopted a new decision in 1994 against 12 of between E.C. and national competition law. The the 14 producers concerned by the initial deci- Court's reasoning has been applied by the Com- sion, correcting the relevant procedural irregu- mission already, as regards the Dutch banks accept- larities in the adoption and authentication of the ance giro system, described below. decision. The 12 undertakings then appealed again arguing, amongst other things: (1) that the Com- Cartel appeals mission was not entitled to adopt a new decision In March 1999 the CFI ruled on various appeals because the issues were res judicata; (2) that they against the steel beams cartel decision?' in which were being fined twice for the same offence; and the Commission imposed fines of some ECU 104 46. See [I9951 2 I.C.C.L.R.60. 47. Joined Cases T-305194, T-306194 and Others 45. CF'I hssRelease No. 14/99;representative judgment, Limburgse Vinyl Maatschappij NV and Others v. Case T-141194 Thyssen Stahl v. Commission, Judgment Commission: CFI Ress Release No. 22/99 of April 20, of March 11,1999. 1999; Judgment of April 20.1999.

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(3)that the Commission should also have restarted order to decide whether it was appropriate to repay the administrative procedure, not just re-signed the fines. its decision properly. The Commission appealed arguing, amongst The CFI rejected such claims. On the substan- other things, that such an approach made a mock- tive infringement, the CFI upheld the Commis- ery of the two-month time-limit in (what was) sion's decision but reduced fines imposed in three Article 173 E.C. (now Article 230 E.C.). The ECJ cases. In one case (Socie'tk Artesienne de Vinyle), agreed, citing various situations in E.C. law where the CFI found that participation in the cartel was a party has been denied the ability to plead the only proved for a shorter period than the Com- illegality of a Community measure after the expiry mission had found. In two other cases (ICI and Elf of the deadline to challenge it. The ECJ held that Alochem), the CFI found that, in allocating the the principle of legal certainty underlying those fine proportionally according to each undertak- situations meant that the Commission was not ing's market share, the Commissian had attributed required to review its decision for those who had too high figures to the companies and therefore not chosen to appeal it. Moreover, judgments had imposed fines which were too high. The reduc- individual consequences, "the authority of a tions ranged between ECU 265,000 and 950,000. ground of a judgement annulling a measure can- In July 1999 the ECJ essentially rejected the not apply to the situation of persons who were not appeals of polypropylene producers against the parties to the proceedings and with regard to CFI's confirmation of the Commission's decision whom the judgement cannot therefore have in the polypropylene cartel case (with some decided anything whatever". The ECJ therefore reductions of fines).48In general, the producers set aside the CFI judgment and gave final judg- argued that the CFI judgment should be set aside, ment in favour of the Commission. because the CFI had refused to reopen the oral procedure and institute measures of inquiry to see Oligopolistic dominance if the Commission had properly taken its deci- In March 1999 the CFI gave judgment in Gencor/ sion. This approach was inspired by a press con- Lonhr~.~~This was on appeal from a Commission ference and comments of Commission agents in decision which prohibited a merger between the hearing in the PVC cases. Implats (controlled by Gencor) and Lonhro. The The ECJ found that the CFI had not erred in Commission found that this merger would have rejecting such requests. In some cases, the plea as led to a collective dominant position in the world to a procedural defect in the Commission's deci- platinum and rhodium market. The judgment is sion had not been raised before the CFI. In any mentioned here since it develops the law on what event, the CFI was not obliged to act unless there constitutes "oligopolistic dominance", which may was sufficient factual evidence put before the also apply to Article 81 and 82 E.C. cases." Court as to the alleged procedural irregularity The main point to note is that the CFI rejected (which was not the case). The sort of indications the argument that for collective dominance struc- raised as to alleged Commission practice could tural links had to exist between the market play- not be regarded as decisive for determination of ers. Economic links could be enough.52Notably, the case before the CFI. anti-competitive market structures could arise In September 1999 the ECJ upheld the Com- where each undertaking might become aware of mission's appeal against the CFI judgment in the common interests and cause prices to increase, Assi Doman Kraft case.49Nine of the Swedish without having to enter into an agreement or resort addressees of the Commission's Woodpulp deci- to a concerted practice. sion did not appeal that decision. When the ECJ annulled most of the Commission decision, the Competition and arbitration companies applied to the Commission requesting In June 1999 the ECJ gave judgment in Eco Swiss the refund of the fines which they had paid, even China v. Benetton on the old issue of the extent to though they were not addressees of the ECJ judg- which competition law must be taken into ment. When the Commission rejected that request, account in arbitrati~n.~~The case involved 'an they appealed to the CFI and succeeded. The CFI eight-year licensing agreement between Benetton, ruled that the Commission had a duty, under Eco Swiss and Bulova whereby Eco Swiss was (what was then) Article 176 E.C. (now Article 233 granted the right to manufacture watches and E.C.) and the principle of good administration, to clocks with the words "Benetton by Bulova" for review the legality of the Woodpulp decision sale by Eco Swiss and Bulova. Dutch law and insofar as it applied to the Swedish addressees, in arbitration was provided for. Three years before expiry of the agreement, Benetton gave notice to

48. Case C-49192P Commission v. ANIC; Case C-51192P 50. Case T-102196, Judgment of March 25, 1999. Hercules v. Commission, and other judgments of July 8, 51. See e.g. the P@O/Stena case, described in Part 2. 1999. 52. Paras 273-277. 49. Case C-310/97P, Judgment of September 14, 1999. 53. Case C-126197, Judgment of June 1, 1999.

(20001 I.C.C.L.R.. ISSUE 2 0 SWEET & 1MAXWELL LIMITED [AND CONTRIBUTORS] RATLIFF: MAJOR EVENTS AND POLICY ISSUES IN E.C. COMPETITION LAW, 1999--PART 1: 12000) I.C.C.L.R. 65 terminate. The arbitrators made two awards (a pre- outside Regulation 123185 and infringed Article liminary one, then a final one) requiring Benetton 85(1) ECs4The Commission had originally taken to pay some U.S.$23.7 million to Eco Swiss and up Riviera's complaint, sent 'a questionnaire to U.S.$2.8 million to Bulova. Benetton then applied some 260 dealers, issued a Statement of Objec- to the Dutch courts for annulment of the awards tions and held an oral hearing. The Commission on the basis that they were contrary to public then rejected Riviera's complaint considering that policy, i.e. the licensing agreement was null and some of the provisions concerned did not restrict void as contrary to Article 81 E.C. The agreement Article 85(1) E.C. and that it was not in the Com- had not been notified, nor was it covered by a munity interest to pursue others because the block exemption. Neither the parties nor the arbi- difficulty of proof was disproportionate to the trators had raised such an issue before. The Dutch Commission's resources. The Commission added Supreme Court noted that in Dutch law a failure that it was addressing the issues through legisla- to apply a prohibition laid down in competition tion, the new block exemption, Regulation 1475195. law is not generally regarded as contrary to public The CFI upheld the Commission's view on the policy so that an arbitration award had to be compatibility of the distribution agreement with denied enforcement, but asked if the same were Article 85(1) E.C. The CFI also supported the Com- true in Community law for Article 81 E.C. mission's rejection of the complaints, confirming The ECJ held that Community law was differ- that where the Commission shares jurisdiction ent. It is in the interest of efficient arbitration to with national courts, a complainant does not have limit review of awards and to annul them only in a right to a decision under (what was then) Article exceptional circumstances. However, respect for 189 E.C. (now Article 249 E.C.)." The Commis- the E.C. competition rules was a fundamental pro- sion was also justified in urging the complainants vision in the E.C. Treaty. Where national law pro- to seek redress in the national courts where the vided for a court to annul arbitration awards for issues involved still required an assessment failure to comply with national rules of public under national law (i.e. of the conditions of the policy, a court should also annul an award for agreement, the consequences of nullity and the failure to comply with Article 81[1) E.C. A refusal to sell based on an agreement which national court asked to determine the validity of would be partially void). Nevertheless, in view of an arbitration award should therefore examine the Commission's "radical change" of view, the whether such an award complied with Article applicants were not required to pay the Comrnis- 81(1) E.C. and, if necessary, refer questions of sion's costs. interpretation to the ECJ. Moreover, the Court held This is not a happy story. Unfortunately, it is that Article 81 E.C. is a matter of public policy for just one of a whole series of court actions in the purposes of the New York Convention of June recent years by frustrated garage owners concern- 10, 1958 on Recognition and Enforcement of For- ing car distribution complaint rejections. Clearly, eign Arbitral Awards. the Commission can change its view of a case The Dutch Supreme Court also asked if domestic (and indeed must do if the evidence shows that is rules of procedure on the time-limits for annul- correct). However, one can understand the com- ment of an arbitration award shouId not be applied, plainant's dissatisfaction at being told that legis- if to do so would prevent review of the award for lation for the future solves the infringement of compliance with Article 81 E.C. The ECJ found which he is a victim. It is to be hoped that the not. The first award could have been appealed Commission's new idea of a notice on complaints within three months, which was not an exces- (setting out more clearly where complainants sively short period. Domestic procedural rules on should go, when) may reduce some of the wasted appealing arbitration awards are justified by basic effort, frustration and delay.'= principles of legal certainty and res judicata. Com- In March 1999 the ECJ upheld an appeal by munity law did not therefore require a national 1'Union FI'an~aise de llExpress ("UFEX"), DHL court not to apply such procedural rules, even if and Others against the CFI's judgment, upholding that were necessary to assess whether an agree- the Commission's decision not to investigate an ment otherwise held to be valid was void under alleged infringement of Article 86 E.C. by the Article 81 E.C. French Post Office, La Paste." UFEX had claimed that La Poste had abused its dominant position by Treatment ot complaints allowing its subsidiary SFMI-Chronopost to use There have been various European Court cases on its infrastructure on unusually favourable terms, the Commission's handling or rejection of com- thereby extending its dominant position in the plaints. Thus, in January 1999, the CFI rejected an action by Riviera Auto Service ~tablissements 54. Joined Cases T-185196, T-189196 and T-190196, Dalmasso ("Riviera ") and Others against the Com- Judgment of January 21, 1999. 55. Para. 48. mission's decision to close an investigation into 56. See discussion of the White Paper below in Part 2. whether VW France's distribution agreement was 57. Case C-lllI97P, Judgment of March 4, 1999.

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Given that the Com- intended to serve UFEX's individual interests. mission was in the final stage of its procedure, it The ECJ upheld the CFI's position on most should have been able to make that decision with- points, but found that the CFI should have exam- in the four- and six-month periods concerned here. ined whether past Article 86 E.C. infringements What the Commission could not do when sum- (concerning cross-subsidisation of Chronopost) moned to act was simply to resume its exam- had ongoing effects requiring Commission inter- ination of the complaint (which it had already vention. (UFEX argued that, even if cross-subsidies had some 47 months to do). had ceased, they had affected competition and necessarily continued to distort it.) The CFI had Dutch sectorai pension funds also failed to seek production of a key letter from In September 1999 the ECJ ruled in three similar the Commissioner for competition, which allegedly cases that the Dutch system of compulsory illustrated the Commission's misuse of power (the affiliation to sectoral pension funds granting letter allegedly showed that the Commission was supplementary pensions to employees is com- publicly concerned for competition in the postal patible with E.C. competition law.'' The context sector, but in reality yielded to pressure from was proceedings brought by three undertakings certain states and postal institutions). The CFI had which challenged orders issued by sectoral pen- also incorrectly found that the complaint served sion funds refusing exemption from participation essentially to make it easier for the complainants and demanding payment of unpaid statutory to show fault in order to obtain damages in the contributions. national courts. If the anti-competitive effects Under Dutch law, employers, although in prin- complained of continued, there might have been a ciple free to decide whether or not to offer Community interest in the Commission pursuing supplementary pensions to their employees, are the case. often in practice obliged to affiliate their employ- Again, this is not a happy story. UFEX's com- ees to a compulsory sectoral pension fund. Those plaint was filed in 1990 and, nearly ten years funds are set up by collective agreement between later, the matter is still not resolved. Proving a management and labour in a particular sector of case such as this, where the law is relatively new, industry. The Dutch State then, at the request of a in national courts would be a daunting task. The group of employers' associations and trade unions, idea of seeking parallel remedies, a Commission makes affiliation to the scheme compulsory for all ruling, followed up by a claim for damages does persons belonging to the sector of the economy not, at first sight, seem an unreasonable line for concerned. the victim of the alleged practice to take, although The plaintiffs contended that the Dutch system it is probably more focused to just go into the infringed either Articles 3(g) and 10 E.C. in con- national court. junction with Article 81 E.C., or Article 86(1) E.C. In September 1999 the CFI ruled on the action in conjunction with Article 82 E.C. (the former brought by UPS against the commission's failure Articles 90 and 86). In particular, it was argued to act on a complaint UPS had filed, in 1994, that the collective agreements between manage- against alleged infringements by Deutsche Post of ment and labour to set up a sectoral pension fund Article 86 E.C." and jointly to apply to the authorities to make UPS had been pushing for the Commission to affiliation to the fund compulsory for all persons act since 1994 with "Article 175 EC letters" in belonging to that sector should be prohibited under November 1996 and October 1997. In February Article 81(1) E.C. The Dutch State, in creating the 1998, in response to a Commission letter indicating legislative framework for compulsory affiliation that it was not proposing to pursue the investi- and in making affiliation compulsory at the gation (an "Article 6 letter" under Regulation request of the representatives of employees and 99/63), UPS offered its observations. Four months employers, infringed Articles 3(g), 10 and 81(1) later, UPS sent another Article 175 E.C. letter E.C. by encouraging and reinforcing the effects of summoning the Commission to act. A further two an agreement contrary to Article 81(1)E.C. months later, UPS filed at court arguing- - that the Commission had failed to act because it had 59. Case (2-67196 Albany International, Judgment of neither initiated the ~rocedure,nor ado~teda Se~tember.21. 1999: loined Cases C-115197. C-116197 definitive decision rejecting the complaint. anh C-117197, ~r&$ens' ~andelsondernehin~BV, Judgment of September 21, 1999; Case C-219197 BV Maatschappij Drijvende Bokken, Judgmentof September 58. Case T-127198, Judgment of September 9, 1999. 21, 1999.

