<p> Brussels 20 November – 8 December 2006 </p><p>Brussels Monitor</p><p>Competition</p><p>Cartels</p><p>The European Commission has fined ENI, Bayer, Shell, Dow and Unipetrol a total of EUR 519 million for operating a cartel in the synthetic rubber sector. This is the second highest fine ever imposed by the Commission. Bayer received full immunity from the fine as it blew the whistle on the cartel. Fines on ENI and Shell were increased by 50% because of their previous involvement in cartel activity. This confirms the recent practise of the Commission to increase fines on repeat offenders. This possibility has now also been expressly set out in the Commission’s new fining guidelines. </p><p>Under the Commission’s previous fining guidelines, which still applied to the synthetic rubber cartel decision, prior cartel participation was considered as an “aggravating factor”. This practise is currently under challenge before the European Court of Justice (ECJ) with regard to a fine imposed on Danone. Although a final judgment is still pending, the Advocate General (AG) asked the Court to rule that it was legitimate for the Commission to impose increased fines on repeat offenders. He suggested that there was no time limit after which past cartel activity had to be disregarded. </p><p>Leniency</p><p>The Commission has adopted a revised Leniency Notice which replaces the 2002 Notice as from 8 December 2006. From that date it applies to all companies that file for leniency in a cartel case, as long as no other company is already co-operating with the Commission under the 2002 Leniency Notice.</p><p>The main changes include:</p><p> Clarification on the information and evidence to be submitted: an applicant has to submit a corporate statement describing the functioning and participants to the cartel as well as any documentary evidence available to the applicant at the time of its submission, including in particular all contemporaneous evidence.</p><p> Modification of the immunity threshold: the threshold for immunity has been linked to the information needed by the Commission to carry out a “targeted” inspection in connection with the alleged cartel. This basically should enable the Commission to know where and what to look for.</p><p> Duty of cooperation: the new Notice states explicitly that the obligation on continuous cooperation concerns also applications for a reduction of fines; it introduces flexibility as to the point in time when applicants should terminate their participation in the alleged cartel activities; the obligation not to destroy, falsify or conceal information now covers also the period when the applicant was contemplating making an application.</p><p>For further information please contact the Brussels office: Martin Baker, Markus Wirtz, Marco Hartmann-Rüppel, Marc Picat, Edgar Panizza or Andrea Iber +32 2 289 6060 Date 20 November – 8 December 2006 Page 2</p><p> Procedure: a discretionary marker system has be introduced, whereby an applicant’s place in the queue for leniency can be protected for a limited period of time, provided that the applicant discloses his name and basic information on the cartel; a procedure to protect corporate statements, including oral statements, has been introduced.</p><p>Unfortunately, the Notice still lacks clarification with regard to a number of important issues, such as clear conditions under which a marker will be granted and a clear definition of terms such as “targeted inspection” and “compelling evidence”, which will have an impact on what type of evidence will have to be submitted. We will set out our detailed analysis of the new Notice in a separate note that we will circulate in due time.</p><p>Financial Services</p><p>Information Exchange</p><p>The ECJ has held that the exchange of client credit information between financial institutions does not necessarily constitute an infringement of EC anti-trust rules if the market is not highly concentrated, the system does not permit lenders to be identified and if the conditions of access for financial institutions are not discriminatory, in law or in fact. But even if such a system was found to be anti-competitive it could still be justified if consumers benefited overall.</p><p>White Paper on Investment Funds</p><p>The Commission has published a white paper that aims to introduce changes to the current EU framework for investment funds (the “UCITS Directive”).</p><p>The proposed changes would</p><p> simplify the notification procedure: the current “simplified prospectus” will be re-simplified to give concise information on charges, risks and expectations;  create a framework for the cross-border merger of funds;  create a framework for asset pooling;  introduce a “Management Passport”: once a management company has been authorised in one Member State, it will be allowed to manage funds in other Member States;  simplify cross-border marketing;  provide for the application of MiFID standards: UCITS brokers will have to abide by MiFID standards on transparency, disclosure of charges, risks and possible conflicts of interests and will have to respect fiduciary duties to look for the best sources of investment;  strengthen supervisory cooperation to monitor and reduce risk of cross-border investor abuse.</p><p>Based on the white paper the Commission will make a report to the EU Council in 2008 and concrete legislative proposals may follow.</p><p>A copy of the white paper is at: http://ec.europa.eu/internal_market/securities/docs/ucits/whitepaper/whitepaper_en.pdf </p><p>Intellectual Property</p><p>Copyright Date 20 November – 8 December 2006 Page 3</p><p>The ECJ has held that hotels are liable to pay royalties on TV and music distributed by means of television sets to their customers. It pointed out that the concept of communication to the public under the EC Copyright Directive had to be interpreted broadly and therefore also hotel customers may be considered to be “the public”. The place where the communication takes place was irrelevant.</p><p>Patents</p><p>The Commission has failed to secure backing from EU Member States to enter into negotiations for the EU’s entry into the European Patent Litigation Agreement (EPLA). The EPLA aims to establish a central European Patent Court and to harmonize the rules of procedure in lower national courts. The plan was rejected as several ministers expressed their preference for the EU to establish its own patent litigation regime.</p><p>This means that there is currently no hope for businesses to be provided in the near future with an alternative for the current regime, which is costly and time-consuming. Currently patents granted in one Member State do not grant protection in the others and in order to settle a patent dispute parties are obliged to obtain separate rulings in the different Member States. Negotiations to set up a “Community Patent” regime and a European Patent Court were effectively broken off in 2003 after Member States failed to agree on the applicable languages.</p><p>State Aid</p><p>R&D Aid</p><p>The Commission has adopted new guidelines clarifying under which conditions Member States may grant state aid for research, development and innovation projects. It explains that state aid will be authorised on the basis of the following test:</p><p> the aid must address a market failure such as knowledge spill-overs, imperfect and asymmetric information or coordination and network failures;  the aid must be well targeted: it must be an appropriate instrument, it must have an incentive effect and must be proportionate;  the distortions to competition and trade resulting from the aid must be limited enough so that on balance it must be declared compatible.</p><p>The guidelines are expected to provide greater legal certainty for businesses profiting from the aid. Unauthorised state aid is illegal and might have to be paid back by the recipient.</p><p>Trade</p><p>Green Paper on Trade Defence </p><p>The Commission has adopted a green paper to launch a public consultation on a reform of the application of the EU Trade Defence Instruments. </p><p>The Paper takes up several of the key questions raised by the Member States and the interest groups most critical of anti-dumping measures, such as the issue of the impact of these measures on European businesses that have relocated their production outside the EU.</p><p>Another controversial questions raised is a more systematic consideration of consumers' interests in anti-dumping investigations. The EU is one of the few trade defence users that applies a public interest test in the form of the community interest rule before applying such measures. Such a test Date 20 November – 8 December 2006 Page 4 is not required by WTO rules. The Paper consults whether the current test should be reviewed, and in particular whether the interests of sellers, importers and consumers must be taken into account alongside those of producers. </p><p>Stakeholders are invited to submit their comments until 31 March 2007.</p><p>A copy of the green paper is at: http://ec.europa.eu/trade/issues/respectrules/anti_dumping/comu061206_en.htm </p>