REPORT FROM THE COMMISSION - Part One - XXXIInd Report on Competition Policy 2002

CONTENTS

Introduction

Box 1: A more meaningful role for consumers

I - Antitrust - Articles 81 and 82; state monopolies and monopoly rights - Articles 31 and 86

A - Modernisation of the legislative and interpretative rules

1. Expiry of the ECSC Treaty

2. Modernisation of the rules implementing Articles 81 and 82 of the EC Treaty

3. Review of the Commission's leniency policy

4. Review of the car block exemption regulation

B - Application of Articles 81, 82 and 86

1. Article 81

1.1. Cartels

1.1.1. Overview of developments in anti-cartel enforcement activity and application of the 2002 Leniency Notice

1.1.2. Individual cases in 2002

1.2. Vertical agreements

2. Articles 82 and 86

2.1. Article 82

2.2. Article 86

C - Sector-based competition developments

1. Energy: liberalisation in the electricity and gas sectors

2. Postal services

2.1. New Postal Directive

3. Telecommunications

3.1. New regulatory framework for electronic communications networks and services

3.2. Closure of sector inquiry into leased lines

4. Transport

4.1. Air transport

4.1.1. Renewal of block exemption Regulation 1617/93

4.1.2. Competition policy in international aviation

4.1.3. Transatlantic alliances

4.1.4. Intra-European alliances and mergers

4.2. Maritime transport

4.2.1. Case-law developments

4.2.2. Review of Regulation 4056/86

4.2.3. Individual cases

4.3. Rail transport

5. Media

5.1. Access to premium content

5.2. Access to new media rights

5.3. Collective copyright management and licensing agreements

5.4. Print media

6. Motor vehicle distribution

6.1. Adoption of the new exemption regulation for the motor vehicle sector

6.1.1. Context

6.1.2. Significant stages in the adoption of the regulation

6.1.3. Salient features of Regulation (EC) No 1400/2002

6.1.3.1. General remarks

6.1.3.2. Sale of new vehicles

6.1.3.3. After-sales servicing and the sale of spare parts

6.1.3.4. Conclusion

6.1.4. Explanatory brochure

6.2. General assessment of the application of exemption Regulation (EC) No 1475/95 in respect of new car prices

7. Financial services

8. Information society

9. Liberal professions

9.1. The application of EU competition law to the liberal professions

9.1.1. Consequences of ECJ judgments

9.1.2. Study on the economic impact of regulation

9.1.3. Coordinated actions with national competition authorities

D - Statistics

II - Merger control

A - General policy and new developments

1. Introduction

2. Judicial review of merger decisions in 2002

2.1. Airtours v Commission

2.2. Schneider v Commission

2.3. Tetra Laval v Commission

3. Remedies

4. Article 9 and Article 22 referral cases - new developments

4.1. Introduction

4.2 Referral cases under Article 9 ECMR

5. Reform of merger control

5.1. Objectives of the reform

5.2. The proposed reform

5.2.1. Substantive issues

5.3. Reform of the merger control process

5.3.1. Legislative measures

5.3.2. Non-legislative measures

6. International cooperation

6.1. International Competition Network (ICN)

6.2. EU/US Mergers Working Group

B - Statistics

III - State aid

A - General policy

1. Modernising state aid control

1.1. General approach

1.2. Transparency

1.3. Development of statistical tools

1.4. State aid scoreboard

1.5. Revision of existing frameworks and guidelines

1.5.1. Multisectoral framework

1.5.2. R&D

1.5.3. Employment aid

1.5.4. Coal and steel (ECSC Treaty)

1.5.5. SMEs

1.5.6. State aid and tax policy

1.5.7. Deprived urban areas

2. Enlargement

B - Concept of aid

1. Origin of resources

2. Advantage to a firm or firms

2.1. Stranded costs

3. Selectivity

4. Distortion of competition

5. Effect on trade between Member States

C - Assessing the compatibility of aid with the common market

1. Horizontal aid

1.1. Rescue aid

1.2. Restructuring aid

1.3. Environmental aid

1.4. R&D aid

2. Regional aid

2.1. Multisectoral cases

Box 2: New multisectoral framework for regional investment aid, including new rules on automobile and synthetic fibres sectors