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Moreover, the plaintiffs argued that the Nether- this type.60The initiative appears partly inspired lands infringed Articles 86(1) and 82 E.C. in by the Commission's "reorientation" in the White granting the sectoral pension funds an exclusive Paper, partly by the large nuinber of recent cases right to operate a supplementary pension scheme. and partly by renewed international focus on chal- The funds abused their dominant position by pro- lenging cartels (e.g. in the OECD and the United viding inadequate services and impeding under- States." In October, Maurice Guerrin, Head of the takings to benefit from global pension coverage Commission's Cartel Unit, indicated that the Com- scheme by an insurance company. mission was receiving significant assistance from Following preliminary references by three companies involved in cartels. He stated that the Dutch courts, the ECJ ruled that agreements con- Commission had received co-operation offers for cluded within formal collective bargaining between "two-thirds of the around 20 cases pending"." employers and workers, which pursue objectives of social policy protected by the Treaty, fall Greek and Italian ferries outside the scope of Article 81(1) E.C. The Treaty also has specific social provisions. As a result, a In December 1998 the Commission imposed fines Member State does not infringe Articles 3(g), 10 totalling ECU 9.12 million on six ferry companies and 81 E.C. in making such an agreement com- based in Greece and one in Italy for operating a price- pulsory for all undertakings belonging to that fixing cartel on routes between Greece and Italy.63 sector. The ECJ then ruled that the funds in ques- The case arose from a complaint in 1992 that tion were undertakings and that the grant of an ferry prices on these routes were very similar. The exclusive right to operate a supplementary sec- practices concerned the three main routes between toral pension scheme resulted in an abuse of the Greece and Italy from 1987 to 1994. The Commis- funds' dominant position (accepting that such sion raided the companies concerned and found funds were not the most efficient). However, the extensive evidence, mainly messages and telexes system was justified under Article 86(2) E.C., in between operators seeking to establish agreed price consideration of the social mission of general levels. There was fairly explicit wording, includ- interest carried out by supplementary pension ing one comment that certain car importers were schemes. "endeavouring to lure our companies into tariff competition .. . we propose to you that we should stick to a common policy which will keep us off Commission decisions the slippery slope",64and that one 15 per cent price increase would give one participant "an immediate Cartels yield of new net receipts in the order of GRD 600,000,000 annually".65 Meetings and co-ordination were found to have Box 6: Cartel continued after a Commission request for infor- 15-20 case handlers in revived cartel mation, albeit in modified form. The defendants unit raised three main arguments: Greek and Italian fenies fines * the "lure of competition" and the - the practices had been imposed by the "slippery slope"! Greek Ministry for the Merchant Navy, "the * five versions of fines tables agreement on prices was a government- Europe Asia Trades Agreement led and supervised cartel"; * "Stability" and shipping - the parties had, in fact, still competed, * effect on trade when exporting through discounts and on-board services Various investigations: bank charges, not covered by the agreements; and newsprint etc. - prices on Greece-Italy routes were lower The international dimension than those on other international routes in the Community.

Revived cartel unit 60. 1998 E.C. Commission Competition Report, point 67; Commission Press Release, IP/98/1060 of December 3, In December 1998 the Commission revived the idea 1998. of a special cartel unit in DG IV for the investi- 61. The United States has also suggested that it would be useful to have a focal point in the Competition Dir- gation and prosecution of cartels. In its 1998 ectorate for co-ordination purposes. Competition Report, the Commission indicates it 62. Reuters, October PI, 1999. has assigned some 15 case handlers to this unit, 63. [19991 O.J. ~109124. 64. Para. 27. which should eventually comprise 20 officials 65. Para. 38. Interesting evidence in the event of a with significant experience in investigations of damages claim!

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The Commission contacted the Greek authorities The parties agreed not to use some 17 per cent concerning the first argument. It appears that there of the space on their vessels to reduce excess of had been some recommendations concerning supply over demand. The Commission objected Greece-Italy maritime lines, in particular in rela- both to the capacity non-utilisation programme tion to public service obligations and the trans- and the related exchange of confidential infor- port of fresh agricultural produce. The Greek mation, given the high market shares of the par- Government was concerned that the route be ticipants to the EATA (some 86 per cent of the viable and wished to avoid any price war which relevant market in 1991). could possibly hinder the smooth promotion of The parties terminated the agreement in 1997, export and import trade. However, the Govern- but the Commission chose to take a full decision ment only fixed tariffs on internal routes, not the partly to show its reasoning, partly unless similar international part of maritime lines. The Commis- practices or arguments should be put forward sion therefore rejected the argument that the com- again, and partly for third parties, who might seek panies were required to fix prices, but reduced redress before a national court (prompting specu- fines on the basis that the companies might have lation as to whether some of the shippers con- been in some doubt as to their position. cerned are suing for damages). As regards proof of the cartel, the Commission Three particular features of the decision are of followed its now standard approach of aiming to particular interest. First, there is an extensive demonstrate the existence, operation and main fea- discussion of what sort of "stability" should be tures of the collusion and then assessed (1)whether accepted in shipping cases.68 The shipowners there was credible and persuasive proof to link argued, amongst other things, that without the agree- each company to the common scheme and (2) for ment there would be a contraction in capacity, what period. The Commission considered the evi- which would mean there would be insufficient dence clear for most of the companies concerned, capacity to deal with any subsequent increase in but not strong enough for two companies which world trade and that the existence of potential were only mentioned once in other companies' competition guaranteed efficient services at com- documents. petitive prices. The Commission's assessment of fines reflects In a detailed analysis of the claimed "inherent the detailed provisions of the Commission's guide- instability" of the shipping industry and "destruc- lines on fines and notice on co-operation. The tive price competition", the Commission rejected Commission took into account the intentional the applicability of such arguments to the liner nature of the infringement, its limited actual impact shipping industry, making it clear that agreements on the market, the low level of fares, the small to achieve a "stability" beyond that endorsed in amount of traffic concerned, the size of the Regulation 4056/86 would normally not be ac- operator^,^^ the duration of the infringement, the cepted and emphasising that such arguments apply fact that one company acted as instigator of equally to other capital intensive industries. the cartel and attempted to hide the cartel after Secondly, the decision appears to be part of a the Commission's Article 11 letter, the doubt as to wider policy to increase competition on maj'or whether the Greek Government's domestic price- world trade routes.69The Commission emphasises fixing practice applied, the "10% of turnover" that it has also taken action against agreements on limit and that one company had provided docu- Trans-Atlantic routes and the American author- ments confirming the infringement to a signifi- ities have intervened as regards Trans-Pacific cant extent. In the process, the fines tables went routes. through five versions. Fines ranged from ECU 0.26 Thirdly, it may be noted that this was an agree- million to ECU 3.26 million. ment affecting exports from the E.U. ("Eastbound" traffic). The Commission discussion of effect on Europe Asia Trades Agreement trade is therefore worth noting, for at first sight the Commission's jurisdiction is not The In April 1999 the Commission took a decision Commission does not rely on findings of actual prohibiting the Europe Asia Trades Agreement effect on trade, but rather potential effects. How- ("EATA").67This was an agreement between ship- ever, as in the West African Shipping Conference ping lines to manage capacity on scheduled mari- and TACA cases, what the Commission does is to time transport services for containerised cargo find such effects on the provision of transport and from Northern Europe to the Far East and to intermediary services within the Community, not improve revenue "to a level consistent with a rea- the market for exports to third c~untries.~'The sonable rate of return on investment and to main- tain the viability of such services in the future". 68. Paras 104-142. 66. Although it still fined two SMEs. 69. Paras 29-33. 67. [I9991 O.J. L193/23; Commission Press Release 70. See paras 157-175. IP/99/313 May 10, 1999. 71. See e.g. TACA [I9991 O.J.L9511, at paras 386-396.

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EATA agreement is found to have reduced com- to meetings to discuss interest rates, commission petition between shipping lines in seven Member charges and banking fees between 1994 and 1998.80 States, thereby influencing the trade flows within A key issue developing again is the extent to the Community, to have affected competition which competition authorities can co-ordinate between ports, and to have affected competition their efforts against international cartels. There in the services ancillary to the supply of maritime have been further discussions on the subject at transport services (e.g. freight forwarding). The OECD level focusing, amongst other things, on EATA also had an indirect effect on the pattern confidentiality and the exchange of information. of trade in the Community, since it may have While such co-operation may be advocated in affected the way goods were exported to third increasingly global cases, Europeans continue to countries. be concerned that doing so may lead to unfair One senses that there may have been wider sanctions where, for example, an executive in an considerations at stake (such as ensuring the com- E.U. company acts, thinking that the risk involved petitivity of European exports to the Far East), is a possible fine and (single) damages suit for his and the facility of the E.U. being the enforcer company, and then finds that he is faced with (rather than a series of Far Eastern anti-trust personal criminal charges in the United States, and agencies). The Commission also had to act because his company may face treble damage suits. This is of the parties' notification. what prompted European blocking statutes some years ago. Certainly, in view of recent U.S. acti- Other cases/investigations vism in this area, companies should now check very carefully on such exposure if there is any During the reference period, the Commission deci- doubt as to whether contemplated activity could sions in the Pre-insulated Pipe Cartel,72British Sugar be unlawful. and Others73and TACA7' have been published. During the year there have also been reports of Distributionnicensing various cartel investigations. Thus, at the end of The U.K. beer trade November 1998 the Commission was reported to have raided companies in Germany, France and During the year, the Commission has continued to the United Kingdom concerning an alleged price- deal with various notifications and complaints fixing cartel in the plasterboard ind~stry.~'In concerning the U.K. beer trade. In February 1999 April 1999 the Commission was reported to have the Commission granted retroactive exemption to sent Statements of Objections to companies alleged Whitbread's standard pub leases." In July 1999 to have participated in a cartel for the supply of the Commission granted retroactive exemption to newsprint paper between 1989 and 1995, after com- the standard pub leases of Bass and Scottish and plaints had been made by publishers of collective Newcastle ("S~ZN").'~ price increases ranging from 10 to 30 per cent.76In In all three cases the breweries notified their May 1999 the Commission was reported to be agreements, since the beer tie commonly used in investigating whether European pharmaceutical the United Kingdom (by type of beer) did not companies have been involved in a vitamin price- meet the requirements of Regulation 1984183. fixing cartel, after BASF, Hoffrnann La Roche and Notifications were made in the context of litiga- others settled with the U.S. authorities, for a fine tion by tied house lessees who claimed that they of U.S.$500 million.77 were being charged prices for their beer supplies In February 1999 the Commission raided banks which were higher than free house owners. The in France, Germany, Italy and Spain and, in October Commission used powers for retroactive exemp- 1999, raided banks and an exchange office in the tion based on the national nature of the relevant Netherlands, Belgium and Ireland concerning agreements under Article 4 of Regulation 17/62 alleged collusion on bank charges for currency (now widened to cover all vertical agreements). exchange cash conversion and money transfers.78 The cases are interesting in particular because In September 1999 there were also reports that the of the assessment of network based foreclosure Commission was pursuing its investigation into which, in the circumstances, was significant but Austrian banks.79The allegations appear to relate not so cumulatively great as to prevent exemptions. The Commission found that the agreements 72. [I9991 O.J.L24/1. concerned fell within Article 85/81 E.C. (as 73. 119991 0.1.L76/1. 74. ilggg] 0.j. ~9511. 75. Financial nmes, November 27, 1998. 80. Reuters, September 21, 1999. 76. European Report, April 7 and 21,1999. 81. Commission Press Release IP/99/104, February 11, 77. Reuters, May 20 and 25, 1999. 1999; [I9991 O.J.L88/26. 78. European Report, February 20, 1999; Wall Street 82. Commission Press Release IP/99/457, July 5, 1999: Journal Europe, February 25, 1999; Reuters, October 20, Bass, Decision, [1999] O.J. L186/1; July 19, 1999: 1999. Scottish and Newcastle Decision, 0.J.L186/28, July 19, 79. European Report, September 18,1999. 1999.

