COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

on Competition Policy 2013

TABLE OF CONTENTS

I...... LEGISLATION AND POLICY DEVELOPMENTS. 4

State aid. 4

1. State Aid Modernisation: continued reform in support of growth and jobs. 5

2. Monitoring, recovery and cooperation with national courts. 8

3. Significant judgments by EU Courts in the State aid area. 11

Antitrust & Cartels. 13

1. Technology Transfer Agreements – on-going review.. 13

2. Notice on Agreements of Minor Importance – on-going review.. 14

3. Proposal for a Directive on antitrust damages actions adopted. 15

4. Significant judgments by EU Courts in antitrust and cartels. 16

5. A top priority in the fight against cartels – making use of leniency and settlement 19

6. Continuing the close cooperation within the European Competition Network (ECN) and with national courts 21

Merger control 22

1. Towards more effective merger control – on-going review.. 23

2. Simplifying merger procedures further – on-going review.. 24

3. The number of merger interventions remain stable. 25

4. Significant judgments by EU Courts in mergers. 26

Developing the international dimension of EU competition policy. 26

1. Bilateral relations. 27

2. Multilateral cooperation. 27

II..... SECTORAL OVERVIEW... 29

1. Energy & Environment 29

2. Information and Communication Technologies (ICT) and Media. 33

3. Financial Services. 38

4. Basic industries and Manufacturing. 46

5. The agri-food industry. 49

6. The Pharmaceutical and health services sector. 52

7. Transport and postal services. 54

I. LEGISLATION AND POLICY DEVELOPMENTS

EU competition policy as the driver of European competitiveness

European institutions, governments and all stakeholders in the economy have continued to work hard on bringing Europe out of the economic crisis. This year we have seen the first signs of these common efforts bearing fruit. The Europe 2020 strategy for smart, sustainable and inclusive growth provides guidance on the path to follow: building on the EU's key asset, the Single Market, we have to reinforce European competitiveness. Competition policy has a major and clear role in that process. It protects and strengthens the Single Market, it ensures a level playing field for businesses and it supports innovation. As the European Parliament's 2013 study[1] on competition policy has concluded: "Competition plays a crucial role in promoting productivity and innovation as drivers of economic growth. This means that competition policy, which intensifies competition, will stimulate growth." In that spirit, the Commission has continued to consistently enforce all instruments of competition policy and to keep the legislative framework for those instruments up to date with the changing economic reality.

State aid

2013 brought not only the first signs of recovery for the European economy but also results for the stabilisation efforts in the banking sector. However, those first positive signs need to be underpinned by further measures to ensure sustainability. State aid policy can support recovery by ensuring a better and more effective use of scarce public resources. At the same time State aid policy maintains undistorted competition in the Single Market, thereby contributing to the competitiveness of European companies and EU economy as a whole. Crisis related State intervention in support of the financial sector has been essential in saving the European banking system from an uncontrolled collapse. State intervention continues to be essential in some Member States. The unprecedented amount of public funds spent on stabilisation of the financial sector posed a high risk of market distortions. The Commission's reformed guidance for aid to the financial sector continues to guarantee compliance with competition rules.

The latest figures on the scale of crisis and non-crisis State aid

Between October 2008 and 31 December 2012 Member States provided assistance to the financial sector amounting to EUR 591.9 billion (4.6 % of EU 2012 GDP) for capital support (recapitalisation and asset relief measures).

Liquidity support (provided in the form of guarantees and other liquidity measures) reached its peak in 2009 with an EU 27 outstanding amount of EUR 906 billion (7.7 % of EU 2012 GDP). . The crisis intensity has gradually weakened in many EU countries since then, and the outstanding amount of liquidity support has dropped down by more than a half to EUR 534.5 billion (4.14 % of EU 2012 GDP) in 2012. The temporary crisis rules for support of the real economy expired in 2011 and the aid granted under those provisions in 2012 amounted only to EUR 63 million.

In 2012, non-crisis State aid increased by roughly EUR 3 billion compared to 2011 and reached EUR 67.2 billion or 0.52% of EU GDP (an increase by 0.01%). Member States mainly sponsored aid measures for regional development, research, environmental protection and providing risk capital to SMEs, all of which contribute to the Europe 2020 strategic objectives of smart, sustainable and inclusive growth.

1. State Aid Modernisation: continued reform in support of growth and jobs

Following the launch of an ambitious State Aid Modernisation programme ("SAM") in May 2012[2], the Commission made major progress in translating the main reform principles into legislation and guidelines during 2013.

SAM aims at directing scarce public funds towards growth- and competitiveness-enhancing measures and turning State aid policy into a smart and efficient tool to help Member States "achieve more with less". The programme has three key objectives, which aim to create a State aid control system that supports growth policies, preserves the integrity of the Single Market and works together with Member States and European businesses. The SAM objectives have also been recognised and supported by the European Parliament in its January 2013 resolution[3]. The progress achieved under each objective is outlined in turns below.

Foster growth in a strengthened, dynamic and competitive internal market

The Europe 2020 Strategy[4] focuses on creating the conditions for smart, sustainable and inclusive growth. One of the key goals of the SAM programme is to support the strategy and its flagship initiatives by facilitating well-designed aid targeted at market failures and objectives of common European interest ('good aid').

The Digital Agenda flagship initiative sets ambitious goals for broadband infrastructure development to support growth in Europe. New guidelines aligning the State aid rules on aid for broadband with the objectives of the Digital Agenda came into force in January, marking the first concrete application of the SAM principles.

In June, the Commission adopted new regional aid guidelines[5] for the period 2014-2020. The new guidelines seek to help Europe’s governments spend better, by ensuring that aid goes to investments that would not take place without the aid, and that therefore bring real value added for regional development.

Well-targeted aid can also help European competitiveness by stimulating innovation. The rules on research, development and innovation (R&D&I) and risk finance aid are particularly important in that respect: the Europe 2020 Strategy identifies R&D as a key driver to achieve the objectives of smart, sustainable and inclusive growth. The design of EU Financial Instruments, such as the Financial Instruments in Horizon 2020 or the Programme for the Competitiveness of Enterprises and SMEs (COSME), also needs to be coordinated with State aid law.[6] The Commission conducted public consultations on new guidelines on R&D&I and risk finance aid in the second half of 2013, with a view to their adoption in 2014.[7]

Finally, the Europe 2020 Strategy sets headline targets for climate change and energy sustainability. In that light, a clear framework is needed for State aid in the field of energy and environment. The Commission launched a consultation on guidelines in that field in the second half of 2013, following a workshop that took place in April.

Focusing on cases with the biggest impact on the Single Market

Simplified and proportionate rules for cases with limited effect on trade also have a role to play in helping direct scarce public resources towards 'good aid'. The key tools in that respect are the Enabling Regulation and the General Block Exemption Regulation.

The amended Enabling Regulation[8], adopted by the Council in July, is a cornerstone of the SAM programme. It makes a proportionate approach possible by adding new categories of aid that can be exempted from prior notification to the Commission. At the same time, it ensures that the exemption supports the objectives of SAM by covering only measures where distortions of competition are limited, the aid is 'good aid' and the Commission has sufficient case experience to be able to set appropriate conditions in advance.

The General Block Exemption Regulation[9] (GBER) sets out the detailed terms on which aid covered by the Enabling Regulation is exempt from prior notification. The changes to the Enabling Regulation make it possible to extend the horizontal and vertical scope of the GBER. At the same time, the review of the GBER gives the opportunity to support competitiveness by simplifying and clarifying the rules and going further in promoting 'good aid' to facilitate growth, while boosting transparency to help ensure that aid remains properly targeted even in the absence of notification to the Commission.

The new GBER will have a significantly extended scope and simplified conditions. 75% of today's State aid measures and around 66% of aid amounts would be covered by the new GBER. If Member States focus their aid policy on the GBER then some 90% of measures could be covered in the future. The Commission proposes to closely work with Member States to achieve that goal; inter alia by setting up a dedicated network of State aid country desks and preparing new guidelines. They should also help Member States to ensure better respect of the GBER conditions when designing their aid measures. To complement that significant shift in the exercise of prior controls, the Commission will monitor aid granted under the GBER. It will also evaluate the effect of the aid together with Member States.

Following the amendment of the Enabling Regulation, six new categories of aid previously not covered will be included in the GBER: innovation aid to large enterprises, certain aid to broadband infrastructures, aid for culture and heritage conservation, including audio-visual works, aid for sport and multifunctional recreational infrastructures, aid to make good the damage caused by natural disasters and social aid for transport for residents of remote regions. In addition, new forms of exempted aid will be introduced for existing categories, such as: a wider concept of risk finance aid, investment aid for research infrastructures, a new category on start-up aid, new possibilities for energy and environmental aid (e.g. aid for remediation of contaminated sites, operating aid for renewables, energy efficiency schemes), enlargement of the notion of disadvantaged workers for employment aid to the youngest, and regional aid for outermost regions and for urban development schemes.

Moreover, the revised GBER provides for a significant increase in the notifications thresholds in key areas linked to the Europe 2020 agenda, such as R&D&I and risk finance.