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In September 1999 the Commission is reported The Commission found that the agreements to have sent a Statement of Objections to Volks- contributed significantly to that foreclosure. wagen concerning alleged price fixing when VW Whitbread's tied network accounted for 7.6 per launched the new Passat model in Germany." In cent of on-trade volume throughput in 199011 and the same month, the Commission sent some 80 6.1 per cent in 199617; Bass's tied sales accounted detailed questionnaires to those involved in the for 18 per cent of volume throughput in 199011 car distribution trade in order to assess the impact and 13.7 per cent in 199617. SbN's tied sales of Regulation 1475195 on price differentials and accounted for 6.16 per cent in 199011 and 9.44 per service to consumers. Under that Regulation the cent in 199718. On the other hand, the tied houses Commission has to complete a report on these of small and regional brewers such as Greene issues at the end of year 2000. Amongst other King/RobertsE3fell outside the scope of the E.C. things, the Commission says it is focusing on the rules because they did not significantly contribute relevance of Internet sales, hypermarkets and to foreclosure of the U.K. on-trade beer market. whether the link between the distribution of new The same was true for non-brewing pub com- vehicles and the provision of after-sales service panies supplied by more than one buyer. still exists." (This was one of the original grounds The Commission accepted that, on average, for Regulation 123185, the predecessor of Regu- tied house lessees paid more for their beer than lation 1475195.) free traders. However, the Commission granted Also in September 1999 the Commission Article 85(3)/81(3) E.C. exemption, because in raided the offices of Peugeot in the Netherlands, each case it considered that the differential was France and Germany, it appears in relation to com- justified by other countervailing benefits (ranging plaints of restrictions on parallel trade between from lower rents to professional assistance, capi- the United Kingdom, Netherlands and Ger~nany.'~ tal investment and bulk purchasing rebates). The All of this has continued industry focus on two Commission also considered that a specification issues: (1) the problems of tax differentials and by type of beer facilitated the introduction of currency fluctuations which account for a sig- foreign or new brewers' brands. For Whitbread, nificant part of the interest in parallel trading the exemption was for eight years from the intro- (even after the Euro was introduced, since some duction of the lease, for Bass 12 years, and for countries such as the United Kingdom are not in S&N 17 years.84 it); and (2) the prospects for renewal of Regulation 1475195. Cars Dutch electrical supplies This year has been a particularly busy year for competition law in the car sector. In April 1999 In October 1999 the Commission fined the Dutch the Commission raided offices of Renault in Paris, Association of Electrotechnical Wholesalers("FEG") its distributor in Ireland and a number of dealers and its largest member, Techische Unie ("TU"), in relation to claimed restrictions on parallel im- ECU 4.4 million and ECU 2.15 million respect- ports from Ireland to the United Kingdom." ively for operating a system of collective dealing Then the Commission sent two Statements of and a system of price co-ordinati~n.~~ Objections related to earlier investigations on The case arose as a result of complaint by a restrictions on parallel imports. One Statement U.K.-based wholesaler and its Dutch subsidiary. of Objections was to Daimler/Chrysler, alleging The equipment concerned includes products such restrictions on Mercedes' exclusive dealers in as cables, plugs, switches and sockets for electri- Germany, Belgium, the Netherlands and Spain cal systems. The Commission found that there selling to non-residents between 1985 and 1996 86. Commission Memo 99/22, April 26, 1999; Reuters, 83. Commission Press Release IP/98/967, November 6, May 14,1999. 1998. 87. Reuters, September 17, 1999. 84. The Commission also appears poised to take a 88. Commission F'ress Release IP/99/691, September 20, similar decision concerning Allied Domecq's standard 1999. pub leases, having published an Art. 19(3) notice in 89. Reuters, September 22 and 23, 1999. March 1999, [I9991 O.J.C82/5. 90. Commission Press Release IP1991803, October 26, 85. Reuters, April 16, 1999. 1999.

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was an agreement between FEG, the association of In July 1999 the Commission sent a Statement importers of such products ("NAVEG") and individ- of Objections to Glaxo Wellcome, challenging its ual suppliers, whereby FEG prohibited NAVEG's dual pricing system for sales in Spain.93Under members from selling to wholesalers which were this system, which was notified in 1998, products not members of FEG. This deprived such whole- for intra-Community export are sold to Spanish salers of their sources of supply and delayed wholesalers at a higher price than those for sale in market entry for foreign suppliers. The practice Spain. The system is designed to prevent Glaxo had been prohibited by the Dutch competition products being parallel imported to other E.U. authorities, but converted into a more covert gentle- markets, notably the United Kingdom where man's agreement. prices are higher. The Spanish authorities have The Commission also found that there had already taken provisional measures to suspend been various measures by FEG and its members to the system. Glaxo argues that the price which it reduce price competition including: determines is the export price, which is modified to the lower level by Spanish law. The Com- - an FEG decision prohibiting advertising mission considers that national price legislation using specially reduced or loss leader cannot justify such a restriction on competition. prices; - an FEG decision required members to pass Abuse of domlnant position on to customers price increases by sup- Article 82 proceedings pliers after products had been ordered; - discussions on prices and discounts at In July 1999 the Commission imposed a fine of FEG meetings; ECU 6.8 million on British Airways for paying - FEG price recommendations to members. rebates to travel agents contrary to Article 82 E.C. It may be recalled that some time ago, Virgin Although these practices were in the Netherlands, complained to the Commission about such prac- they were considered to affect trade between tices. Press reports suggest that the Commission Member States because FEG members accounted objects to BA having offered progressive turnover for 96 per cent of the Dutch wholesale market for rebates (i.e. more rebate for more sales of BA such electrotechnical equipment, and some 30-50 tickets than the previous year) over the last seven per cent of such equipment sold in the Nether- years. We are still waiting for the text of the lands was imported. decision to be p~blished.'~ According to the latest Competition Report, the Other Commission also intervened last year against exclusive long-term supply agreements by Nordion, In May 1999 the Commission approved licensing a Canadian company which produces and sells agreements between Microsofl and several Euro- Molybdenum 99, a base product for radiopharma- pean Internet Service Providers ("ISPs") after ceuticals used in nuclear medicine. It was argued changes. Notably, provisions were deleted which that this made it very difficult for IRE, a Belgian require the ISPs not to promote and advertise competitor, to develop and/or maintain its pres- browsers other than Microsoft's Internet Explorer ence on the market. After receiving a Statement of and providing for termination of the ISPs' contracts Objections, Nordion undertook to renounce the if they failed to attain certain minimum distribu- exclusivity clauses.95 tion volumes. The approval only covers the agree- In May 1999 the Commission indicated that it ments concerned, not the issue of a possible abuse had raided the offices of Danisco concerning of dominant position by Microsoft, currently being alleged abuses of dominant position in the Danish considered in the United state^.^' sugar market. It appears the issues are the alleged In July 1999 the Commission also announced imposition of tied sales on customers and charg- that it was launching an investigation into licens- ing excessive prices. The Commission also stated ing agreements between Network Solutions Inc. and that it was investigating Agrana, the Austrian unit registrars of second-level Internet domain names of the German sugar producer, Siidzucker, having in the .corn, .org and .net domains. There are con- carried out raids in April 1997.96 cerns regarding discrimination, conditions for ac- exempted by analogy to the transfer of technology block creditation, barriers to entry (a performance bond of exemption; [I9991 0.J. L4/27. See Menis, 1999 E.C. U.S.$100,000) and rules on domain p~rtability.~' Commission Competition Policy Newsletter No. 1, February, p. 31. 91. Commission Press Release IP1991317, May 10, 93. Commission Press Release IP/99/522, July 16, 1999. 1999. 94. Agence Europe, July 15, 1999. 92. Commission Press Release IP/99/596, July 29,1999. 95. 1998 E.C. Commission Competition Report, at In January 1999 the Commission also published its deci- point 74. The Commission also co-operated with the sion in Sicasor restrictions in certain standard licensing Japanese Fair Trade Commission which pursued similar agreements for the production and sale of seeds protected proceedings. by plant variety rights not covered by Art. 85(1) E.C. or 96. Reuters, May 28, 1999.

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In July 1999 the Commission raided offices of both cases, the relevant authority was giving a the Coca-Cola Company and three of its bottlers, in discount to domestic traffic of at least 50 per cent. Germany, Austria, Denmark and the United King- The two authorities had different justifications. In dom. According to a Commission Press Statement the Finnish case, the authority argued that there the object is to investigate whether these com- were different costs related to the two types of panies have been offering targetlgrowth rebates, service: runways had to be longer and more dur- full rangelassortment rebates and exclusivitylde- able, and airports had to stay open later for con- listing payments contrary to Article 82 E.C." necting flights. The Commission rejected these arguments on the facts, and considered rather that Airport landing charges under Articles 82 (and the system recommended by the International 86 E.C.)" Civil Aviation Organisation should apply, namely that landing charges should be based on the maxi- mum take-off weight (MTOW) of an aircraft so Box 7: Articles 82/86 E.C. that charges vary simply according to aircraft size. BA tmvel agents rebates, various enquiries The Portuguese Authority's justifications related Finnish and Portuguese airport landing more to Portuguese geography. It was argued that charges domestic flights serve island airports in the * discriminatory discount scales and Azores for which there is no alternative to air variations between the domestic and transport and for which therefore prices have to international tariff. be lower, and other domestic flights are so short and cheap that the full landing charge would be a disproportionate amount of the overall cost. The Commission reserved its position on the first In February 1999 the Commission took two deci- argument, noting that there was no Community sions on airport landing fees, designed to follow traffic with the Azores (other than with Portugal) up on the Zaventem case. One case concerned and that the discrimination was therefore un- Finnish airports, the other Portuguese airports." likely to affect trade between Member States. The The Finnish case is based on (what was then) Commission rejected the second argument noting Article 86 E.C., the Portuguese case on (what was that some international flights were equally short then) Article 90 E.C. insofar as the Finnish Civil and therefore should qualify for similar discounts. Aviation Administration ("the Finnish Authority") It is clear that in these cases there is differ- set its own landing fees, whereas the Portuguese entiation according to the origin of a flight and Authority charges were fixed by law. that therefore what is happening is that, in a In both cases, the Commission focused on simi- sense, the state or company is using foreign-based lar issues: the Authorities charged international income to pay for local service (or to save local flights more than domestic flights and they taxpayers). Few would argue that this is wrong in operated discount scales based on the number of terms of building a common market. However, flights which, in practice, favoured the locally looking at the terms of Article 86(c) one may based airline. As in the Zaventem case, the Com- wonder whether the "competitive disadvantage" mission found that there were no economies of element is satisfied. Article 86(c) states that there scale in the provision of landing services, except should be the application of "dissimilar condi- for a negligible amount in concentrating invoicing tions for equivalent transactions, placing the par- on a customer. ties concerned at a competitive disadvantage". The Commission's position as regards the dis- How is the international airline disadvantaged count scales is that the system gives a competitive vis-a-vis the domestic airline? Unless, the inter- advantage to the national airlines (which in prin- national airline also competes on domestic ciple can be passed on either in the price or other services (or something similar). The Commission business advantages). The Finnish Authority has quotes Corsica Ferries II, including Advocate- agreed that such discounts should be terminated. General van Gerven, which is clear support for its The Portuguese decision requires the Portuguese view. However, whilst one can see that the dif- Authority to do so, and the Commission is pur- ferentiation in charges is offensive, in the author's suing other actions in other Member States with view, it is not clear that the elements of Article the same target. 86(c) are fulfilled. The Commission's reasoning on price dis- Finally, mention should be made of the way crimination relies heavily on Corsica Ferries II. In that the Commission finds that the different air- ports concerned, which are often small in terms of traffic, together constitute a "substantial part" of 97. Commission Memo 99/42, July 22, 1999. the common market. The Commission applies 98. Ex Arts 86 and 90 E.C. 99. [I9991 O.J. L69/24 and L69/31. Commission Press the reasoning in La Crespelle and Almelo judg- Release IP/99/101, February 10, 1999. ments and considers that the Authorities held a

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"contiguous series of monopolies" in each airport Perhaps more ports (air and sea) may be open to which, being controlled by the same undertaking, Article 82 E.C. arguments than thought previously, represented a substantial part of the common market. if this approach is followed!

In the second half of this article, John Ratlii surveys: The many European Commission decisions on joint ventures and co-operation between companies in 1999, in sectors ranging from insurance to legal services to telecoms, pay-TV and film distribution and a number of important "rule of reason" findings. The Commission's proposals to modernise and decentralise the enforcement of E.C. competition law in its recent "White Paper". Recent developments on the application of competition rules to sport in E.C. and national competition law (notably as regards the collective sale of broadcasting rights).