Finally, the proportionate approach is also supported by the de minimis Regulation[10] that sets out the conditions on which small amounts of State support (up to EUR 200 000) do not constitute aid. After a careful review of the available evidence and in view of the support fiscal consolidation and the redirection of scarce public funds towards objectives of common interest in line with the Europe 2020 agenda, the Commission decided not to change the de minimis threshold. However, a number of simplifications and clarifications have been introduced in the new Regulation that was adopted on 18 December. Those changes will facilitate access to this instrument for all firms when they need it.

Better targeting and improved ex-post controls

Enlargement of the GBER should not be confused with softening control. In the present economic conditions it is even more important than ever that aid is well-targeted and addresses real market failures and cohesion needs. For that reason, aid to large firms in assisted regions should be primarily reserved to green-field investments, RDI and energy and environmental objectives, if necessary with higher intensities to compensate for regional handicap (regional bonuses). Support to ailing firms should only be granted under conditions that ensure their ability to come back to viability: the new GBER will consider a single and more precise definition of firms in difficulty, based on clearer and simpler criteria established in consultation with financial experts and practitioners so as to reflect market practices.

Such an important enlargement and simplification of the GBER has to be balanced by improved ex-post controls. They will be based on greater transparency of aid awards at the individual level, more systematic monitoring of compliance with the formal conditions for exemption and by introducing ex-post evaluation, notably for the largest schemes in key areas relevant for the internal market. Ex-post evaluation will ensure a more solid and effective method to ensure good aid with incentive effect, and it will help designing better schemes with more limited impact on competition and trade. Predefined thresholds will provide predictability and legal certainty as to the schemes to be evaluated. In order to ensure a common guidance and the same treatment to all, the Commission launched a public consultation on a common methodology for ex post evaluation in the summer of 2013. It aims to adopt the revised regulation in the first half of 2014.

Streamlined and clearer rules and faster decisions increase the efficiency of aid distribution

The SAM programme also involves streamlining the rules, to allow the Commission to adopt faster and better decisions and concentrate its resources on the most important cases.

To that end, the Council adopted the new Procedural Regulation[11] in July. The regulation allows the Commission to improve the handling of complaints. In particular, it introduces new requirements designed to improve the quality of information received from complainants and clarifies the requirements to lodge them. For example, a mandatory complaints form is introduced and the complainant must show the existence of an interest to act, in order to be able to file a formal complaint. Moreover, a complaint will be considered withdrawn in case the complainant does not provide meaningful information or fails to cooperate.

The amended Procedural Regulation also gives the Commission the power to collect the appropriate information on a case within business-relevant deadlines. In particular, the Commission can obtain information directly from market participants and conduct sector inquiries.

Lastly, the regulation will facilitate coherent application of State aid rules across Member States through its provisions on cooperation with national courts. The role of the national courts has been reinforced. On the one hand, national courts can now obtain information from the Commission for the purpose of applying Article 107(1) and 108 of the Treaty on the Functioning of the European Union (TFEU). Courts can also ask the Commission for an opinion on a concrete case. On the other hand, the Commission can make oral or written submissions to national courts in the EU public interest (amicus curiae).

2. Monitoring, recovery and cooperation with national courts

Increased monitoring of existing State aid to ensure a level playing field

Over the years, the architecture of State aid control has evolved significantly. Today, roughly 85% of aid granted to industry and services is not individually examined by the Commission, but is granted on the basis of previously approved aid schemes or under block exemption regulations[12]. DG Competition monitors the way in which Member States apply existing aid schemes by doing regular, sample based, ex-post checks.

To further improve the effectiveness of that control which is relevant to the proper functioning of the Single Market, DG Competition decided in 2011 to significantly enlarge the scope of those sample checks (from 20 to 30 cases reviewed per "monitoring exercise", to more than 50). In the context of the 2012/2013 monitoring exercise DG Competition examined a sample of 63 existing aid schemes involving all Member States, all main types of aid and covering 33% of Member States expenditure under existing schemes. The investigation of a number of cases is still on-going, but it can already be noted that issues or at least questions are raised in several cases. These issues are of varying types and gravity e.g. non-notified modification of schemes, individual aids exceeding the maximum thresholds, compatibility conditions not properly reflected in the national legal basis etc.

The fact that irregularities are detected in a number of cases is obviously a source of concern. However, it must be noted that the detection of an irregularity does not necessarily mean that incompatible aid was granted and that competition was distorted. For example an individual aid that did not meet the conditions of the scheme under which it was granted, although in principle problematic, could be found compatible on another basis (e.g. as de minimis). Therefore, while monitoring shows that Member States are not always abiding by the rules and there is scope for improvement in terms of compliance, at the same time the actual impact of the detected irregularities on the market should not be overestimated.

The Commission follows-up systematically all irregularities and uses the means at its disposal, as appropriate, to address the competition distortions that these may have induced. In some cases, Member States offer to voluntarily redress the problems detected (amend national legislation, recover the excess aid granted etc.). In other cases, formal action may be necessary to tackle the detected irregularities. In 2013, the Commission opened the formal investigation procedure in 2 cases where, in the context of the monitoring, doubts were raised on the correct implementation of the examined schemes. The formal investigation procedure is on-going.

Restoring competition through recovery of State aid granted in contravention of the rules

To ensure the integrity of the Single Market, the Commission has the power and the duty to request Member States to recover unlawful and incompatible aid which has unduly distorted competition and trade between Member States. In 2013, further progress was made to ensure that recovery decisions are enforced effectively and immediately.

Continued efforts to recover illegal aid

The most recent figures[13] show that Member States recover illegal aid much faster in recent years. 69% of incompatible aid has been recovered (around EUR 13.5 billion since January 2004) thanks to the Commission's action, probably facilitated by the pressure to consolidate public finances. The percentage of illegal and incompatible aid still to be recovered has therefore fallen from 75% at the end of 2004 to around 21% on 31 December 2013.

In 2013, the Commission adopted nine decisions ordering recovery of incompatible aid, ensuring the recovery of over EUR 726 million by the Member States. As of the end of December 2013, the Commission had 52 pending active recovery cases (compared to 94 cases at the end of 2004).

Recovery decisions adopted in 2013 || 9

Amount recovered in 2013 (in EUR million) || 726

Pending active recovery cases on 31 December 2013 || 52

As a guardian of the Treaty, the Commission may use all legal means at its disposal to ensure that Member States implement their recovery obligations, including launching infringement procedures. In 2013, the Court of Justice condemned three Member States pursuant to Article 108(2) TFEU (Italy four times, Spain and Greece).

Moreover, in 2013, the Commission adopted for the first time a decision fixing an amount to be paid by a Member State in implementation of a Court ruling requiring that Member State to make penalty payments, following its failure to implement recovery.

The case in relation to which that decision was adopted concerns an employment aid scheme which was introduced by Italy in 1984 and involved employers' exemption from social security contributions for certain types of contracts. In its decision adopted on 11 May 1999, the Commission found that part of the aid was incompatible with the internal market and ordered its recovery. On 1 April 2004, the Court of Justice found that Italy had failed to comply with the Commission's decision ordering the recovery[14]. Despite the Court's judgement, little progress was made; therefore the Commission referred Italy to the Court for the second time under Article 260 TFEU[15]. By judgment of 17 November 2011, the Court of Justice found that Italy had failed to implement both the Commission's decision and the Court's 2004 judgment. The Court therefore ordered Italy to pay a lump sum (EUR 30 million) and periodic penalty payments, depending on the recovery progress achieved every 6 months by reference to the outstanding aid on the date of the judgement. The Commission will continue to enforce the Court's ruling as regards the penalty payments, until Italy fully implements recovery of the illegal and incompatible aid.

Cooperation with national courts to ensure the effectiveness of State aid rules on the ground

The Commission continued its cooperation with national courts under the Notice on the Enforcement of State Aid Law by National Courts of 2009 (the 'Enforcement Notice'). While (so far) no requests for information were received, the Commission received one request for an opinion from the Oberverwaltungsgericht Berlin-Brandenburg. The request concerned the calculation of the net grant equivalent of an approved grant (regional aid) and was treated during 2013. Furthermore, as a follow-up to the Enforcement Notice, the Commission's advocacy efforts continued. In 2013, the Commission was actively involved in financing training programmes for national judges following an annual call for projects, and also sent trainers to teach at such workshops and conferences (see also section 6 of the Antitrust & cartels title, on the Cooperation with National Courts).

3. Significant judgments by EU Courts in the State aid area

The EU courts clarified certain aspects of key State aid concepts in a number of significant judgments in 2013.

In the so-called France Télécom judgment[16] the Court of Justice clarified in an appeal the link between the conditions of State resources and advantage needed for State aid to be present. The Court overruled the General Court's judgment and confirmed that the Commission was correct in finding that the announcement of State support on 4 December 2002 and a shareholder loan offer, taken together, constituted State aid in favour of France Télécom ("FT"). The Court of Justice clarified that for establishing the existence of State aid, several State interventions might, depending on their links with one another and their effects, be regarded as a single intervention. The Court noted that it was clear in that case that the announcement was inseparable from the shareholder loan offered.

The General Court, in its judgment on nature conservation areas[17], upheld the Commission's decision stating that aid was involved in German measures to support large-scale nature conservation projects and the transfer of natural heritage sites to environmental protection organisations free of charge. The Court clarified that although the environmental protection tasks entrusted to the organisations did not constitute an economic activity, the environmental protection organisations had to be considered as undertakings to the extent that they offered goods and services in competitive markets, namely sales of wood, granting of hunting and fishing leases and touristic services. As those activities could be dissociated from their non-economic activities, the organisations qualified as undertakings when carrying out those economic activities.