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UIP film distribution clearance In July 1999 the Commission issued an Article Major Events and 19(3) notice for the UIP Cinema film distribution Policy Issues in joint venture between Paramount, Universal and MGM.2 This has been a controversial issue for E.C. Competition Law, many years because European filmmakers say the 1999-Part 2 J.V. results in too many U.S. films in European cinemas, while American filmmakers suggest that politics is interfering with antitrust analysis. The notice was a little surprising because last year the Commission seemed to be suggesting that the J.V.'s exemption would not be renewed. In the end what JOHN RATLIFF has happened is that further undertakings have been given by UIP in return for a further five-year Wilmer, Cutler & Pickering, Brussels exemption. The J.V. was notified to the Commission first in 1982 and exempted in 1989 for five years. Since 1989 UIP's share of the market for distribution of This article contains the final part of the "Over- films to cinemas has fluctuated at around 20 per view of Major Events in E.C. Competition Law", cent in the various national markets concerned, published in last month's journal. The article is depending on the films released. In 1997 UIP's divided into section (1) joint ventures and co- market share was 13 per cent and in 1998, 17 per operation decisions of the European Commission; cent. (2) an outline of current policy issues; and (31, some As part of the Commission's 1989 decision, UIP comments on particular areas, meaning this year and its parents (called "Partners" in the notice) sport and books. gave various undertakings which now have been renewed in a revised form. Thus, UIP and the Partners undertake that they will co-finance and Overview of major events (continued) distribute films made by third parties in the EEA (rather than just the films which the Partners Joint ventures and co-operation' produce), where in UIE"s commercial judgment they are likely to generate reasonable earnings. They also agree to promote and support the develop- Box 8: Joint VenturesICo-operation ment of European filmmakers and film festivals. Large number of decisions and 19(3) notices Further, UIP and the Partners undertake to set UIP exemption renewed the dates for release of their films through UIP EPI Code of Conduct: prohibition on advert- individually (rather than to co-ordinate such ising by legal representatives contrary to releases), and not to bundle their films (or "block competition rules book" them as it is called in the film business). * Arduino case, Italian lawyers tariff UIP also undertakes to support an initiative for TPS/Cbgbtel+4/Tblbcom Dbveloppement: co- an arbitration procedure for disputes between operation and/or vertical restrictions outside exhibitors (cinemas] and distributors. Films sup- Article 85(1) E.C., where J.V. assists effective plied to the Partners' own cinemas will be sup- market entry against strong competition plied on an arm's length basis. PbO Stena Eurotunnel: assessment of com- For the renewed exemption, UIP and the Part- petition in a duopoly (transparency, capacity ners have agreed on two main new undertakings: constraints, differing cost structures) Dutch acceptance giro system did not affect (1) Under the UIP agreements, UIP had a trade (after Bagnasco) right of first refusal to its parents' films. CECED: minimum environmental standards If UIP decides not to distribute a film, for washing machines then the Partners can use other distri- An economic approach to insurance pools butors. However, the whole Community -P b 0 Pooling and 'Group Agreements was considered as a single territory. This * minimum dimension-1 player has been changed so that each Member * quotation procedures-"inherent" restric- State is considered a single territory, save tion (but not with retained claims and own Again, with many thanks to Ingrid Cloosterin and Flavia costs) Distefano for their help in the production of this paper. Co-operation towards cost-based cross- border mail services-REIMS II 1. Not covered by the E.C. Merger Control procedure. 2. [I9991 O.J. C20516.

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the United Kingdom and Eire, and Belgium The case relates to the Code of Conduct of the and Luxembourg which are both grouped Institute of Professional Representatives (the together. In the previous agreement, since "EPI") before the European Patent Office. The EPI UIP had right of first refusal for the Com- was set up by the European Patent Organisation munity as a whole, the parents were not which was itself set up by the European Patent able to distribute their films in those Mem- Convention. ber States where UIP was not present and The EPI has a regulation on discipline for pro- no other distributor could be appointed. fessional representatives which sets out various (2) The Partners have undertaken to delete a rules as to what such representatives can and provision in the UIP shareholders' agree- cannot do, and is enforced by a Disciplinary ment under which UIP was to maximise Board from which there is a right of appeal to gross receipts for each film distributed. It another "Disciplinary Board of Appeal", but not is argued that this created an incentive for to the national courts of a Member State. It would the Partners to seek a co-ordination of appear that the Commission was not entirely happy their releases (so as not to compete with with this lack of access to the courts (generally it each other for audiences). However, UIP is concerned about association statutes excluding still commits itself vis-a-vis each Partner access to the courts), but the Commission found to maximise the gross receipts of each the latter could be "deemed equivalent to a legal individual Partner's film. It will be inter- body". esting to see what difference this makes in Eighty-five per cent of European patent applica- practice. tions are filed by EPI professional representatives. In 1997 there were 5,861 named representatives, The Commission accepts that the J.V. involves of which 5,563 were within the Community. In distribution efficiencies for its parents, allowing that year, some 72,904 applications were filed, them to make more films for release in the Com- involving therefore significant levels of turnover. munity to the advantage of consumers. The Commission rejected any idea that the EPI In September 1999 the Commission announced was exercising some form of public power, taking that it had sent UIP a comfort letter.3 The Com- its Code of Conduct outside Article 85 E.C. mission argues that, even if UIP is a joint sales Before the Commission's intervention, it agency, it has only a limited market effect and appeared that the Code of Conduct prohibited certainly does not lead to dominance. The Fed- individual advertising and any supply of unsoli- eration of European Film Directors, FERA, has cited services, and required members to charge already protested and asked the new Commission fees which were "reasonable but sufficient to to review this decision, arguing that most of the maintain their professional independencew.= "European" films distributed by UIP were, in fact, These provision have now been deleted under American productions, and that there are still too the amended Code of Conduct which provides for few European produced films being shown in individual advertising (although comparative other E.U. countries than where they were made. advertising is prohibited) and the offer of unsoli- cited services (save in respect of cases already in Advertising and legal representatives progress or to those who have already been the In April 1999 the Commission took a decision on client of another representative for a specific case). advertising restrictions in a code of conduct for It also includes a recommendation to charge rea- representatives before the European Patent Office, sonable and justifiable fees (but without any sanc- the EPI Code of C~nduct.~The case may be tion to ensure compliance). important not only for similar codes at European Certain provisions were considered outside level, but as influential reasoning on similar cases Article 85(1) E.C. Thus, the Code of Conduct pre- under national competition laws. vents representatives from paying commission to The case arose as a result of a complaint by a third parties. The Commission considers this European patent agent working with a firm of justified (and therefore not a restriction of com- English solicitors. Intervention by the Commis- petition), "given that it would be impossible to sion resulted in the notification of the Code of impose the rules by which representatives are Conduct, and then a decision that various pro- bound on third parties". visions of the Code were outside Article 85(1) E.C. The Code of Conduct also prohibits charging An exemption was granted for certain remaining fees related to the outcome of the service pro- restrictions, including those on advertising, but vided. The Commission found that "even if in only as a transitional measure until April 2000. other circumstances it might constitute a restric- tion of competition to prohibit fees from being determined according to outcome, it is necessary 3. Commission Press Release IPl991681, September 14, 1999. 4. [I9991 0.J.L106/14. 5. Para. 15.

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in the economic and legal context specific to the 1999, in a case called Manuele Arduino, the Pretura profession in question, in order to guarantee Circondariale of Pinerolo (Turin) asked the ECJg: impartiality on the part of the representatives and to ensure the proper functioning of the EP0".6 whether a decision of the Italian National This meant in practice a concern that repre- Legal Council approved by a Ministerial sentatives should not just aim for short-term Decree, fixing binding tariffs for the profits rather than cases taking longer, where fees professional activity of lawyers, comes would only come later. The Commission found within (what was then) Article 85(1) E.C.; that a restriction on approaching a client of and another representative while he is representing if so, does the case correspond to one of that client "does not set out to restrict compe- the situations envisaged in (what was tition but contributes to the smooth handling of then) Article 85(3) E.C.? cases" and also fell outside Article 85(1) E.C. On the other hand, the restriction on approach- Restrictions for market entry-TPS pay-TV joint ing a client after another representative had venture finished a case was caught by Article 85(1) E.C. In April 1999 the Commission granted an The prohibition might prevent representatives exemption to the French satellite pay-TV joint from approaching the former clients of other venture TPS (Tblbvision par Satellite)." TPS is a representatives. partnership under French law whose share- The cdmmission also found that the provisions holders are now TF1, France TBlevision, M6 and prohibitihg comparative advertising restricted Lyonnaise Satellite. Since these companies are competition. Customers should be able to obtain also involved in broadcasting, the main issues information on representatives' services, fees and related to the risk of spillover collusion and conditions in order to choose whom to engage. vertical supply arrangements in favour of TPS. The Commission accepted that, under the Mis- The case is primarily of interest to the pay-TV leading Advertising Directive, a Member State sector. However, the Commission's treatment of could establish derogations concerning compara- these aspects is interesting, above all the way that tive advertising within the liberal professions. some restrictions were found to be ancillary to the However, the Commission considered that Article launch and therefore outside Article 85(1) E.C., 85 E.C. would still apply because such derogation while others were cut down in duration, taking had to be in compliance with the provisions of the into account investments made and the financial Treaty. According to the Commission, the prohibi- risks in the light of forecasts and TPS' perform- tion of comparative advertising "restricts the ance in the first eight months. As in other cases ability of more efficient representatives to this year in the telecoms sector (such as Ckgbtel develop their services to the detriment of less +4 discussed below), a theme of the decision was efficient representatives" and "helps to crystallise that restrictions in a combination designed to the clientele of each profession representative allow effective market entry to compete with an within each national market".' Such restrictions established and strong competitor may fall out- affected trade because they related to cross-border side Article 81(1) E.C. services, i.e. patent applications for all the The Commission found that pay-TV constitutes Contracting States to the Convention. a product market separate from free access tele- The Commission's exemption for these restric- vision. The pay-TV market includes transmission tions was unusual, because it only gave a period by terrestrial, satellite and cable means. There are to allow for an "orderly transition" in view of the now three main players in the French market, extent of the change required. The Commission CANAL+, TPS and AB Sat. CANAL+ is the lead- emphasised that, in the meantime, a representative ing channel in terms of subscribers, having been could advertise in the Yellow Pages or the press, launched first in 1984 and owning an extensive indicate the scale of charges for his services and portfolio of rights to broadcast. advertise a specialisation or particular profes- As regards scope for spillover, the Commission sional experience. The exemption ends when the decided that there was no risk of collusion Member States are required to have adopted the between the parents of TPS, particularly the (amended) Misleading Advertising Directive.' broadcasters. These were not present in the pay- The position of lawyers has also been raised by TV market other than through TPS and they were a new question for the European Court. In January not competitors in technical services for pay-TV. There was little risk of co-ordination on the 6. Para. 35. 7. Para. 43. acquisition of broadcasting rights, as long as the 8. The EPI has appealed; [I9991 0.1. C281117. See also broadcasters continued to focus the bulk of their Bicho, "Professions lib6rales: aspects essentiels de l'action de la Commission en matiere de l'application de con- currence" (1999) EC Commission Competition Policy 9. [I9991 O.J.C100110. Newsletter, June, No. 2, pp. 24-26. 10. [I9991 O.J. L90/6.

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TPS' The Commission then focused on certain ver- arrangements envisaged also the possibility of tical aspects of the arrangements and cleared entrusting exclusive transmission of the Arte and them, with some amendments. The Commission La Cinquibme channels to TPS. This was changed argued in part that these arrangements were out- by the parties into a non-exclusive arrangement. side Article 85(1) E.C., and in part they were Fourthly, the Commission considered a provision inside Article 85(1) E.C., but were exemptable as whereby, as originally notified, the cable operators facilitating the successful launch of a new pay-TV which hold shares in TPS (France TBlBcom via competitor in France. France TBl6vision and Lyonnaise Communica- First, the Commission considered a non- tions via Suez Lyonnaise des Eaux) undertook to competition clause whereby TPS' parents es- give priority to include TPS programmes on their sentially undertook not to become involved in networks, in particular in pay per view services, companies engaged in television programmes and to consult each other on co-ordinating these broadcast for payment in digital mode by satellite programmes and services with those already on to French-speaking homes in Europe. This was cable. This was deleted at the Commission's regarded as ancillary to the creation of TPS during request, insofar as there was concern that the its launch phase, which the Commission assessed provision would weaken the position of inde- as three years. For that period the clause was pendent channels by restricting their access to outside Article 85(1) E.C. these networks, which accounted for some 56 per Secondly, the Commission considered provisions cent of the French cable network." granting TPS preferential rights to special interest programmes distributed by its shareholders. TPS Information exchanges was given first refusal over such products where In September 1999 the Commission indicated operated or produced by the shareholders and that it had sent comfort letters to various tractor and also a right of final refusal or acceptance on the agricultural machinery manufacturers and their best terms proposed by competitors for pro- trade associations, concerning their information grammes which its shareholders offer to third exchange systems." The Commission followed parties. During the procedure, it was clarified that principles applied in relation to the U.K. Tractor this applied only to programmes produced and Exchange, upheld by the ECJ in John Deere. operated by the TPS' shareholders, not to all the The key principles are: broadcasting rights held by (i.e. acquired by) them. The right of first refusal over the share- - individual data may not be exchanged holders' programmes was considered as possibly until 12 months after the event concerned; ancillary to the launch of TPS for three years, but - aggregate market data which is less than clearly within Article 85(1) E.C., since it was for 12 months old may be exchanged if the 10 years' duration and limited the supply of such data are supplied by at least three dealers programmes to third parties. The Commission belonging to different industrial or finan- found that TPS needed to have recourse to its cial groups. If there are less than three parents' offerings to secure a minimum content dealers, data may be exchanged only if for its transmissions during its launch period. The the figure being exchanged concerns more Commission considered that such priority access than 10 tractors. was, however, essential only for three years. Thirdly, the Commission considered a provision The principles have been accepted by the Euro- giving TPS the exclusive right to broadcast the pean associations of agricultural machinery general-interest channels (TF1, France 2, France 3 manufacturers, the four largest manufacturers, and M6) in encrypted form and digital mode by and apply equally to importers to the Community. satellite for 10 years. This right has a particular value in France because reception of such free 11. In September 1999 the Commission exempted for access channels is occasionally poor or even seven years a joint venture, originally called British Interactive Broadcasting, but now named Open to impossible in certain parts of the country. Access provide new digital interactive television services, such to such rights was not essential for the launch of as home banking, shopping, learning online etc., to TPS' digital service, but gave TPS a commercial consumers in the United Kingdom, Commission Press Release, IP1991686, September 16, 1999. advantage in those parts of France. The Com- 12. Commission Press Release, IP/99/690, September mission noted that such exclusive access enabled 20, 1999.