Regarding the market economy creditor test, the General Court confirmed[18] the Commission's decision concerning Rousse Industry, a Bulgarian entrerprise. The Commission refused the authorisation of an agreement on rescheduling a debt in favour of Rousse Industry pre-dating Bulgaria's accession and ordered recovery of illegal aid. The judgment clarified the application of the market economy creditor test in cases of default on debt rescheduling agreements by a debtor in difficulty without clear prospects of return to viability. In such situations, a private creditor would not limit itself to 'soft' recovery actions, but would rather take decisive action, i.e. proceed at least to the forced execution of the pending debt. It also established that lack of recovery action following a failure to comply with a debt-rescheduling agreement constitutes a substantial modification of the initial debt rescheduling agreement. The judgment recalled the distinction between the general concept of existing aid in the Procedural Regulation and the specific application of the concept of 'existing' aid for the new member States. For the new Member States, the Accession Treaties define a more restrictive concept of 'existing aid', which covers only: a) aid put into effect before a specified cut-off date (in the case of Bulgaria, 10 December 1994); b) aid specifically listed in the annex to the Accession Treaty as 'existing aid', and c) aid that was approved by the national State aid authority prior to accession and in respect to which the Commission had not raised objections.

The Court of Justice confirmed[19] the negative decision with recovery adopted by the Commission as regards the incompatible aid granted to the Greek shipyard Ellinika Nafpigeia throughout the period 1985-2005 in the context of its liquidation and successive privatisation. The judgment is important for underlining, once again, that the scope of the exemption from the EU State aid discipline foreseen by Article 346(1)(b) TFEU for military/defence measures must be strictly interpreted. In particular, a clear distinction must be made between the production and commercialisation of military material, on the one hand, and any other economic activity on the other hand, especially in cases where the beneficiary undertaking is engaged in both types of activities. Undertakings which engage in both types of activities cannot invoke the military defence exemption for the whole of their production/activities, i.e. including the civil part, by arguing that the civil production is necessary for the viability of the military/defence activity and indissolubly linked to it.

The General Court handed down two judgments that address the question of the application in time of State aid rules. In Case T-92-11 – Andersen v Commission, judgment of 20 March ("Danske Statsbaner"), the General Court partially annulled a Commission decision declaring the State aid contained in the public service transport contract between the Danish Ministry of Transport and Danske Statsbaner (the incumbent Danish railway company) compatible with the internal market. It ruled that the Commission had erred in law in applying Regulation no 1370/2007 instead of Regulation No 1191/69, the latter being the substantive rule at the time when the aid had been paid. It considered that as a general principle, aid notified but not paid out should be assessed under the substantive rules in force at the date on which the Commission takes its decision. Aid which has been paid out without notification has in principle to be assessed under the substantive rules in force at the time the aid was paid out, unless exceptional conditions for retroactive application of the new legal basis are fulfilled.

In Case T-570/08 RENV - Deutsche Post v Commission, judgment of 12 November, the General Court found, however, that aid which has been paid out without prior notification constitutes an on-going situation, and not a definitive situation, and that for that reason, new rules of compatibility apply with immediate effect to the assessment of aid paid out without prior notification. Such aid therefore has to be assessed on the basis of the rules in force at the time the Commission adopts its decision.

The Commission has lodged an appeal against the ruling of the General Court in Danske Statsbaner, inviting the Court of Justice to review the findings of the General Court with respect to the application in time of substantive State aid rules. This will be an opportunity to clarify this important question on which the case law has so far taken different positions, and provide legal certainty.

In its judgment of 24 October in Joined Cases C214/12 P, C215/12 P and C223/12 P – Land Burgenland v Commission, the Court of Justice dismissed the appeals against a ruling of the General Court which had confirmed the Commission's decision on the privatisation of Bank Burgenland by the Province of Burgenland through a tender procedure. In the final phase of the tender two bids were made, one by the Austrian company GRAWE (EUR 100.3 million), and a much higher one by a Ukrainian Consortium (EUR 155 million). The tender was awarded to GRAWE. The Commission found that the sale constituted State aid for GRAWE because, by not taking the highest bid, the Province of Burgenland did not behave like a private seller operating in a market economy. The Court of Justice confirmed that existing public guarantees should not be taken into account in the evaluation of the bids because the guarantees concerned constituted State aid (i.e. by definition granted by the State exercising its prerogatives as a public authority), and a private investor would not grant aid. When there is an open, transparent and unconditional tender procedure, it can be presumed that the highest bid corresponds to the market price if the bid is binding and credible and the consideration of economic factors other than the price is not justified. In such a case the Commission is not obliged to look at other methods, such as independent studies, to establish the market price. In addition, the reasons of a potential buyer for submitting a bid are not relevant from the perspective of a private vendor.

Finally, the Court of Justice held in Case C284/12 – Lufthansa v Flughafen Frankfurt Hahn[20] that when the Commission has opened a formal investigation procedure, the national courts are required to enforce the obligation to suspend the implementation of the relevant aid measure. If the national court has doubts about whether the measures constitute State aid, it may seek clarification from the Commission and, in accordance with the second and third paragraphs of Article 267 TFEU, it may or must refer a question to the General Court for a preliminary ruling.

The Court acknowledges that the assessment in the opening decision is preliminary in nature, but considers that the effectiveness of the stand-still obligation in Article 108(3) TFEU and the preventive character of State aid control require the national courts to take measures to suspend the implementation of the measure even if the Commission's final decision were later on to conclude that there were no aid elements. In addition, the Court refers to the principle of sincere cooperation (Article 4(3) TEU), from which it derives that national courts must refrain from taking decisions which conflict even with a provisional Commission decision.

Antitrust & Cartels

1. Technology Transfer Agreements – on-going review

The EU aims to achieve a more competitive, connected, greener, knowledge-based and inclusive society. In particular, innovation and competitiveness are fundamental to the Commission's Europe 2020 Strategy.[21] Innovation often results in greater prosperity and a more efficient use of scarce resources, with knowledge as the key input.

Efficiency enhancing technology transfer agreements between competitors or non-competitors promote innovation and competitiveness in Europe by ensuring that technologies are disseminated to also other companies than the original inventor. Dissemination of technology enables more competition and can also increase follow-on innovation.

The review of the existing guidelines and the block exemption regulation for technology transfer (TTBER) continued in 2013. The goal of that revision is to strengthen incentives for research and innovation, facilitate the diffusion of intellectual property and stimulate competition.

A draft TTBER and draft Guidelines were published for public consultation on 20 February. The public consultation ran until 17 May. The Commission received 58 replies from stakeholders[22].

Stakeholders seem, in general, to be more comfortable in self-assessing the compliance of their technology transfer agreements with Article 101 TFEU. They support the current effects-based approach to enforcement that the Commission has been promoting since modernisation of EU competition law in 2004. The overall majority of stakeholders indicate that the current system has given them flexibility to organise their cooperation, notably through the so called "safe harbours" provided for in the TTBER and the Guidelines. Therefore, companies welcome that the Commission is keeping the overall structure of the regime. As regards specific proposed changes in the draft TTBER and Guidelines, most of the submissions focused on proposed changes as regards market share thresholds, termination clauses, exclusive grant-back clauses and patent pools.

The Commission is now in the process of reviewing the draft TTBER and Guidelines in light of the input received in the public consultation and aims at adopting final texts in spring 2014.

2. Notice on Agreements of Minor Importance – on-going review

Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements that aim at, or result in, appreciable restrictions of competition. The current Notice on Agreements of Minor Importance (De Minimis Notice)[23], adopted in 2001, creates a market-share based safe harbour for agreements that the Commission considers as having a non-appreciable effect on competition. Agreements between competitors are deemed not to have an appreciable effect on competition if the aggregate market share of the companies involved does not exceed 10%. For agreements between non-competitors the relevant market share is 15%. However, if an agreement, be it between competitors or non-competitors, contains a particularly serious restriction of competition, known as hardcore restriction, it will not be able to benefit from the safe harbour.

In July, following a consultation of the Member States, the Commission launched a public consultation on a revised draft of the De Minimis Notice. The proposed revision of the Notice seeks to reflect the ruling of the European Court of Justice in the Expedia case[24], which clarified that an agreement that has an anti-competitive object constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition. Accordingly, the revised draft Notice provides that agreements containing a restriction by object will always constitute an appreciable restriction of competition if they affect trade between Member States. Secondly, the revised draft proposes technical changes to ensure that the De Minimis Notice is consistent with other recently amended competition rules, in particular the 2010 Vertical and Horizontal Block Exemption Regulations.

The public consultation on the revised draft Notice was closed in October. The Commission is currently reflecting on the implications of the responses received and is working towards adopting a revised Notice in 2014.

3. Proposal for a Directive on antitrust damages actions adopted

On 11 June, the Commission adopted a Proposal for a Directive on antitrust damages actions[25], an initiative which has long been awaited by stakeholders and which is a policy priority for the current Commission. Under EU law, any person or company who suffered harm because of an infringement of EU competition law has a right to full compensation. The proposal has two complementary goals. First, the proposal aims at optimising the interplay of private damages claims with the public enforcement by the Commission and national competition authorities, to safeguard strong public enforcement and to achieve a more effective enforcement overall. Second, to make the EU right to compensation a reality in all Member States, by removing key practical difficulties which consumers and companies frequently face when they seek redress.

To achieve these goals, the proposal includes substantive and procedural rules on crucial aspects of antitrust damages actions, such as access to evidence, limitation periods for bringing an action, standing and the burden of proof with regard to compensation for overcharges passed on along the distribution chain. The proposal seeks to create legal certainty as to the accessibility of evidence produced for the purposes of public enforcement. For instance, in order to safeguard the attractiveness of leniency programmes, it provides that leniency corporate statements should never be disclosed in private damages litigation. The proposal facilitates follow-on damages claims by stipulating that final infringement decisions by national competition authorities have probative effect.

The legislative proposal has been submitted to the European Parliament and the Council under the ordinary legislative procedure. On 2 December, the Competitiveness Council adopted a General Approach on that initiative.[26] In the European Parliament, the file is shared between three Committees: Economic and Monetary Affairs (ECON), Legal Affairs (JURI) and Internal Market and Consumer Protection (IMCO). The latter adopted an opinion on the proposal on 17 December.

In parallel to the proposal, the Commission adopted a Communication on quantifying antitrust harm in actions for damages based on breaches of Article 101 or 102 TFEU, to provide guidance to courts and to the parties in such actions.[27] This is accompanied by a more comprehensive Practical Guide drawn up by the Commission's services[28] and available in all official EU languages. Finally, the proposal is complemented by the Commission Recommendation on collective redress[29], which recommends that all Member States introduce collective redress mechanisms to facilitate the enforcement of the rights that all Union citizens have under Union law, including the right to compensation for antitrust harm.

4. Significant judgments by EU Courts in antitrust and cartels

Deutsche Bahn

In Deutsche Bahn[30], the General Court confirmed the legality of the Commission's unannounced inspections at the premises of the German railway incumbent Deutsche Bahn in 2011. The Court ruled that inspections may be carried out based solely on a Commission decision and do not require prior authorisation by a judge. The Court also confirmed that the rules on inspections set out in Regulation no. 1/2003 do not violate fundamental rights, as protected by the European Charter of Fundamental Rights, as the Regulation and the system of remedies in the Treaty provide for sufficient safeguards to protect the company's rights of defence and right to effective judicial protection. The Court further confirmed that inspectors cannot be expected to be able to immediately assess whether certain documents are within the scope of the inspection decision, but they must be able to read the documents to make that assessment. The applicants have appealed the judgment before the Court of Justice.

Schindler

In Schindler[31], the Court of Justice dismissed an appeal against a 2011 judgment of the General Court upholding the Commission decision[32] from 2007 fining Schindler and various subsidiaries for their participation in the "Elevators and escalators" cartel. With reference to the 2011 Menarini judgment of the European Court of Human Rights[33], the Court confirmed that the current EU antitrust enforcement system – in which the Commission as administrative agency imposes fines subject to judicial review – does not violate fundamental rights and in particular the principle of effective judicial protection established by Article 6 of the European Convention on Human Rights. It stated that in view of Menarini, the review court must have "the power to quash [the decision] in all respects, on questions of fact and law"[34]. In particular, the Court of Justice held that the notion of full jurisdiction requires an examination of "all questions of fact and law relevant to the dispute". The Court of Justice went on to hold that the judicial review exercised by the EU courts in competition cases meets that standard because: (a) within the sphere of "review of legality", the EU courts carry out a "full and unrestricted review"; and (b) within the sphere of "unlimited jurisdiction", the EU courts can substitute their own appraisal for the Commission’s and consequently, to cancel, reduce or increase the fine.

CISAC

In a series of 22 judgments the General Court ruled[35] on the appeals brought by 21 collecting societies and the International Confederation of Societies of Authors and Composers (“CISAC”) against the Commission Decision of 16 July 2008[36].

The Commission found in the CISAC decision that Art. 101 TFEU prohibits certain provisions in reciprocal representation agreements among collecting societies in the EEA, which have the effect of restricting competition among them by limiting their ability to offer their services to authors and commercial users (such as RTL or Apple) outside their domestic territory. In the case at hand, authors were forced by virtue of membership clauses to enrol with the society of their own State, while collecting societies could not provide their services outside their own allocated territory due to exclusivity restrictions. The Decision also found that the collecting societies coordinated their bilateral arrangements to ensure that commercial users only obtained licenses limited to the domestic territory of each collecting society.

The Court gave guidance with regard to the required standard to prove concerted practices and with respect to the concepts used to establish the existence of concertation and those used to establish the existence of a restriction of competition. It endorsed the findings of the Commission in relation to the "membership clauses" and has also upheld the principle that collecting societies must be able to provide services outside their territory. In the judgment on the appeal by the Swedish collecting society (STIM) the Court addressed the issue of the relationship between Article 101 and Article 167 TFEU (on cultural aspects), as well as the treatment of cultural claims under Article 101 TFEU. However, the General Court found that the Commission had failed to adduce sufficient evidence of a concerted practice whereby each collecting society was alleged to have limited, in its reciprocal representation agreements, the right to grant licences relating to its repertoire in the territory of another collecting society party to the agreement.

Cartel judgments: the Courts confirm the Commission´s approach to parental liability

The Courts have continued to clarify and confirm the Commission's practice on parental liability. In Portielje[37] the Court of Justice sided with the Commission and reversed the finding of the General Court, which had concluded that the presumption had been successfully rebutted. The Court of Justice clarified that parental liability has to be assessed on the basis of all relevant factors relating to the economic, organisational and legal links and not only those related to company law. In the same judgment, the Court of Justice also clarified that the fact that the parent company itself does not have any economic activity is irrelevant, as long as it constitutes a single undertaking with the entity that directly participated in the infringement.

In two judgments relating to the Chloroprene Rubber cartel, the Court of Justice confirmed the Commission's findings on the imputation of parental liability in a joint venture constellation for a 50/50 joint venture between Dow and DuPont[38].

The General Court also further clarified the application of parental liability by confirming in the Bananas cases that Del Monte was liable as a parent company for a limited partnership under German law (Kommanditgesellschaft), although Del Monte was only the limited partner in that relationship (case T-587/08, Del Monte).

Del Monte and Dole

In Del Monte[39] and Dole[40] the Court also confirmed the Commission's finding that the bilateral exchange of not publicly available "pre-pricing" information, relating to the fixing of quotation prices, constituted a concerted practice that had the object to restrict competition.

Marine hoses

In the Marine Hoses cartel case, the General Court delivered three judgments[41] in which it upheld for the most part the Commission's 2009 decision[42] that a number of companies active in the business of marine hoses (used to transport crude oil to and from ships) participated in a world-wide cartel. The General Court endorsed point 18 of the 2006 Fines Guidelines and the method used to calculate the fines in situations where the EEA sales would not be representative for example because of the existence of a 'home market' protection rule.

The General Court partly annulled the Commission's decision in the Parker case.[43] The General Court found that the Commission has wrongly interpreted the concept of economic continuity to the infringing undertakings. The Commission has appealed the judgment at the Court of Justice.

The General Court also provided guidance on the notion of repeated infringement in the MRI case[44]. The Court found in particular that if an undertaking’s participation in the infringement was interrupted and that the infringement committed by the undertaking before and after that period has the same features, the infringement in question must be characterised as a single infringement and as a repeated infringement. In that case, the Commission cannot impose a fine in respect of the period during which the infringement was interrupted.[45]

Bathroom fittings

In the Bathroom fittings cartel case, the General Court confirmed[46] the Commission's finding of a single overarching cartel, which affected six Member States, lasted from 1992 to 2004, and covered three product groups (ceramics, taps and fittings, shower enclosures). The coordination took place during meetings of national trade associations and in bilateral contacts and it consisted of fixing price increases, minimum prices, rebates, and exchanging sensitive business information.

5. A top priority in the fight against cartels – making use of leniency and settlement

DG Competition’s strong enforcement record against hard core cartels continued in 2013. The Commission continued to receive a constant flow of immunity and leniency applications, close to the long term trend of around two applications per month. Although the total number is lower than for 2011 and 2012, those years were exceptional, given the large number of applications in the car parts sector, where one application and investigation quickly spurred additional immunity applications.

The wire harnesses decision[47] is the first decision in the car parts sector; more are likely to follow. It is the seventh cartel settlement decision adopted by the Commission demonstrating the increasing success of the settlement system which gives companies a 10% reduction in the fine if they accept liability for the infringement and do not contest the Commission’s findings. Settlement is used if the Commission considers after screening that a case is suitable for settlement and the parties are willing to cooperate in the procedure. It is an effective resolution tool of cartel proceedings since it allows freeing up resources more quickly to fight other cartels and therefore contributes to further deterrence in that respect.

Although settlements can lead to quicker decisions, the Commission will not pursue settlements at any cost. It has a responsibility as a public enforcer to take decisions in the public interest; if companies and the Commission cannot reach a common understanding on the existence and the characteristics of a cartel, then settlements will not be available. In the smart card chips case[48] the settlement route was abandoned due to lack of progress.

The domino effect of the leniency system and the successful use of the settlements procedure were both further confirmed by the two cartel cases in the interest rates derivatives industry, EIRD[49] and YIRD[50]. Additional ongoing cases linked to the sector will be treated as a priority.