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The Commission has suggested that similar which the players would not compete fully. The principles should be followed by other economic Commission first noted the parties positions prior sectors which are as highly concentrated as the to the J.V. and that there had been instability in market for tractors and agricultural machinery. market shares in recent years, in part because of Eurotunnel's entry. The Commission then looked Assessment of competition in a duopoiy-P&O at factors affecting competition between the J.V. Stena and Eurotunnel: In June 1999 the Commission's decision in PbO Stena was p~blished.'~It is an interesting case the degree of price transparency in the because of the way in which the Commission market (considered to be high for tourist assesses in detail whether a duopoly will develop traffic and therefore conducive to parallel between the J.V. and Eurotunnel, conducive to behaviour); parallel behaviour between them. The parties the extent to which each party was capa- operate ferry services, amongst other things, on city constrained (and therefore likely to the "Short French Sea" (otherwise known, to some, go for high load factors through price as the narrow part of the English Channel!). In competition), in particular at peak times 1996 they notified their proposal to merge their (found not to be likely); and operations, provoking a complaint from a smaller the different cost structures of the J.V. and competitor, Sea France (owned by SNCF), which Eurotunnel (which made it less likely they argued that it would be progressively eliminated would act in parallel). from the routes concerned. The parties' aim was to create cost-savings of On the other hand, the Commission considered some E75 million (in port costs, administration that there was not a sufficient probability that the and marketing) and to offer improved frequencies other smaller competitors woyld constitute an of sailings and continuous loading, essentially effective competitive restraint. Barriers to entry giving them a greater ability to match Eurotunnel. from outside the ferry industry were also low. The The Commission focused on the impact of the J.V. Commission concluded that the J.V. and Euro- on tourist passengers and freight services, looking tunnel could be expected to compete with each first at the issue whether there would be spillover other rather than to act in parallel to raise prices. on competition between the two companies on The Commission was, however, still concerned other markets, such as North Sea services and about the effects of the abolition of duty-free, services in the Western part of the Channel. Put which was expected to lead to considerably broadly, given the number of players in the mar- higher prices. In particular, the Commission was ket and the existence of competition in the Short uncertain whether Eurotunnel might be capacity French Sea market (which was related to the North constrained in the future and that, if the ferry Sea and Western Channel) markets, the Commis- companies could not replace duty-free income sion found there was little risk of successful co- with other revenue sources, they would have ordination. In other words, if P&O and Stena did more incentives to go for higher prices. There co-ordinate to raise prices on these markets then, might also be less competition from the small they would be likely to lose customers to com- companies. The Commission therefore limited the petitors such as Eurotumel. exemption to three years. The Commission then focused on the Short French Sea market. At first sight, the J.V. only "Effect on trade" and banking--Dutch giro involved concentration levels moving from six system clearance players to five. However, three of those players In September 1999 the Commission decided that were much smaller, or niche players, so that, in restrictions in the Dutch giro system were not some ways, the concentration looked more like caught by Article 81(1) E.C., applying Bagnasco.14 three players being reduced to two. Eurotunnel It is an interesting decision because it appears had some 36.9 per cent market share in 1997 and that for most of the procedure the Commission P&O/Stena combined had 45.1 per cent in the held the view that there was an appreciable effect same year, which meant that, after the J.V. was on trade and changed that view in the light of established, these two companies would have some Bagnasco. Otherwise, the Commission examined 82% together, and they would also be far ahead of in detail the multilateral interbank commission their nearest competitors (on 9 per cent, 8 per cent concerned and stated that, if it had decided on the and 1 per cent). system, it would have taken a favourable decision. The Commission accepted that a J.V. was The case started in 1991 when the Dutch Asso- essential to achieve the desired efficiencies, but ciation of Banks notified an amendment to its exist- focused on whether a duopoly was created in ing procedure for joint payment and acceptance 13. [I9991 O.J. L163161; Commission Press Release IPl99156, January 28,1999. 14. 119991 O.J. L271128.

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They are used widely by payees independent expert. for regular bills such as for energy and telephone The Commission found that there was not an charges, insurance premiums and subscriptions. appreciable effect on trade. The Commission took Various organisations which frequently receive into account that": payments in this form complained about the new system, arguing that all the cost should be borne - the agreements extended over the whole by the purchaser, that it was unlawful to fix the territory of the Netherlands and therefore price multilaterally and that there was a con- had the effect of reinforcing the compart- certed practice by the banks concerned, by which mentalisation of markets. (However, this they systematically passed on the charge. was not enough in itself to show that The Commission analysed the nature of the there was an appreciable effect on trade giro system in detail, noting that the concept was between Member States); that the purchaser's bank performed certain - the economic activity concerned (i.e. the services which were of value both to itself and the payments) were essentially domestic in collecting party's bank, and for which the latter nature; should therefore make a contribution (set at half - although many branches and subsidiaries of the relevant costs). The relevant product mar- of non-Dutch banks had participated in ket was that for acceptance giros and direct debit the system (11 out of 58 from other Mem- payments. The relevant geographic market was the ber States), the amount of business they Netherlands because the giro system is designed did with acceptance giros was limited for domestic business payments. (less than 1 per cent of acceptance giro In the face of Commission objections, the banks contracts concluded, and a small amount dropped requirements that the collecting party's of acceptance giros processed-less than bank does not offer particular advantages in con- 1 per cent of debits and less than 5 per nection with the holding of a particular credit cent of credits); and account and a ban on participants not introducing - the opportunity to offer the giro system their own giro procedures. was also found not to be a key competi- This left the issue of the restriction resulting tive factor when foreign banks decided to from the uniform commission, set multilaterally enter the Dutch market (about one-third of by the banks, for the services in question in the such banks did not even offer the accept- agreement. In 1992 the banks modified this ance giro product). requirement to allow banks to agree lower charges bilaterally. The banks also specified that the Clearly in future those assessing the effect on amount of the charge had been set on the basis of trade in (at least) financial services cases should the costs associated with the most efficient means be attempting to quantify any claimed effects." of processing giro forms and agreed to review the level of the charge periodically in light of an inde- Environmental clearances pendent expert's report. Various co-operation agreements for energy sav- In its decision, the Commission finds that the ing, environmental efficiency or recycling schemes multilateral interbank charge system is a restrict- have been the subject of attention at E.C. level this ive agreement caught by Article 81(1) E.C. insofar year. In December 1998 the Commission published as it significantly limits the freedom of banks to an Article 19(3) Notice concerning an agreement determine their own charging policy. Interestingly, committing members of the CECED (the European the Commission also noted that the change in 15. Commission Press Release IPl991683,September 15, 1992 to a maximum charge system had not had 1999. practical effect-since none of the banks had 16. Paras 57-65. chosen to charge a lower rate bilaterally. The 17. In March 1999 the Commission issued an Article 19(3) Notice indicating its intention to take a favourable Commission found that the collecting party's banks view of rules governing access to and operation of the had systematically passed on the interbank com- Systhme Interbancaire de T614compensationby a Groupe- mission to their customers as a minimum charge, ment of similar name, GSIT. SIT is a remote interbank clearing system enabling financial institutions to exchange in a "fairly uniform fashion". However, there was mass automated payment transactions and to carry out no evidence that the banks had agreed to do so. In interbank clearing of those transactions, [I9991 O.J.C64/5.

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Council of Electrical Domestic Construction) to the circumstances, the Commission has cease production and imports of several models exempted the scheme for three years). of washing machines which are considered less efficient.'" The manufacturers concerned account An economic approach to insurance pools for some 90.5 per cent of the EEA market. In April 1999 the Commission exempted the P&I The Commission considers that an agreement of Insurance Pooling and Group Agreements." It is this type (i.e. not to produce or import machines an interesting (if complex) decision, mainly because that do not meet specific criteria) amounts to the the Commission holds that a claim sharing agree- establishment of a private obligatory minimum ment between insurance mutuals covering 89 per performance standard as regards energy efficiency. cent of the world market for certain types of The manufacturers restrict their ability to com- insurance fell outside Article 85(1) E.C., because pete with less energy efficient washing machines. it was necessary to allow its members profitably to Some 1,718 models out of a total range in 1995 of insure some very large maritime risks. As explained 2,730 would not be produced or imported. How- above, the Commission regards this as an appli- ever, the Commission proposes to take a favour- cation of its new economic approach to insurance able view of the agreement, since the reduced pools whereby "no matter how high the market energy consumption planned should reduce CO, share is . .. [such pools] cannot be considered to emissions significantly (an estimated 3.5 Mtons of be anti-competitive as long as pooling is necessary CO,, 17 tons of SO, and 6 Ktons of NOx per year in to allow their members to provide a type of insur- 2010). The Commission has quantified the social ance they could not provide alone".21The Com- benefits as more than sevenfold greater than the mission then held that all restrictions indispensable increased purchase costs of the machines meeting to the proper functioning of the claim sharing the more stringent standard, and the Commission were outside Article 85(1) E.C. as ancillary to, or assesses that the minimum performance standard "inherent" in, that functioning (applying the Danish provides consumers with a fair rate of return (in Cooperatives case).,, terms of financial savings on reduced electricity P&I clubs are mutual non-profit-making asso- bills) over a reasonable payback period. Less ciations which provide protection and indemnity restrictive alternatives, such as information cam- insurance to their members, i.e. shipowners. The paigns and eco-label awards are thought unlikely International Group ("IG") of P&I Clubs is an to deliver the expected benefits. association of 19 such P&I clubs, spread through- It is an interesting analysis, different to classic out the world. antitrust, yet reflecting a broad economic assess- The Pooling Agreement is a claim-sharing ment of welfare gains through the agreement. agreement between mutual associations. Its pur- In the latest Competition Report,lg the Com- pose is to share proportionately among all the P&I mission dso discusses: clubs the claims made on one club in excess of a certain amount. The claim-sharing arrangements - an agreement between European auto- provide for different layers of insurance coverage: mobile manufacturers (via ACEA) to reduce CO, emissions from cars by 25 per - A first layer (called "retention") up to cent by 2008 (a voluntary agreement con- 4.57 million is borne by the club whose sidered to be outside Article 81(1) E.C.); member has incurred the liability. Most - another co-operation agreement between claims fall into this layer. Europe's leading motor manufacturers to - A second layer between 4.57 million and research into environmental issues, not- 27.42 million is shared by the clubs under ably noise or emission pollution by motor the Pooling Agreement. This accounts for vehicles (EUCAR) (outside Article 81(1) some 20 claims a year. E.C. because the research co-operation is - A third layer from 27.42 million up to 1.8 only at a pre-competitive stage) and; billion is covered by a group reinsurance - a U.K. scheme for packaging waste contract with commercial insurers. Only recovery and recycling (Valpak). The one or two claims a year reach this layer. scheme was found to be within Article - Any excess over this (called "overspill") 81(1) E.C. because it required businesses up to around 3.9 billion is again shared by joining it to transfer their obligations in the clubs (the exact figure varies, but is all packaging materials to the scheme, based on 2.5 per cent of the maximum restricting competition from other schemes liability set by international convention). operating on a material-specific basis. (In

20. [I9991 O.J. L125112. 18. [I9981 O.J. C382/6. 21. 1998 E.C. Commission Competition Report, points 19. 1998 E.C. Commission Competition Report, 111-119. points 129-134. 22. Paras 65-67.