In a smaller case, but one that was also uncovered thanks to the leniency system, the Commission fined four North Sea Shrimps traders a little under €30 million in November for operating a multi-year cartel in North-Western Europe.

More information on the cartel decisions mentioned above is available in the sections below, describing the relevant sectors. At the same time, the Commission has begun a number of other investigations and laid the groundwork for future enforcement. In addition to the Statements of Objections in wire harnesses and the EIRD and YIRD cases, which led to the prohibition decisions mentioned above, the Commission also sent a Statement of Objections to the smart card chips producers[51] and conducted a number of inspections.

With four decisions, fines totaling EUR 1 882 975 000, and solid work for enforcement in future years, the Commission’s cartel enforcement record remains strong and effective.

Case name || Adoption date || Fine imposed EUR || Undertakings concerned || Procedure

Automotive wire harnesses || 10/07/2013 || 141 791 000 || 5 || settlement

Shrimps || 27/11/2013 || 28 716 000 || 4 || normal

EIRD || 04/12/2013 || 1 042 749 000 || 4 || settlement

YIRD || 04/12/2013 || 669 719 000 || 6 || settlement

Antitrust and cartel output

6. Continuing the close cooperation within the European Competition Network (ECN) and with national courts

Regulation 1/2003 empowers the Commission, National Competition Authorities (NCAs) and national courts to apply Articles 101 and 102 TFEU to agreements and practices that are capable of affecting trade between Member States. Since May 2004, the Commission has investigated potential antitrust infringements across almost all sectors of the economy and has adopted over 120 decisions, many of which landmark precedents. NCAs have investigated more than 1600 cases in this period, giving rise to enforcement decisions in more than 600 cases. DG COMP and the NCAs continued to coordinate competition enforcement in the ECN in 2013.

Convergence of enforcement powers

In 2013 the ECN discussed the need to further improve the procedural framework for the enforcement of Articles 101 and 102 TFEU. Procedures and sanctions for the application of the EU competition rules in the Member States are not harmonised by EU law. The Commission and NCAs apply the same substantive rules according to different procedures and sanctions based on national legislation. Convergence of enforcement powers has been a focus of horizontal ECN work for several years. The ECN has notably produced detailed comparative reports on investigation and decision making powers[52] in 2012. On that basis, a set of ECN Recommendations on investigation and decision-making powers were adopted in December 2013[53]. As regards sanctions for breaches of competition law, most NCAs can impose deterrent administrative fines and calculate those fines based on a similar methodology. Reforms leading to more convergence of procedures have been encouraged by country specific recommendations in the framework of the Europe 2020 strategy (European Semester) and in the context of Economic Adjustment Programmes.

Leniency convergence and interface with other areas of law

Leniency programmes are generally recognised as an important tool to detect secret cartels. From the outset, the ECN has given priority to fostering convergence and smooth interaction in that area. The ECN notably developed the ECN Model Leniency Programme (MLP)[54], providing Member States and NCAs a cohesive set of rules and procedures from which to inspire themselves. Refinements of the MLP were endorsed in late 2012. As a result, virtually all Member States have introduced leniency programmes and a significant process of alignment with the MLP has taken place by 2013.

The question of the disclosure of leniency material in the context of civil damages actions[55] was addressed in the Commission's Proposal for a Directive on Actions for Damages of 11 June 2013. Some stakeholders pointed out that sanctions on individuals, including classical criminal sanctions, applied by a number of MS have an adverse effect on the efficiency of the leniency policies. Particular concerns are that leniency does not always apply to individuals, or that the leniency options available for businesses and for individuals are not harmonised. There is a growing awareness of this issue which has been explicitly addressed by some Member States in their legislation or leniency policies.

Cooperation with national courts

National courts apply national and EU competition rules in a variety of scenarios. Certain national courts have jurisdiction over lawsuits between private parties (e.g. actions for damages). Some national courts act as review courts, hearing appeals which are brought against decisions of the national competition authorities. There are also courts that act as public enforcement authorities. Finally, if national courts apply national competition law, they are also required to apply Article 101 TFEU and Article 102 TFEU, where there is an effect on trade between Member States.

Efficient implementation of competition policy requires coherent and consistent judicial interpretation. The Commission therefore continues to support the coherent application of competition rules through cooperation with national courts. This cooperation includes direct case related assistance to national courts when they apply EU competition law. The courts can ask the Commission to provide case related information, or to provide an opinion on the application of the competition rules. The Commission may also submit amicus curiae observations on its own initiative.

In 2013, the Commission responded to five requests for information and one request for an opinion pursuant to Article 15(1) of Regulation 1/2003. The requests for information were issued by courts in Spain, the United Kingdom and Belgium. They concerned the state of the proceedings before the Commission or the transmission of documents in the possession of the Commission. The request for an opinion came from a Spanish court and concerned the application of Articles 101 and 102 TFEU to vertical agreements. DG Competition publishes opinions issued to national courts as soon as it receives approval from the requesting court.[56]

Cooperation on a more general level includes DG Competition's Grant Programme on the "Training of National Judges in EU Competition Law". The main aim of the Programme is to promote the convergence of competition policy and of enforcement by national courts throughout the EU and to boost cross-border exchanges between national judges. In 2013, nine projects were awarded totalling almost EUR 800 000. These projects make provision for the training of around 720 judges of 26 nationalities in EU competition law and are intended to enhance cooperation between them.

Merger control

Merger control is an essential component of competition policy enforcement in Europe. Efficient merger control contributes to the maintenance of competitive pressure on market participants, which stimulates innovation and efficient distribution of scarce resources. In order to maintain the recognised high standard of controlling merger transactions, the Commission continuously evaluates the substantive and the procedural rules in force. Where the Commission identifies room for improvement, it does not hesitate to launch policy changes. In 2013 work has progressed on two major policy initiatives in merger control, the review of the Merger Regulation and the simplification initiative.

1. Towards more effective merger control – on-going review

On 20 June, the Commission published a Staff Working Paper "Towards more effective EU merger control"[57] in order to seek the views of interested parties on a possible modification of the Merger Regulation.

First, the initiative considers whether to apply merger control rules to deal with the anti-competitive effects stemming from a new category of transactions, namely acquisitions of non-controlling minority shareholdings (hereafter "structural links"). Effective competition policy requires having the appropriate means to tackle all sources of harm to competition and consumers. Significant harm to competition and consumers can occur not only from acquisitions of control, but also from structural links, in particular if minority shareholdings are acquired in a competitor or in a vertically related undertaking.

Until now the Merger Regulation has been limited to “concentrations” defined as acquisitions of control and the Commission has only had the possibility to take pre-existing minority shareholdings into account if it is competent to analyse the effects of a separate acquisition of control. Austria, Germany and the United Kingdom currently have national merger control rules that also give them the competence to review structural links. In addition, in a number of other countries outside the EU, such as Canada and the United States, structural links are also subject to competition review under national merger control rules.

The Staff Working Paper discusses options to extend EU merger control to the acquisition of non-controlling minority shareholdings without creating an undue burden for businesses. This could be done either by extending the current ex-ante notification system for “full” mergers to minority shareholdings or through a more selective system, whereby the Commission may “pick and choose” cases that are most likely to raise competition issues.

Second, this initiative aims at assessing whether the Merger Regulation should be amended to improve the effectiveness and smoothness of the case referral system without fundamentally reforming the basic features of this system or the allocation of competences between the Commission and Member States. The 2009 Report to the Council on the operation of the Merger Regulation[58] found that although the existing thresholds and referral mechanisms lead to an appropriate allocation of cases in most instances, a significant number of cross border cases are still subject to multiple review in several Member States (240 cases in 2007). In some cases, where the Commission might have been the more appropriate authority, companies may also have opted against a referral to the Commission in order to avoid the Commission's jurisdiction for reasons of "forum shopping". To render the case referral system between the Member States and the Commission more effective and business-friendly, the Staff Working Paper discusses options to streamline pre-notification referrals to the Commission under Article 4(5) and post-notification referrals to the Commission under Article 22.

Finally, this initiative also aims to implement, if need be, several possible further technical improvements to the Merger Regulation.

The consultation period ended on 12 September. The Commission received a large number of replies from various groups of stakeholders (namely businesses and business associations, law firms, lawyers' and other law associations, academia, economic consultancies, international organisations, NCAs, national governments and private citizens). The Commission's services also met with representatives from EU and EFTA Member States during various meetings and conferences. Further progress is envisaged for this initiative in 2014 through the publication of a White Paper.

2. Simplifying merger procedures further – on-going review

On 5 December, the Commission adopted the 'merger simplification' package. The package includes the amendment of the Merger Implementing Regulation[59] and the adoption of a new Notice on Simplified Procedure[60]. In parallel, the Commission has updated its model texts for divestiture commitments. The Commission's decision followed a public consultation earlier in 2013.

The changes aim to make the EU merger review procedures simpler and lighter for stakeholders and to save costs. They will also allow the Commission to better focus its resources on those merger cases which merit a more intense review. These objectives are achieved in three main ways. First, the Commission has extended the scope of application of the simplified merger review procedure to cover more cases which are generally unlikely to raise competition concerns. In particular, the Commission has raised the market share thresholds under which cases qualify for a simplified merger review. Furthermore, it has introduced a new category mergers eligible to be considered under the simplified procedure, namely those mergers between competitors which result in small increments in market share.

Second, the Commission has updated and streamlined the information that notifying parties are required to include in merger notifications and in pre-notification case referral requests. The required information is now more tailoured to the particular type of case being notified. Third, the Commission has has made proivision for more focused pre-notification contacts.

Significant net benefits are expected to ensue for businesses and their external advisorsin terms of costs and resources. It is expected that the ratio of cases dealt with in simplified procedure will be increased by around 10%. That means that approximately 70% of all cases will be simplified (on the basis of the current data).

For the remaining cases which are reviewed under the normal procedure, the Commission has clarified, updated and significantly streamlined the information that the parties need to compile for notification. Additionally, the information required from parties requesting a referral of a case from the Commission to Member States or vice-versa (the Form RS) has been reduced to a strict minimum.

The streamlining of the information requirements for notification described above is also expected to make pre-notification processes in both simplified and non-simplified cases even more focused. In individual cases, the information requirements can be further reduced at the request of the parties by waivers. The amended texts clarify that waiver requests will be assessed within the 5-working day timeframe set out in DG Competition's Best Practices on the handling of merger cases[61]. This is a clear signal of the Commission's willingness to adopt a non-formalistic approach in its review and grant such waivers in cases that merit them.

The simplification initiative is a concrete example of the Commission's commitment towards the goals of the Regulatory Fitness and Performance (REFIT) programme[62]. It makes rules and administrative procedures simpler and less burdensome for business, thereby stimulating growth and making Europe more competitive.

3. The number of merger interventions remain stable

The number of merger notifications in 2013 reflects the average of the last four years. Overall, 300 cases were notified to the Commission in 2013, including 23 referrals. The Commission opened six new in-depth (i.e. second phase) investigations covering several sectors such as IT, mobile telephony, air transport and basic industries.

The number of decisions and the number of interventions[63] remains stable (at 15 in 2013) compared with the average of the last four years. The number of prohibition decisions increased to two in 2013[64] compared with only one in 2012[65]. In 2013, two decisions[66] were concluded in second phase with commitments, compared with six in 2012. The number of clearance decisions adopted in first phase with commitments remained stable, with eleven in 2013 compared with nine in 2012.

The recent trend that transactions become more complex has continued in 2013. Second phase investigations in particular generally require sophisticated quantitative and qualitative analyses involving large amounts of data.

Merger decisions

4. Significant judgments by EU Courts in mergers

In 2013 there was one judgment by EU Courts in the area of merger control. On 11 December, the General Court dismissed Cisco Systems' appeal of a Commission decision of October 2011[67] to clear the acquisition of Skype by Microsoft[68]. The judgment confirmed the Commission's assessment of new markets and technologies under the EU Merger Regulation. The Commission's decision to clear the transaction did not put the development of innovative products and services at risk. The Commission will continue to ensure that competition in nascent and fast evolving markets is maintained.

Developing the international dimension of EU competition policy

The proliferation in recent years of jurisdictions with competition legislation and enforcement mechanisms is on the one hand a positive development. On the other hand diverging competition regimes present a challenge to businesses acting on an international level. The Commission seeks to reinforce the role of competition policy in international economic cooperation and cooperates with competition agencies globally. Such regulatory and enforcement cooperation helps to ensure a level playing field for European companies active on global markets.

1. Bilateral relations

The EU launched negotiations with the US on a Transatlantic Trade and Investment Partnership Agreement (TTIP) on 8 July. The agreement has a competition chapter that will include provisions covering antitrust, mergers, State-owned enterprises, and subsidies. The high-level bilateral policy dialogue in the framework of the cooperation agreement[69] continued in 2013. Discussions with the US federal competition authorities aim, among other things, to improve cooperation in the area of unilateral conduct, mergers and airline alliances.

Negotiations on a Free Trade Agreement were also started with Japan on 25 March. The proposed agreement includes competition provisions which DG Competition is following closely. DG Competition also met representatives of the Japanese competition agency in accordance with the existing cooperation agreement[70].

On 17 May, the EU signed a second generation Cooperation Agreement with Switzerland[71]. It includes an innovative feature that will enable the competition agencies to exchange information they have obtained in their investigations. Negotiations on a similar agreement between the EU and Canada have been progressing well.

A new Memorandum of Understanding for Cooperation in the area of competition law (MoU) was signed on 22 November with the Competition Commission of India.[72] The MoU sends a positive signal for intensified cooperation on competition matters between the EU and India.

The European Commission continued negotiating Free Trade Agreements with a large number of third countries, all of which include a chapter on competition. In addition, the Commission continued to engage in technical cooperation activities with other non-EU competition authorities, in particular with the Chinese and Indian competition authorities.

In the framework of the accession negotiations, significant progress was made in 2013 with the screening of Montenegrin legislation and the identification of opening benchmarks for negotiations of the competition chapter. The Commission continued to closely monitor the implementation of the steel and shipbuilding protocol included in the Accession Treaty for Croatia.

2. Multilateral cooperation

The Commission also continued its active engagement in competition related international fora such as the Competition Committee of the OECD, the International Competition Network (ICN) and Unctad. In 2013, it continued co-chairing the Mergers Working Group of ICN and one of the Sub-Groups of the Cartel Working Group. In 2013, the Commission was the project leader (together with US FTC) for the Steering Group projects on investigative processes in competition enforcement activities

II. SECTORAL OVERVIEW

This section provides an overview of policy developments and enforcement activities in a number of selected sectors, which the Commission particularly focused on in 2013: energy and environment, ICT and media, financial services, manufacturing, the agri-food industry, pharmaceutical and health services and transport.

1. Energy & Environment

Overview of key challenges in the sector

The energy sector is of significant importance to the EU, as energy is a key input across all economic sectors. Affordable energy prices and security of supply are vital for a competitive European industry. While some progress has been made towards the three central goals of the European energy policy, that is competitiveness, sustainability and security of supply, several challenges remain.

Challenges facing European competitiveness, sustainability and security of supply

The Commission's communication "A policy framework for climate and energy in the period from 2020 to 2030"[73] is a comprehensive framework aiming to make the Euroepan Union's economy and energy system more competitive, secure and sustainable. The most important challenges include the reduction of greenhouse gas emissions, the combat against climate change, maintaining secure and reliable provision of energy at competitive prices, reducing our dependence on energy imports and improving interconnection between European gas and electricity grids. The Commission's Communication "Energy 2020 – A strategy for competitive, sustainable and secure energy"[74] calls for action in several areas, such as energy efficiency, infrastructure, choice and security for consumers, energy technology and the external dimension of the internal energy market. The Commission's Communication "Energy Technologies and Innovation"[75] calls for particular actions to bring new, high performance low-cost, low-carbon sustainable energy technologies to the sector. Competition enforcement and advocacy, along with sector-specific legislative proposals, constitute the main tools the Commission has at its disposal to achieve these goals and create a single European energy market by the 2020 target date. Given the strategic importance of the energy sector, the European Parliament, in its Resolution on the 2012 report on competition policy (the Tremosa i Balcells report) continued to request that the Commission actively monitors the degree of competition on the market.

The three key challenges identified in 2013 are the EU's increasing dependence on imported energy, increasing energy prices and lack of investment.[76] EU energy markets still do not function efficiently, as markets remain segmented along national borders, investments in infrastructure is lacking and access to networks remains difficult for new entrants. In 2013, EU competition policy contributed to tackling those challenges in several ways.

Contribution of EU competition policy to tackling the challenges

Enhancing competitiveness across the energy sector

Competition enforcement and advocacy in the energy sector contribute to competitiveness of EU industry in general and the completion of the Single Market. It does so in particular by opening energy markets, creating a level playing field between competitors, preventing incumbents from reinforcing their dominant positions and creating a framework for investment that avoids distortions and ensures the efficient allocation of public resources.

The competitiveness of European industry is affected by energy prices that are higher in the EU than in other major trading partners. Antitrust enforcement actions have contributed to curbing energy prices by combatting the segmentation of markets, inefficient allocation of energy and abusive or collusive behaviour. Cases investigated in 2013 include an examination of the behaviour of companies active in the crude oil, refined oil products and biofuel sectors;[77] Gazprom, in relation to the supply of gas to Central and Eastern Europe[78]; BEH, in relation to the supply of electricity in Bulgaria[79]; and power exchanges[80].

Industrial competitiveness is also addressed by the State aid Guidelines on the Emissions Trading Scheme (ETS) which entered into force on 1 January 2013. Member States can relieve energy-intensive industries from indirect costs of CO2 in their electricity price. Such measures address the risk of relocation of energy-intensive industries to countries outside the EU where environmental regulation is less strict.[81] During 2013, the Commission approved such schemes in five Member States.[82] On the other hand, plans of the German authorities to grant such support to certain non-ferrous metals producers have been declared incompatible, as it would have entailed serious distortions of competition to the detriment of producers in other Member States.[83]

Furthermore, to enhance competition and ensure a level playing field in the energy sector, the Commission has initiated several in-depth investigations in State aid. The cases concern either electricity generators or selective and potentially distortive advantages to electricity consumers. In particular, the Commission has launched an investigation to examine the role of aid in preventing market opening in the Portuguese electricity generation market[84] and it re-opened an inquiry into certain tax measures granted by the French State to Electricité de France (EDF)[85]. In-depth probes were also launched in Germany[86], Denmark[87] and the UK[88].