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All members of the P&I clubs are obliged to share little used and ineffective. The IG has now modi- claims in this way. As originally notified, the fied these procedures so that they only apply to Pooling Agreement provided that the members the costs related to claims and reinsurance, not should share cover up to a higher level, i.e. around each club's own internal administrative costs. 16.5 billion (20 per cent of the maximum liability Clubs are free to charge specifically for their inter- set by international convention). However, the nal costs or to finance them out of their invest- Commission objected to this on the basis of ment income. Clubs will also publish a five-year Articles 85(1) and 86 E.C. The Commission con- average expense ratio to show what percentage sidered that the requirement impeded clubs from administrative costs represent of premium and competing by offering lower levels of cover to investment income. 2.5 per cent for which there was substantial In the light of these changes, the Commission demand. The IG therefore agreed to reduce the decided to clear the Agreements. As regards the minimum level of cover and clarified that members Pooling Agreement, the Commission considered were free to offer both higher and lower levels of whether claim-sharing with IG was necessary to cover outside the Pooling Agreement. allow the P&I clubs to provide P&I Insurance up As notified, the Pooling Agreement also only to 3.9 billion. Interestingly, the Commission's set out objective conditions for P&I clubs to provide inquiries suggested that insurers would need to reinsurance to other mutual insurers, but not to be insuring 30 per cent of world tonnage in commercial insurers. The Commission objected order to offer reinsurance of up to 1.38 billion, 45 that this could lead to discrimination and that per cent up to 1.8 billion and that more than 50 there was also a lack of appropriate procedures to per cent was required for amounts higher than ensure clubs complied with such procedures 2.75 billion. As a result, the Commission con- when providing reinsurance to such commercial cluded that the IG's claim-sharing arrangements insurers. This was considered to be an infringe- were necessary to offer the present level of cover ment of Article 86 E.C. The IG accordingly and, given the minimum dimension of activity modified its rules, laying down conditions for required, cleared the arrangement as outside both types of insurer and established an appli- Article 85(1) E.C. even though that meant there cation procedure, with provision for appeal and would be no second source of supply. There was arbitration. only room for one market player at such levels of The Commission then found that the restrictions coverage. in the Pooling Agreement on the minimum level As regards the International Group Agreement, of cover (as amended), common approval of each the Commission found that the quotation pro- P&I club's policy conditions and accounting prac- cedures still restricted competition, but exempted tices, and the joint purchase of reinsurance were them for 10 years, on the basis that it would be ancillary restrictions "inherent" in the Pooling very difficult to split the system up to apply only Agreement and therefore outside Article 85(1) E.C. to the claims costs shared and not retention costs. As regards the International Group Agreement, The Commission also considered that the clubs the Commission focused on provisions limiting remained able to compete on non-price parameters the freedom of P&I clubs to quote a rate to ship- (such as the level of claims handling service) and owners for vessels insured by other clubs in order their own administrative costs. to attract them. In the face of earlier Commission The Commission has also explained that it has objections, a procedure had been introduced pro- carried out an investigation of aviation pools in viding that one club could offer a lower rate to E~rope.'~In some cases, it has found that the shipowners of vessels currently insured by risks are great and the markets international so another, if (1) it had a binding agreement with a that the pools come within the market share shipowner before September 30 in a year; (2) it limits of the block exemption. In others, where had notified the "holding" club within three days; markets are national and the risks are smaller, the and (3) provided that the "holding" club could pools are not considered necessary and indeed appeal to an expert committee if it considered the not eligible for exemption. However, in view of new club's rate unreasonably low. the limited turnover concerned, the Commission The Commission found that a degree of disci- decided it was not in the Community interest to pline on rates quoted was "inherent" in the claim- take further action. The Commission set comfort sharing arrangement. No club would be ready to letters, with a caveat as regards such pools, indi- share claims with another club that would be cating that national authorities could intervene, offering a lower rate for covering these same claims. as appropriate. However, this was not the case for costs not shared between the clubs, i.e. the retention level of cover and the administrative costs of each club. 23. See the Report on Insurance described in Part I, In 1997 the Commission also objected that the para. 30. and the 1998 E.C. Commission Competition procedure for quoting to other club's clients was Report at points 111-115.

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Co-operation towards cost-based Telecoms joint ventures4eveloping cross-border mall sewices-REIMS II infrastructure In September 1999 the Commission granted an In the last year there have also been a number of exemption to REIMS 11,24an agreement between J.V./co-operation cases involving the develop- 16 public postal operators on "terminal dues" (i.e. ment of new telecoms infrastructure, including the compensation for delivery of cross-border optic fibre networks in different parts of Europe. mail in the country of destination) until the end of In August 1999 the Commission published its 2001. The agreement is intended, amongst other decisions clearing the restructuring of Cbgbte1,25 things, to assist postal charges for cross-border the new French telecoms operator and Tblbcom mail to move closer to the real costs of delivery. Dbveloppement,'% joint venture between C6g6tel The REIMS 11 agreement links terminal dues to and the French railways, SNCF to develop and domestic mail tariffs in the country of destination run a national long-distance telecoms network and to the quality of service provided by the along the French national railway network. Both postal operator that delivers the mail. According cases were treated as pro-competitive, since they to the notified agreement, terminal dues were to are viewed as necessary combinations to allow increase over a transitional period until they effective competition to develop in the French reached (subject to quality of standard penalties) market. a maximum of 80 per cent of domestic tariffs in The restructuring of Ckgktel involves Vivendi, 2001. It was argued that this figure was a "suffi- BT, Mannesmann and SBC Communications. The ciently reliable proxy" for the costs actually idea is to enable Cdg6tel to become the second incurred by postal operators, insofar as the parties full-service telecoms operator in France. Given currently do not have precise cost-accounting the considerable barriers to entry, the Commis- information. sion regarded the fusion of the parties' strengths The Commission requires in its decision that as creating a more effective competition ta France the transitional period for the agreement be post- TBlbcom than the parties could have achieved poned so that a phased increase in tariffs comes in separately. The restructuring was therefore con- more slowly to reach 70 per cent in 2001 and that sidered to fall outside Article 81(1) E.C. Pro- no increases are to occur during the transitional visions for preferred-supplier and preferred period if the quality of the service of the party customer relations with BT and (modified) non- concerned goes down. Movement to the 80 per compete provisions on the parents were also cent rate is to be reviewed in 2001, when the considered ancillary to the restructuring and exemption expires, to see if it is justified. not subject to separate assessment. The appoint- The agreement also introduces a system of ment of C6g6tel as exclusive distributor of Concert quality of service standards, with a penalty services in France was exempted for 10 years to system if agreed standards are pot met. The give Cdg6tel the time necessary to achieve a sig- standards are defined as a percentage of incoming nificant market share and recoup its investments cross-border mail from another post office in fixed telecoms services. delivered within one working day after the day of The Tblbcom Dbveloppement ("TD") decision its arrival with the receiving post office. The concerns the framework agreement between parties have also clarified that they are legally Cdg6tel and SNCF. SNCF has contributed to TD bound to give each other access to the "generally exclusive rights to use surplus capacity on its available" domestic rates (such as bulk rates for optical fibre network. CBg6tel has placed its long- direct mail, periodicals etc.). distance optical fibre network at the disposal of Most of the parties have not yet set up proper TD. A joint company between C6gBtel and TD is cost-accounting systems. The Commission has to have sole responsibility for marketing TD's long- therefore linked further exemption to the intro- distance telephony services to the general public. duction of such systems (as required by Article 14 CBgbtel agrees to use TD as sole supplier for its of the Postal Directive) by the end of 1999. The long-distance traffic in France, unless TD's prices Commission argues that only if there are such at any time prove to be above market price. SNCF, procedures, can it assess whether the dues are Cdg6tel and TD are bound by various related non- properly cost-justified (and the Commission pro- compete clauses. The agreements also grant TD motes the Directive's objects). There are special an exclusive right of access to surplus capacity transitional rules for Greece, Italy, Spain and on SNCF's network, as well as a priority right of Portugal, and annual reporting obligations on the access to SNCF's land along the railway lines in parties. order to allow TD to deploy its telecommuni- cations network.

25. [I9991 O.J. L218/14. 24. [I9991 O.J. L275/17. 26. [I9991 O.J. L218124.

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Following objections from the Commission, Current policy issues the agreements have been amended to limit the priority right of access. SNCF is now free to use White Paper on remaining capacity for access rights as it sees fit, M~derni~ati~n/Decentralisation in particular, by making capacity available to other operators, provided that it does not unduly affect TD's installation plan. Additionally, the Box 9: White Paper on Modernisation1 priority right will not apply if installation of cables Decentralisation on the railway-owned land is the only way for a No notifications except for mergers, full- third operator to create a telecommunications function and partial J.V.s network. Move to a "legal exception" regime with a The Commission considered that the acquisi- posteriori control tion of a shareholding by C6g6tel in TD fell "Precedent clearance" decisions by E.C. outside the scope of Article 81(1) E.C. SNCF and Commission C6g6tel were neither actual nor potential competi- Article 81(3) E.C. exemption in national tors and the establishment of a telecommunica- competition authorities and courts tions network with national coverage required Increased co-ordination with national author- substantial time and investments which both TD ities and courts but Commission to have right and CBg6tel would not have undertaken on an to overrule a "national" E.C. clearance in individual basis. Their combination would lead some cases and also to remove cases from to the entry of a more effective competitor along- national competition authorities side France T616com. Other contractual pro- Greater co-ordination amongst E.U. compe- visions were considered ancillary to the activity tition authorities and courts (amicus curiae?) of TD because they gave TD the necessary con- Greater investigation powers for Comrnis- ditions for fast entry on the market." sion: ability to take oral statements "on the spot" and by witness summons? Competition and new transport infrastructure 0 Greater role for (certain types of) com- In January 1999 the Commission issued an Article plaints: preliminary assessment within four 19(3) Notice indicating its intent to take a months favourable position as regards track access agree- Increased penalties for procedural non- ments to the Channel Tunnel rail link ("CTRL"), compliance, e.g. Euro 50,000 for incorrect related infrastructure and certain stations in the information United Kingdom. The agreements are between Commission "freed-up" to focus on cartels, Railtrack, subsidiaries of London Continental concentrated and liberalising markets Railways and Eurostar. The agreements allocate amounts of capacity of the CTRL to Eurostar in return for charges calculated by reference to In April 1999 the Commission adopted what may agreed rates of return on the investment made by turn out to be the most important competition Railtrack over a 50-year period. policy document for a long time: its so-called What is of interest is that the notifying parties White Paper on Modernisation of the Rules 'expressly rely on the Commission's recommen- Implementing Articles 85 and 86 of the EC Treaty dations on the application of the competition ("the White The White Paper envisages rules to new transport infrastructure projects to far-reaching reforms: the abolition of the general argue that the arrangements fall outside Article 85 notification and exemption system, decentralised E.C." In other words, the parties consider that application of Article 81(3) E.C. powers, both to other transport operators had been given the national competition authorities and national opportunity to reserve capacity on the relevant courts, and the strengthening of the Commission's infrastructure; the capacity reserved for Eurostar enforcement powers, including the right to sum- is proportional to the financial commitments by mon witnesses to be interviewed. In practice, this Eurostar and Railtrack and corresponds to the means a rewriting of Regulation 17/62. operational requirements for the CTRL; and that The proposals will take much assimilation there still would be spare capacity at peak hours because these are fundamental changes to how for international services. In the alternative, the E.C. competition law is enforced. Many areas parties seek exemption. remain controversial, such as how companies should obtain adequate legal certainty for prac- 27. In March 1999 the Commission issued an Article 19(3) Notice indicating its intent to take a favourable tices which are not clearly dealt with in the case view of agreements to establish a pan-European telecoms network called the Farland Network, involving BT, Sunrise Communications, Telfort, Albacom and Viag 29. [I9991 O.J. C132/1; Commission Press Release Interkom; [I9991 O.J. C7712. IP/99/275, April 28,1999. I have updated to Arts 81 and 28. [I9971 O.J. C295/5. 82 E.C.