Contributing to sustainability

Sustainable development is the long-term use of resources to meet human needs, while preserving the environment. Sustainability was at the heart of the measures reviewed under the State aid rules, under which the Commission authorised aid that supports renewable energy sources and environmentally friendly businesses.

During 2013, based on the provisions of the Environmental Aid Guidelines[89], the Commission issued a great number of approval decisions for the promotion of renewable energy.[90] The Commission is currently revising those Guidelines, with a view of adopting modernised rules in 2014. The revision will adapt the rules in light of their application and market developments. It will allow Member States to design support schemes to reach the EU objectives and help companies to better bear the costs relating to the support of electricity from renewable energy sources and contribute to increased environmental protection and growth. The revised guidelines will therefore also consider negative impacts of environmentally harmful subsidies, while taking into account the need to address trade-offs between different areas and policies as recognised by the flagship initiative for "Resource-efficient Europe".

The Czech Republic notified five individual aid measures in the steel sector within an overall aid scheme for improving air quality in the Moravia-Silesia Region. The Commission came to the conclusion that the measures proposed would increase the level of environmental protection by going beyond the mandatory obligation that can be imposed on the beneficiary based on applicable Community standards under Directive 2010/75/EU on industrial emissions and they were approved on this basis.[91]

Enforcement actions supporting sustainability include the on-going anti-trust investigation in relation to the Austrian waste management markets[92]. The Commission’s intervention will contribute to achieving more efficient ways of collecting and recovering packaging waste and help achieving environmental targets.

Contributing to security of supply

The EU energy sector is increasingly dependent on imports and dependency is expected to grow to more than 80% in the case of oil and gas by 2035. However, energy dependency differs greatly among Member States. Some Member States rely on one single supplier and often on one single supply route for 80%-100% of their gas consumption,[93] whereas Member States with a diverse portfolio of gas suppliers and supply routes and with well-developed gas markets reap the benefit by paying less for imports. The EU energy sector is also characterized by a significant need for investments, e.g. in electricity generation infrastructure, given the trend for gas and renewables to contribute more to electricity generation in the EU.

With the aim of encouraging investment, the Commission authorised in 2013 State aid for a number of gas infrastructure projects (in Greece[94] and Poland[95]) as well as investments into Liquefied Natural Gas (LNG) infrastructure (in Greece and Lithuania[96]). At the same time, in the field of merger control, the Commission cleared a number of transactions involving investments into European energy infrastructure by companies which are new to this market (e.g. investment funds, trading companies and industry conglomerates). Many of these investments focussed on the production of electricity from renewable energy sources (e.g. wind parks[97], solar parks[98], waste-to-energy[99] or biodiesel[100]) as well as on investments into transmission systems (e.g. off-shore electricity transmission,[101] off-shore gas transmission[102] and on-shore gas-transmission[103]).

Similarly, the Commission's anti-trust enforcement aims at resolving security of supply issues by facilitating access to the market and encouraging investment. That is illustrated by the decision regarding CEZ electricity[104], the investigations into BEH in relation to Bulgarian gas market[105], into the Romanian power exchange[106] and into Gazprom[107] in relation to the partitioning of markets and the prevention of diversification of the supply of gas.

The Commission has also remained vigilant to maintain competitive market structures when it assessed proposed merger transactions. In that spirit the Commission cleared the acquisition of joint control over WINZ and Wintershall Services of the Netherlands and sole control over Wingas and WIEH of Germany by the Russian energy company Gazprom[108]. The Commission assessed the potential impact of the transaction on competition in the markets for the sale of gas in Germany, Austria and the Czech Republic, where Gazprom sells gas to downstream wholesalers and retailers, including Wingas which is both wholesaler and retailer. The Commission also assessed the potential effects of the acquisition on competition in the markets for the storage of gas in Germany and Austria. The Commission concluded that the transaction would not raise competition concerns as it would not allow Gazprom to restrict customers' access to gas supplies.

2. Information and Communication Technologies (ICT) and Media

Overview of key challenges in the sector

Information and Communication Technologies (“ICT”) play a key enabling role for Europe to achieve its strategic objectives under the Europe 2020 Strategy, in particular, as regards the objectives under the Digital Agenda flagship initiative[109] and the revised priorities adopted in December 2012[110]. That role is also recognised in the Communication on e-commerce and other online services.[111] Creative content is an essential input into the digital economy and a key driver of consumer demand for digital services. Europe’s sustainable competitiveness largely depends on its ability to absorb the potential benefits of the rapid progress in ICT.

ICT increasingly affects all segments of society and the economy. It is estimated that half of all productivity growth derives from investment in ICT[112]. There is a very considerable growth potential in those sectors. In mature economies, internet-related expenditure and consumption accounted for 21% of GDP growth during the past five years.[113] There are more than 4 million ICT workers across many sectors in Europe and their number is growing by 3% annually despite the crisis. The internet is empowering people to create and share their ideas, giving rise to new content, entrepreneurs and markets. ICT is the essential transformative technology that supports structural change in sectors like health care, energy, public services, and education.

In light of the rapid technological developments which characterise those sectors, effective competition policy and enforcement are essential to address potential malfunctioning in the ICT and media sectors.

Contribution of EU competition policy to tackling the challenges

Competition policy contributed to key initiatives to boost a European single market for electronic communication and proposals in the media sector

Competition policy played an important role in shaping the Commission’s legislative proposals in the telecom and media sectors in the course of 2013.

On 11 September, the Commission adopted a legislative package for a "Connected Continent: Building a Telecoms Single Market". This package comprises a proposal for a Regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent and a Commission Recommendation on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment, as well as a Communication on the Telecoms Single Market. The package contains a number of safeguards aimed at ensuring compliance with EU competition law.

On 5 November, the European Parliament and the Council agreed in principle on the Commission’s proposal for a Directive on collective rights management. The proposed measures aim to modernise collecting societies that are responsible for the licensing of copyright-protected music for online use on behalf of the authors. The proposal also contains a number of important competition law safeguards, built on the Commission's enforcement experience, including the CISAC decision, which was largely upheld by the General Court in in April.[114] The safeguards aim at ensuring compliance with EU competition law in the collective management of copyright.

Moreover, on 13 November, the Commission adopted a new Communication on State aid for films and other audio-visual works.[115] This new Communication extends the scope of the preceding Cinema Communication. In particular, it allows aid for a wider scope of activities, reinforces Member States' discretion in defining cultural activities worthy of support, introduces a higher aid intensity level for cross-border productions and promotes film heritage. The new Communication also ensures that territorial obligations imposed on film producers, which are in potential conflict with internal market principles, are more proportional to the aid granted.

Enforcement action in the telecoms sector

The Commission continued to pursue enforcement actions against telecommunication operators suspected of engaging in anti-competitive conduct.

On 23 January, the Commission imposed fines of EUR 66 894 000 on Telefónica and EUR 12 290 000 on Portugal Telecom[116], as it concluded that their agreement not to compete in the Iberian telecommunications markets was in breach of Article 101 TFEU. This case is a good example of the Commission's tough stance against anti-competitive agreements having as their object or effect the compartmentalisation of the internal market along national borders.

The Commission continued to advance its case against Slovak Telekom and its parent company, Deutsche Telekom[117], following the Statement of Objections (SO) issued in May 2012. In the SO, the Commission took the preliminary view that Slovak Telekom may have abused its dominant position in certain wholesale broadband markets in Slovakia. In particular, Slovak Telekom may have refused to supply unbundled access to its local loops and wholesale services to competitors, and may have imposed a margin squeeze on alternative operators. Broadband access plays a key role in the competitiveness of the European digital economy.

Enforcement linked to digitisation

The Commission continued in 2013 to pursue enforcement actions related to the impact of the transition to digital networks.

The transition from analogue to digital terrestrial broadcasting has a positive digital dividend. To ensure that this dividend leads to new entry and broader viewer choice it has to be allocated subject to specific conditions (e.g. open, transparent and non-discriminatory procedures), required by EU law[118]. In 2013, following interventions by the Commission, France amended its broadcasting regulations. By contrast, the Commission considered measures proposed by Bulgaria to address the distortions as insufficient and on 24 January decided to refer Bulgaria to the Court.[119] The Commission is also closely monitoring steps taken by Italy to assign new digital frequencies (multiplexes) to new entrants or smaller TV operators.

In June, the Commission concluded its investigation in relation to the public financing of the digital terrestrial infrastructure in Spain. The measures at stake included granting State aid for the transition to digital terrestrial television in remote areas. The public financing also encompassed aid for the operation and maintenance of the digital terrestrial infrastructure. However, those subsidies worth EUR 260 million went exclusively to terrestrial operators and alternative digital transmission platforms, such as satellite, cable or the Internet, could not effectively benefit from the subsidies. Therefore, the Spanish measure unduly distorts competition between DTT players and operators using other technologies. As a result, the Commission concluded that aid was incompatible with EU State aid rules and adopted a final negative decision[120] with recovery obligation.

The Commission also completed its antitrust proceedings into alleged anti-competitive practices by five international publishers and Apple affecting the sale of e-books in the EEA, by adopting a second[121] Article 9 commitment decision addressed to Penguin Random House. The Commission suspected that, by jointly switching the sale of e-books from a wholesale model to an agency model with the same key terms on a global basis (first in the US and then in the EEA), the publishers, together with Apple, may have engaged in a concerted practice with the object of raising retail prices of e-books in the EEA or preventing the emergence of lower prices in the EEA for e-books. The Commission closed its proceedings against Penguin after the latter proposed essentially the same commitments as the other four publishers, i.e. (a) the termination of agency agreements, (b) a 5 year ban on price MFN (most-favoured-customer) clauses, and (c) a 2 year "cooling-off" period during which retailers will have the right to discount e-books even if under an agency arrangement. With the commitments the potential infringement ended and conditions were created to allow for a competitive reset as quickly as possible in that nascent and fast-moving market.

Finally, the Commission continued to advance its 2012 fact-finding investigation to examine whether licensing agreements for pay-TV content contain absolute territorial protection clauses. Such clauses may breach Article 101 TFEU by preventing consumers from accessing content across borders. [122]

Enforcement in technology markets

The Commission's enforcement action in technology markets is mainly focused on unilateral conduct, potentially in breach of Article 102 TFEU.

Protecting consumer's interest on the Internet

One of the key Commission enforcement actions in the ICT sector is the on-going investigation concerning Google's business practices in the markets for online search, online search advertising (Google's relationship with advertisers) and online search advertising intermediation (Google's relationship with website owners, known as "publishers"). The Commission has identified four business practices by Google that may constitute an abuse of a dominant position: (i) the preferential treatment of Google's own vertical search services to the detriment of competing vertical search services (including on mobile devices); (ii) the copying of third party content for use in Google's own vertical search services; (iii) exclusivity agreements with publishers for search advertising; and (iv) restrictions on the portability and management of search advertising campaigns across search advertising platforms. Google submitted a first set of commitments in April and a revised set of commitments in October. The Commission sought feedback on Google's revised commitments through formal requests for information. In light of the feedback it has received, the Commission has come to the conclusion that the revised commitments still fall short of adequately addressing the competition concerns the Commission expressed in its Preliminary Assessment and has informed Google of this conclusion. The Commission has also informed Google that if it wishes to submit a further revised set of commitments that adequately addresses the Commission's concerns, it has only a very limited amount of time to do so, failing which the Commission will revert to the procedure under Article 7 of Regulation 1/2003.

The Commission continued in 2013 its investigations in relation to the enforcement of standard essential patents ("SEPs") in the Samsung and Apple/Motorola cases. SEPs are patents essential for the implementation of an industry standard and for which companies committed to license the patents on fair, reasonable and non-discriminatory ("FRAND") terms.

The Samsung case concerns the compatibility with Article 102 TFEU of Samsung's enforcement of its mobile communications SEPs by means of injunctions against Apple before various national courts in the EEA. Following the issuance of a Statement of Objections in December 2012, in September 2013 Samsung offered commitments to address the competition concerns identified by the Commission. Under the proposed commitments, Samsung essentially commits not to seek injunctions in the EEA on the basis of its smartphone and tablet SEPs for a period of five years if potential licensees agree to comply with a specified process for determining appropriate FRAND royalty rates. The Commission has market-tested these commitments and is taking account of the feedback it has received in discussing with Samsung possible improvements to the commitments. If at the end of these discussions, the Commission reaches the conclusion that Samsung’s commitments adequately address the Commission’s competition concerns, the Commission may make the commitments binding on Samsung by the adoption of a decision under Article 9 of Regulation 1/2003.

The Motorola case concerns the compatibility with Article 102 TFEU of Motorola Mobility's seeking an enforcement of an injunction in Germany against Apple on the basis of one of Motorola's mobile communications SEPs. The Commission issued a Statement of Objections in May and is currently examining the observations received on the Statement of Objections.

The Commission continues to be vigilant in other areas of the IT and internet sector as well. On 6 March, the Commission adopted a decision imposing a EUR561 million fine on Microsoft for failing to comply with its commitment to offer users a browser choice screen enabling them to easily choose their preferred web browser. That commitment had been made legally binding on Microsoft in December 2009 to address competition concerns related to the tying of Microsoft's web browser, Internet Explorer, to its dominant client PC operating system, Windows. Microsoft committed to make available for five years (i.e. until 2014) in the European Economic Area a "choice screen". This screen would allow users of Windows to choose in an informed and unbiased manner which web browser(s) they wanted to install in addition to, or instead of, Microsoft's web browser. The Commission found that Microsoft failed to roll out the browser choice screen with its Windows 7 Service Pack 1 from May 2011 until July 2012. As a consequence, at least 15 million Windows users in the EU did not see the choice screen during this period. Microsoft has acknowledged that the choice screen was not displayed during that time and has not appealed the decision.

The Commission also sent a Statement of Objections regarding an alleged cartel in smart card chips. The Commission initially explored the possibility of a settlement with certain companies allegedly involved in the cartel but discontinued the talks due to lack of progress. Therefore, the normal antitrust procedure will now run its course. Almost everybody uses smart card chips, be it in mobile phone SIM cards, bank cards, passports, identity cards, Pay TVs or in numerous other applications. The Commission has concerns that certain chips suppliers may have agreed or coordinated their behaviour in the European Economic Area (EEA) in order to keep prices up.

ICT in the context of merger control

Finally, through the Merger Regulation, the Commission ensures that the ICT and media sectors remain competitive and open for new entrants, and that access to key elements (whether content, technology or interconnection) is not denied. The Commission also aims at ensuring that consumers do not suffer from higher prices, less choice, poorer quality and limited innovation as a result of mergers in that sector.

Significant merger activity in the telecommunication sector continued in 2013. The Commission reviewed a number of high profile transactions in this sector, including Liberty Global's USD 23.3 billion acquisition of Virgin Media[123], the largest cable operator in the United Kingdom and Vodafone's EUR 8 billion acquisition of Kabel Deutschland[124], the largest cable operator in Germany. Both these transactions were ultimately cleared unconditionally by the Commission in phase I. The Liberty/ Virgin case is a cross-border expansion by one telecom operator in another Member State (indeed, Liberty Global was essentially not present at the retail level in the United Kingdom prior to the Virgin Media acquisition). The Vodafone/ Kabel Deutschland case is an expansion by one operator into one or more sectors in which its activities were previously limited within the same Member State (indeed, prior to the Kabel Deutschland acquisition, Vodafone's activities in Germany were mainly focused on mobile communications).

Another significant transaction in the telecoms industry was the acquisition of most of Nokia's devices & services business (D&S) by Microsoft. The D&S business mainly produces and sells smartphones and feature phones. The Commission concluded that the transaction would not raise any competition concerns, in particular because there are only modest overlaps between the parties' activities and the links between Microsoft's mobile operating systems, mobile applications and enterprise mail server software with Nokia's smart mobile devices are unlikely to lead to competitors being shut out from the market.

The Commission, however, is in the process of reviewing two transactions entailing a four-to-three consolidation between Mobile Network Operators ("MNOs"). They are active within the same Member States, namely Ireland and Germany. In the first case, on 1 October, Hutchison 3G UK notified to the Commission its intention to acquire sole control over Telefónica Ireland[125] and on 6 November, the Commission opened an in-depth investigation into that transaction. In the second case, on 31 October, Telefónica Deutschland notified to the Commission its intention to acquire sole control over KPN's mobile operations in Germany (trading as E-Plus) [126] and on 20 December, the Commission opened an in-depth investigation of the transaction. As those cases would result in the reduction in the number of players in markets (both the wholesale access market and the retail market) that are already very concentrated, the Commission will carry out in-depth investigations in the course of 2014.

3. Financial Services

Overview of key challenges in the sector

Financial services represent about 5% of the EU’s GDP but, more importantly, they play an essential role in the economy in transforming short-term savings into long-term lending and directing capital where it is most needed. In 2013, for the first time since the outset of the financial and economic crisis, the instability surrounding the financial sector showed signs of improvement across the EU. The Commission has continued to apply its State aid regime for the financial sector with the aim to ensure that aided financial institutions restructure adequately to become viable again, to deal with the distortions of competition created by the aid received while at the same time maintaining financial stability, safeguarding the internal market and protecting the interests of taxpayers. At the same time, the Commission continued its antitrust enforcement action, with the aim of making the financial services markets function better.

Furthermore, since its launch in June last year, the project to achieve a "Banking Union" is right on top of Europe’s agenda[127]. While it is still incomplete to date, progress is moving fast on different fronts:

As from January 2014, European banks will apply the new rules set out in the so-called CRD (Capital requirements Directive) IV package, which implements Basel III. Insufficient level of capital – both in quantity and in quality – was one of the vulnerabilities shown by banking institutions during the crisis; the new capital adequacy rules of the CRD IV will address that shortcoming. In December 2013, the EU co-legislators reached a political agreement to revise the EU directive on Deposit Guarantee Schemes ("DGS") with the aim to harmonise the set-up and functioning of the Member States' national deposit guarantee schemes and to ensure they are provided with adequate funds. As of November 2014, a Single Supervisory Mechanism (“SSM”) for euro-area banks will be fully operational. The European Central Bank will become the single banking supervisor for the euro area countries and for all those that decide to join the Banking Union. In December 2013, co-legislators also agreed on a text of a new European directive on Banking Recovery and Resolution which will provide a common tool-box for resolving banks in difficulties. This legislation aims