[ZOO01 I.C.C.L.R., ISSUE 3 O SWEET & MAXWELL LIMITED [AND CONTRIBUTORS1 106 RATLIFF: MAJOR EVENTS AND POLICY ISSUES IN E.C. C(IMPETITION LAW, 1999--PART 2: [2000]I.C.C.L.R. law, the co-ordination of Commission and Mem- Reform concept ber State action, and the extent to which company The Commission proposes to end the current employees can remain silent when faced with system where prior notification is required for alleged infringements. authorisation by the Commission of an agreement or practice (save as regards mergers and joint ventures of a Community dimension) and change Outline of Commission proposals to a system where an agreement or practice is excepted from the prohibition of Article 81(1) Background E.C. in defined circumstances. This is to be deter- The White Paper starts with the Commission mined by the companies concerned themselves or reviewing current enforcement practice. The national courts or the Commission or national Commission highlights how it is not able to cope competition authorities. A system of a posteriori with current ~orkloads,~~and that this situation as opposed to prior control.33 will be even worse if the Community is enlarged The Commission also wants to eliminate the by a further five Member States (despite the intro- difficulties created by a split application of duction of block exemptions and notices, and the Article 81(1) and (3) E.C. In particular, the situ- use of comfort letters). A recurrent theme in the ation where national court proceedings can be White Paper is the Commission's determination blocked by a notification to the Commission, as not to have a new wave of notifications increase the national court may often then consider that it its backlog again if the Community enlarges (as has to wait until the Commission has decided on currently envisaged) to 20 Member States. the case. A related theme is that it would be more The Commission stresses that, as a result of the coherent to apply Article 81 as a whole so that notification system, the bulk of its activity is distinctions as to what is outside Article 81(1) directed to reviewing agreements which are often E.C. (on a "flexible approach" or "rule of reason" not very important, rather than to responding to test) or within Article 81(1) E.C., but capable of key complaints or pursuing its own enforcement exemption under Article 81(3) E.C. have less initiatives. The Commission would like to be importance. focusing more on "the fight against cartels, particu- A key part of the proposals (going further than larly in concentrated markets and in markets many expected) is therefore the idea that national undergoing liberali~ation"~~and wants to be pro- courts, as well as national competition authorities active, not reactive. would have Article 81(3) E.C. powers. The Commission notes how the world has changed since 1962 when Regulation 17 was Key features introduced, so that now there is a greater aware- More specifically, the Commission suggests: ness of competition law around the Community and almost every Member State has adopted a law (1) The Commission should retain the sole based on E.C. principles. One senses that, as a right to propose legislative tests, notices, result, the Commission sees both an opportunity guidelines, et~.~~ to decentralise and share its workload, and a (2) The Commission will continue to take degree of concern as Member States increasingly individual prohibition decisions and apply national rather than E.C. competition "positive" decisions (which will not be laws.32 exemptions as we currently know them, The central theme is clear: the combination of but may be used to establish precedents). all the Community rules, notices and decisions Such decisions will have the same legal after some 35 years of enforcement, and new value as negative clearance decisions. The Member State competition laws has created an Commission expects the number of indi- environment in which decentralised E.C. exemp- vidual prohibition decisions to increase tion powers are both possible and advisable. sub~tantially.~~The Commission will also have power to adopt a decision taking note of commitments entered into by companies 30. According to the 1998 E.C. Commission Compe- and establishing their binding nature tition Report (at points 14 and 19) the Commission had (with penalties for non-compliance).3s 509 new cases under Arts 81, 82 or 86 E.C. in 1998, closed 581 cases under Arts 81 and 82 and had 192 new (3) Partial function production joint ventures complaints. involving a minimum of assets should 31. -Fifty-eight per cent of new cases in 1988-98 were also be subject to a prior authorisation notifications; 29 per cent complaints and 13 per cent own-initiative procedures, White Paper, para. 44. regime. It is therefore proposed to extend 32. The Commission also states that it has only some 153 officials dealing with concentrations, agreements 33. Para. 69 and, in general, Chap. I11 of the White Paper. and abuses of dominant position whereas (based on 34. Para. 84. figures collected for the 1998 FIDE Congress) the 35. Paras 87-89. Member States have some 1,222 officials altogether. 36. Para. 90.

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the scope of the E.C. merger control regu- (8) National competition authorities should lation to such joint ventures with the "dual also be required to inform the Commis- test" of dominance and Article 81 E.C. sion if they are involved in national (Articles 2(3) and 2(4) of Regulation procedures which are likely to have an 4064/89).37 influence on Community procedure^.^' (4) The Commission envisages that the Com- (9) The Commission also proposes to enlarge mission and national authorities should the powers of national competition be allowed to transmit a file and confi- authorities to disapply a block exemption dential information to another authority in a distinct market in their territory in for pursuit of infringements of the E.C. appropriate cases (having advised the competition rules, which authority may Commission of that intent).'3 then be allowed to make use of such (10) The Advisory Committee on Agreements documents as eviden~e.~' and Dominant Positions would become a (5) In order to achieve a coherent and uni- "full-scale forum" for discussion of cases, form application of the competition rules, whichever authority is handling them." the Commission suggests that: (11) National competition authorities should (a) if the Commission has initiated a pro- be required to inform the Commission of cedure or adopted a decision which the opening of a procedure in cases has become final, then national com- involving the application of Articles 81 petition authorities and courts should and 82 E.C. and on closure of the be obliged to avoid conflicting deci- pr~cedure.~' sions, if necessary by suspending (12) Similarly, national courts should be their proceedings; required to provide information to the (b) where a national authority or court Commission on procedures applying has adopted a "positive" decision or Articles 81 and 82 E.C. judgment which has become final, (13) There should be a right for the Com- the Commission "can always inter- mission to intervene as amicus curiae vene and prohibit the agreement subject to the leave of the subject to the principle of res judicata that applies to the dispute Strengthening of investigative powers between the parties themselves" 39; The quid pro quo for this abolition of the noti- (c) where a national authority or court fication and authorisation system in many cases has adopted a "negative" decision or is the reinforcement of ex post control. Here also judgment which has become final, the Commission has radical proposals: the Commission should not normally intervene, save if there is a reference (1) In order to facilitate simultaneous dawn to the European Court; however, if raids in several Member States, the Com- the decision is not final, the Com- mission seeks the right to obtain author- mission may at any time adopt a isation for such procedures in one go contrary decision, which would have before a Community court (presumably to be taken into account by the the CFI) rather than various Member appeal court, with the national State courts (or a procedural harmonisa- decision (as discussed below, this is tion to speed up the obtaining of such more controversial). clearance^).^' (6) The Commission should also have "the (2) The Commission wishes to have clarified ability to remove cases from national that it has the power to put oral questions competition authorities using a to representatives and employees of an mechanism like Article 9(3) of Regulation undertaking during dawn raids, where 17/62".40 these are related to the investigation, and (7) The Commission proposes to use Article to require answers (with penalties for the 83 E.C. (the former Article 87 E.C.) to provision of incorrect information). This prevent national legislation prohibiting or should include questions which are not altering the effects of agreements exempted directly related to documents found on under a Community reg~lation.~'

37. Paras 79-81. 42. Para. 105. 38. Paras 92 and 96-97, potentially resolving the 43. Para. 95. Spanish Banks issue. 44. Para. 106. 39. Para. 102. 45. Para. 105. 40. Para. 105. 46. Para. 107. 41. Para. 85. 47. Para. 111.

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the premise^.^' To some extent this is rejected for lack of Community interest happening already, as shown by Commis- were handled by the authority of the sion references in the British Sugar case Member State most affected by the prac- to "transcripts" of answers given at a com- tice complained of.52 A sign of the pany. It is, nevertheless, a worrying pros- developing system of shared enforcement. pect for many employees, which is why (2) To set a time-limit of four months at the many lawyers counsel their clients to give end of which the Commission will be factual answers (e.g. as to what specific obliged to inform the complainant whether references in documents mean), but not to it intends to take up a complaint or answer more wide-ranging questions, whether it intends to reject it. The Com- until the company's position has been mission would reply by reasoned letter checked factually and legally. There is against which an appeal may be made if it also the issue of the privilege against self- means the Commission proposes no fur- incrimination. The Commission's proposal ther action.53This is most welcome. is therefore controversial. (3) To do away with "Article 6 letters", the (3) The Commission seeks the right to letter sent to a complainant giving him an summon any person likely to provide it opportunity to offer comments on a with information useful to its enquiry to proposed rejection of his complaint) Commission premises to "gather that per- followed by a formal decision to reject a son's statement for the record". This complaint (on the basis that the two could apply to persons not available on a phases of rejection of a complaint take up dawn raid, complainants or third parties.49 too much time)." Again, a very controversial proposal, (4) To include in Regulation 17 specific pro- although it appears that comparable visions for interim measures, concerning powers exist in some Member State laws. conditions, the relevant procedure, the (4) The Commission emphasises that sectoral period for their validity and the consult- enquiries will take on a new importance ation of the Advisory C~mmittee.~'Again, under the new system (which follows, if this is most welcome with, however, the there are to be no notifications). comment that such procedures must be (51 As regards Article 11 letters, the Commis- fast-a question of days or weeks not sion proposes to authorise the frequent several months, as has happened in some practice that these are provided by law- Commission cases. I do not agree with yers on their client's behalf as well as by the Commission's view that current company representative^.^^ practice "has proven to be efficient". Sometimes it has been relatively quick Complaints given administrative constraints but, in As regards complaints, the Commission considers general, the proceedings are slow. Usually that these will take on a greater importance in the one has to seek parallel interlocutory future. It proposes: relief through national court proceedings. With the Commission one has to hope (1) To issue an explanatory notice on com- that the threat of proceedings will secure plaints (designed to encourage complaints, compliance. The Commission must also but also to explain the Commission's be more open to such applications. At the discretion based on Automec and what a moment, they appear to be actively complainant can expect from the Com- discouraged. missi~n).~'This is a welcome suggestion. As the court cases have shown recently, Penalties update complainants need a better idea at the Finally, the Commission suggests to modernise outset whether a Commission complaint the system of penalties, notably in the light of is the right way to achieve their objectives experience with the Merger Control Regulation. or whether they should be applying to a Thus: national court. They also need a better sense of when to go to national com- (1) Immunity from fines on notification petition authorities. Interestingly, in the would disappear.56 latest Competition Report, the Commis- sion noted that 15 of the complaints it had 52. 1998 E.C. Commission Competition Report at point 30. 48. Paras 112-113. 53. Para. 120. 49. Para. 114. 54. Para. 121. 50. Para. 116. 55. Para. 122. 51. Paras118-119. 56. Para. 123.

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(2) Fines for the provision of incorrect infor- This may be contrasted with the current exemp- mation would be increased to between tion decisions which are valid for a certain time Euro 1000 and Euro 50,000. and where various (negotiated) conditions and/or (3) Periodic penalty payments for failure to undertakings may be attached. Companies should provide information or refusal to submit not be at risk of a changed ruling at any time, and to a dawn raid would increase to Euro how conditions and undertakings are meant to be 25,000 per day. dealt with, in particular in national courts, needs (4) A new category of periodic penalty pay- further explanation. ments for failure to comply with commit- Thirdly, many lawyers are concerned about ments given for a positive decision could how they will be able to prove the many features be created, set at Euro 100,000 per day as required for a "positive" decision (to use the in E.C. merger control. White Paper's terminology) before any court, at (5) Members of an association of undertak- reasonable cost. The prospect of proving most of ings would be made jointly liable for the what is in a Form A/B is a daunting one for many payment of a fine imposed on the cases and likely to be expensive. This is likely to ass~ciation.~' make Article 81(3) E.C. defences difficult. Simi- larly, there is concern that proving complaints Transitional arrangements can be very difficult in national courts (if, for The Commission also proposes that, on entry into example, one is faced with Delimitis type appre- force of the new regulation, all pending notifi- ciability issues or evolving policy, as recently, in cations would become null and void. A great the liberalising sectors). disincentive on more filings! Member States should therefore be encouraged to allocate E.C. competition issues to particular courts (perhaps the current appeals courts for First reactions domestic competition law). These courts should have jurisdiction in all E.C. competition matters On the whole, these changes are very welcome or be consulted in a national form of Article although many are apprehensive as to the scale 234(3) E.C. reference (or "case stated" as English and nature of the change. It has been clear for lawyers might call it). This has been mentioned in some years that, even with DG IV's best efforts to previous reviews because it happens already in become more efficient, 150 officials in Brussels Belgian competition law with the Brussels Court could not keep up with E.C. notifications and of Appeal. Arguably, such a reference procedure exemptions for 15 Member States. It is also clear could slow down the legal process a little. However, that the current co-operation systems are not this is a small price to pay if the benefit is to be successful substitutes for decentralising Article heard by experienced competition law judges with, 81(3) E.C. powers. as a result, more scope for predictable and con- However, there are a number of aspects which sistent rulings. The creation of such courts would are difficult and appear to need further work. also assist co-ordination issues, as judges could First, whilst it is clear that many agreements be included in common training or co-ordination caught by Article 81 E.C. have not been notified seminars (with competition authority officials). for many years (as companies assess the risk of an Fourthly, the Commission and/or national com- unenforceability claim or fine against the compli- petition authorities should also actively assist the ance cost), in some cases it is important to be able national courts as amicus curiae, more as the rule to do so. Companies do not like to introduce new than the exception, in order to limit the number of business formats for the whole of Europe without cases where the Commission might decide to take being fairly certain that they are legal. Significant a contradictory decision after a national judgment. investments also require reasonable legal cer- There are already similar co-operative mechan- tainty. The Commission should therefore find a isms in Germany, France and Belgium. The place in the new system for some sort of short importance of all this lies in getting the right "business review" process, based on a briefing result at the outset. It is unlikely that adequate paper, probably followed up by a meeting and cohesion will be achieved just through notices some Commission response. and guidelines. Secondly, there should be greater clarification Fifthly, there are still a number of practical con- about the nature of the decisions to come, above cerns about the co-ordination and coherence of all their validity over time and the position on decision making. In practice, one would expect undertakings. It appears that all the competition the "centre of gravity" principle to be important authorities concerned will simply rule on whether for the allocation of cases. This may still lead to there is an infringement or not, at a given moment. national competition authorities and courts ruling on cases involving practices which, although mainly in one Member State's territory, also have

[ZOO01 I.C.C.L.R.. ISSUE 3 O SWEET & M AXWELL LIMITED [ANDCONTRIBUTORS1 110 RATLIFF: MAjOR EVENTS AND POLICY ISSUES IN E.C. COMPETITION LAW, 199%--PART 2: [2000] I.C.C.L.R. effects in another. How this is to be dealt with, his Written Replies for the European Parliament other than by the Commission taking the case, is hearings in August 1999. In those Replies he also not clear. stated that: "Competition policy lies at the heart Sixthly, it is also not clear just how hierarchical of the European Union's economic and social a control the Commission should have. Some fear policy. ... It is ... an essential component of the renationalisation of competition law and major construction of a modern social market economy divergences in decisions. Others are concerned in Europe aiming at growth, employment and the that, if a decision has been taken by a national safeguard of consumers interest^".^' These are authority (perhaps after extensive hearings), the terms highly reminiscent of Mr Van Miert's initial Commission should not be able to override it, pronouncements as Competition Commissioner. save by an appeal in the national proceedings. We shall have to see how that mix works out in Finally, one may reflect a little on how this may the next mandate. change the nature of competition law which is currently mainly administrative. As noted already, at present many Commission exemptions take Areas of particular interest years, with extensive negotiations, development of position and technical understanding and, in Sport some cases, a degree of broader engineering by the Commission to promote competition. It is an open question how that will fit with national court Box 10: Competition and Sport 1999 decisions, where there may be less scope for such development over time and less scope for inter- General policy formulation action and solutions, yet the matters could come * Helsinki report up in any Article 81(3) E.C. defence for hearing * "Towards Guidelines" (in some countries) at the parties' "day in court". Collective sales of league broadcasting rights * DFB, Gandalf, UEFA * A new Commissioner U.K. Restrictive Practices Court v. Italian Competition Authority The appointment of a new Commissioner always * 5 31 German Competition Act prompts speculation as to whether this will lead New clearance for Eurovision collective to a significantly new approach to competition purchasing system policy and enforcement. It appears that Mr Van Formula One/FLA Miert recommended Mr Monti as his successor. * Abuse of regulatory powers by governing In the last Commission, Mr Monti was respon- body? sible, amongst other things, for financial services Coming: and taxation. He has also been involved in * World Cup tickets fine? (UEFA Euro 2000 controversial areas in his previous mandate-the notification) abolition of duty-free and tax harmonisation. It is * FIFA agents case? a little early to gauge Mr Monti's approach. * Amateurs may be caught by competition However, what one can note is that he is already rules? (Deliege) very familiar with competition policy, as one would expect from a Professor of Economics and Competition and Books 1999 that his expertise and experience may also be very timely, given the renewed emphasis on econom- No Austro-German book agreement decision ics in competition policy. Amongst other things, yet, but Dutch books case closed he was on the drafting committee for the Italian Competition Act. Mr Monti has also been involved in various Again, this has been an extremely active year for Italian Treasury Committees on banking and competition and sport. There are little signs of financial issues. It will be interesting to see if this abatement as key notifications on the collective leads to a new emphasis on these sectors. He has sale of sports rights and the Commission's already been quoted as saying that he felt the investigation of Formula One proceed. financial services sector had "only belatedly, First, one may mention progress towards a sometimes timidly entered the competitive envir- general policy in this area. In February 1999, it onment and competition culture".58 appears that the Commission circulated to Clearly, a main agenda item for him will be the Member States a document on its developing White Paper, an aspect he already emphasised in policy, suggesting the application of Article 81(1)

58. Reuters, October 26, 1999. 59. at 3.

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E.C. to sport along lines similar to those discussed upheld a Bundeskartellamt decision prohibiting last year. In other words, dividing sports rules collective sales. In the United Kingdom, after a into those "inherent in sport" or "necessary for the lengthy and detailed hearing before the Restrict- organisation of sport or sporting competitions" ive Practices Court, the collective sale of rights on and those of a more economic nature.60During the an exclusive basis by the Premier League to Sky year (what was) DG X has also been developing a and the BBC was held fo be in the public interest, more general document on the "European Model good for sport and a stimulus to competition of Sport", intended as a report to the Council of amongst broadcaster^.^' In Italy, a law has been Ministers in Helsinki in December 1999. passed limiting to 60 per cent the amount of Secondly, the Commission has received three football rights to the Italian Serie A which can be notifications on leagues which mainly focus on sold to one broadcaster. The Italian Competition the issue of the centralised broadcasting of foot- Authority also ruled that the Serie A and Serie B ball competitions. In January 1999 the German could not sell their rights c~llectively.~~ Fussballbund ("DFB") notified its collective sales Mr Van Miert has criticised the German exemp- arrangement^.^' In March 1999 the Media Partners tion. The Commission has also expressed reser- project for a new European Football League vations about the English decision, arguing that (Project Gandalf) was n~tified.~'Then in April such collective sales affect trade between Member UEFA notified its central marketing arrangements States, and reopening its own investigation into for the new format UEFA Champions League.63 the case.=' This has provoked widespread criti- These notifications raise fundamental issues. cism insofar as the centre of gravity of these issues DFB and UEFA argue that they are at least co- is clearly national, and principles of subsidiarity owners of the rights in question so that there is no would seem to suggest that specific national solu- "joint sale" by separate undertakings in the sense tions should apply, based on the differing eco- of Article 81(1) E.C. They also argue that the nomic and legal contexts (both amongst leagues collective sale system is key to ensuring a proper and broadcasters). competitive balance between clubs in a league, Commission criticism of the English decision is since funds generated are partly redistributed to particularly controversial at a time of decentral- the weaker clubs. The system also allows for a isation because it is hardly acceptable for the channelling of funds into youth football, and Commission to undermine the results of a trial players' training and education. The DFB argues lasting months with a brief Press Statement after that other systems, such as each club selling its the event. All the more so since it is clear from the rights separately with a payment into a "solidarity judgment that there was detailed competition fund" for smaller are less able to achieve analysis, not just a broad public interest review. these ends because they create a conflict of inter- In short, it appears that the judgment cannot just est between Core questions as to what is be brushed aside as based as a non-economic the relevant market and/or product are also appraisal. What the Court accepted was the raised. Are football matches just part of a larger notion that periodic competition by tender for market for "sporting events"? Are matches pro- exclusive rights was an adequate form of com- ducts or is the product also the "story of the petition in the circumstances, given that there league" as it develops over a season, so that the were various broadcasters bidding for such rights. championship should normally be sold as a Indeed, such sales were viewed as a stimulus to whole? Beyond this, for what period can such competition between broadcasters. rights be sold exclusively? The lack of criticism of the Italian national The Commission is understood to be still judgment (based on a law modelled on E.C. prin- considering its position on these complex issues. ciples) has also prompted speculation that the Matters have not been made simpler by national Commission may favour breaking collective sales. developments. Thus, in Germany, an exemption That would be a huge change for the leagues con- to the German Competition Act has been intro- cerned, and would be likely to result in appeals to duced for the collective sale of sports rights, the European Courts. where revenues are applied, amongst other Thirdly, in September 1999, the Commission things, to the promotion of youth and amateur published an Article 19(3) notice concerning a sports activitieP after the Bundesgerichtshof had revised version of the Eurovision rules, after the CFI had annulled the Commission's previous 60. See Commission Press Release IP/99/133, February 4, clearance." It will be recalled that Eurovision is a 1999. 61. [1999] O.J.C6/10. 67. Re: The Agreement between the Football 62. [I9991 O.J.C70/5. Association and the Premier League, Judgment of July 63. [I9991 O.J.C99123. 28, 1999. 64. A system advocated by the Bundeskartellamt and 68. See Italian Competition Authority website, Press Mr Van Miert. Releases No. 33, July 16, 1999 and No. 36, July 28, 1999. 65. See the DFB notice at 11. 69. Reuters, September 20, 1999. 66. 5 31 GWB. 70. [I9991 0.J.C248/4.

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system for the exchange of television programmes There have also been issues on ticket sales, the amongst the members of the European Broad- FIFA agents system and multiple club ownership. casting Union ("EBU"). In addition, through Euro- The last point I would emphasise is the opinion of vision, EBU members jointly acquire and share Advocate-General Cosmas in the context of a sports rights. The EBU has two types of member: claim by Ms Deliege, a judoka, that the Belgian "active" members and "associate" members. The judo federation had improperly impeded her EBU system is controversial because its member- career by not permitting her to take part in ship rules have the effect of favouring national, important competitions (notably the Barcelona public, free to air broadcasters. On the other hand, and Atlanta Olympics). some argue that the system is the only way for He found that: public broadcasters to compete with pay-TV. Key issues have been the conditions of active - "amateur" sport, practised at an advanced membership (giving access to the jointly acquired level can be an economic activity and sports rights) and sub-licensinglthird party access - Community law was not opposed to rules rights for non-members. The CFI annulled the Com- of international federations which impose mission's clearance in 1996,mainly on the ground certain limits on the activity of athletes that the Commission had not properly analysed which are purely related to sport (in this the conditions of membership so as to ensure they case, the interest of the national teams and were objective and non-discriminatory. The EBU the need to ensure the representative has now complemented its original notification character of the corn petition^).^^ with guidelines on the criteria for active member- ship, an obligation on the EBU's Council to ensure The impact of competition on sport may be yet the rules are respected, a new system of arbi- wider than previously thought. In the case, the tration for applicants, and new rules on the Advocate-General stated that there were insuffi- continuing participation of former Eurovision cient facts to reach a conclusion on the applica- members in existing sports programmes in certain tion of competition law, but he likened Ms Deliege's cases. The EBU has also adopted a set of sub- activity to that of a company and the judo feder- licensing rules relating to the exploitation of ation to an association of companies. Eurovision rights on pay-TV channels. The Commission proposes to take a favourable view of the revised system. Books Fourthly, the Commission has continued its cases against Formula One and the FIA, prompted Finally, continuing from last year,73one may note in part by their notifications and in part by com- that discussions have continued as regards the plaints concerning abuse of dominant position. Austro-German bookpricing agreement. The Com- The focus of the case at present appears to be on mission is acting in response to a complaint by the use of regulatory powers by a governing sports the Austrian retail book chain, Libro. The Compe- body. In June 1999 the Commission announced tition Directorate appears resolved to prohibit the that it had opened formal proceedings, and issued agreement considering that the claimed cultural a Statement of Objections. The Commission is benefits of fixed book prices for the production reported to have identified several problems and distribution of books have not been shown. including that: First signs are that Mr Monti shares Mr Van Miert's opposition to such cross-border book pricing - the FIA uses its regulatory powers to block system^.'^ On the other hand, political pressure series which compete with its own to retain the system is clearly great; including a events; Council Resolution in February 1999 calling on - the FIA used such powers to force the the Commission to take account of the cultural promoter of a Grand Touring champion- implications of (what was then) Article 128(4) ship out of the market and then sub- E.C." stituted the championship with its own; In September 1999 the Commission announced - the F'IA used its powers abusively to that it was closing its file on the Dutch fied book acquire all the television rights to inter- price system, after the parties concerned amended national motoring sports events; and - Formula One and the FIA protect the Formula One championship from compe- 72. European Court Press Release No. 31/99, May 18, 1999. tition by tying-up everything that is 73. See [I9991 I.C.C.L.R.73-74. needed to stage a rival ~hampionship.~' 74. Answer of Mr Van Miert to EP Written Question E- 0773198, [I9991 0.J. C1318; Comments by Mr Schaub, 71. Commission Press Release IP/99/564, July 26, Reuters, July 27, 1999; Comments by Mr Monti, Reuters, 1999; Commission Press Release IP/99/434, June 30, September 23, 1999. 1999; see also [I9991 I.C.C.L.R.71. 75. [I9991 0.J.C42/3. (Now Article 151 E.C.)

1 [ZOO01 I.C.C.L.R., ISSUE 3 0 SWEET & MAXWELL LIMITED [ANDCONTRIBUTORS] RATLIFF: MAJOR EVENTS AND POLICY ISSUES IN E.C. COMPETITION LAW, 199!3-PART 2: [20001 I.C.C.L.R. 113 their agreement to abolish resale price mainten- appreciable effect on trade between Member ance for foreign books.76Previously the Cornrnis- States, essentially leaving the Dutch authorities to sion had issued a Statement of Objections to the assess whether to intervene further against the Dutch association of publishers and booksellers, restrictions concerned. The Commission has the KVB. The Commission states that it has con- added, however, that it would still take action if it cluded that the amended system no'longer has an learned that the Dutch' fixed book price system still restricted imports or created an entry barrier 76. Commission Press Release IP/99/668, September 9, or handicap, in particular to sales of books over 1999. the Internet.

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