2.2. Aid for developing businesses' international activities

2.3. Social aid

2.4. Sectoral aid

2.4.1. Cableways

2.4.2. Shipbuilding

2.4.3. Motor vehicles

2.4.4. Coal

2.4.5. Steel

3. Transport

3.1. Rail

3.2. Combined transport

3.3 Road transport

Box 3: Road transport undertakings

3.4. Passenger transport

3.5. Waterways

3.5.1. Inland waterway transport

3.5.2. Maritime transport

3.6. Air transport

4. Agriculture

4.1. Policy developments and legislative initiatives in 2002

4.1.1. New guidelines for state aid concerning TSE tests, fallen stock and slaughterhouse waste

4.2 Overview of cases

4.2.1. Natural disasters

4.2.2. Promotion and advertising

4.2.3. Increase in the cost of fuel

4.2.4. Opening of formal investigations

5. Fisheries

D - Procedures

1. Existing aid

2. Exempted aid

3. Recovery of aid

4. Non-execution of decisions

5. Court judgments

E - Statistics

IV - Services of general interest

1. General principles

2. Recent developments

2.1. Draft Green Paper concerning a framework directive on SGIs

2.2. State aid cases dealt with by the Commission

Box 4 Deutsche Post

3. Antitrust (including liberalisation)

4. Liberalisation through legislative measures

V - International activities

A - Enlargement

1. Accession preparation and negotiations

2. Progress in alignment of competition rules

3. Instruments under the Association Agreements

4. Technical assistance to the candidate countries

B. - Bilateral cooperation

1. United States

2. Canada

3. Japan

4. Other OECD countries

C. - Multilateral cooperation

1. International Competition Network (ICN)

2. WTO Working Group on Trade and Competition (WGTCP)

3. OECD Competition Committee (CC)

4. UNCTAD Intergovernmental Group of Experts (IGE)

VI - Outlook for 2003

1. Antitrust and liberalisation

2. Mergers

3. State aid

4. International field

Annex - Cases discussed in the Report

Introduction

1. The virtues of effective competition on the market in delivering efficient allocation of resources and fostering innovation and technical development are widely recognised throughout the world. However, ensuring or creating the conditions which allow markets to function competitively constitutes an ongoing challenge both as regards the behaviour of actors on these markets and in view of obstacles created by state measures. Competition policy then serves a twofold aim: addressing market failures resulting from anticompetitive behaviour by market participants and from certain market structures, on the one hand, and contributing to an overall economic policy framework across economic sectors that is conducive to effective competition, on the other. In a world of continuing globalisation, competition advocacy within an integrated economic area, such as the European Union, necessarily needs to find also its external expression in order to provide for a level playing field in the international arena.

2. EU competition policy rests on three closely related pillars, all of which serve to bring the benefits of effective competition to the consumer and at the same time to enhance the competitiveness of European industry. First, vigorous enforcement of the antitrust rules which prohibit undertakings from engaging in unjustified restrictive agreements or practices and from abusing dominant positions they hold on the market. This activity focuses increasingly on preventing the most serious forms of anticompetitive behaviour by market players, such as price-fixing or market-haring cartels, from disrupting effective competition. At the same time, the control of concentrations is necessary to avoid a situation in which dominant positions on a market are created or reinforced through mergers and acquisitions. Secondly, the opening-up of economic sectors in which effective competition is not yet firmly rooted is pursued through a gradual liberalisation policy which accompanies legislative measures to further integrate the single market. Thirdly, EU competition policy covers the control of state aid on a supranational level to ensure that state intervention does not distort the competitive situation on the market through subsidies and tax exemptions.

3. The main challenges which EU competition policy has been facing over the past few years and which have shaped the legislative and enforcement priorities of the Commission are well known: imminent enlargement of the European Union to 25 members implies a substantial effort both within the Union and by the 10 candidate countries in order to prepare the ground for the Treaty competition rules to be applied effectively upon accession of the new Members States. Globalisation of markets requires increased cooperation between competition policy makers around the world. Finally, changes in the economic environment, such as the reduced prospects of economic growth or the difficulties facing certain sectors which we have seen in 2002, cannot be ignored, although they are no reason to compromise the fundamental logic of an effective competition policy.

4. Apart from its continuing fight against hardcore horizontal cartels, one of the most serious infringements of competition law, the Commission has proceeded successfully with a number of reform projects in all fields of competition policy to address these challenges. Most prominently in 2002, an ambitious and fundamental overhaul of the antitrust rules implementing Articles 81 and 82 of the Treaty has led to the adoption of a new basic regulation by the Council. It will usher in a new era of antitrust enforcement in the European Union, involving national competition authorities and national courts more directly in the application of the Treaty competition rules within the framework of a European network of competition authorities. The new block exemption regulation applying to the motor vehicle industry represents a major overhaul of competition rules in that sector. The review of the Merger Regulation has likewise advanced with the adoption by the Commission of a proposal for a new regulation based on an extensive consultation of stakeholders and drawing on the experience gathered in applying the first merger regulation. Last but not least, the recognised importance of a smoothly running state aid control has filtered into a number of important reform projects to simplify state aid procedures with a view to further enhancing the crucial role of this instrument within the EU competition policy framework.

5. In 2002, the total number of new cases was 1019, comprising 321 antitrust cases (under Articles 81, 82 and 86 of the EC Treaty), 277 merger cases and 421 state aid cases. Comparable figures for 2001 were a total of 1 036 new cases, comprising 284 antitrust cases, 335 merger cases and 417 state aid cases (excluding complaints). The overall development in new cases therefore shows no uniform tendency across the pillars of competition policy. While a significant increase can be reported in the field of antitrust, the number of merger cases clearly went down and new state aid cases remained stable.

6. In antitrust, the number of new notifications remained at a relatively low level, whereas significantly more new own-initiative cases were opened in 2002 (91) than in 2001 (74). This tendency prepares the ground for the phasing-out of the notification system which modernisation of the antitrust rules will bring about. The number of complaints continued to grow this year (129 in 2002, after 116 in 2001 and 112 in 2000).

7. The total number of cases closed in 2002 was 1 283, comprising 363 antitrust cases, 268 merger cases, and 652 state aid cases (excluding complaints). Comparable figures for 2001 were 1 204 cases closed, comprising 378 antitrust cases, 346 merger cases and 480 state aid cases. While the decrease in closed antitrust cases can be attributed to the continuing priority given to resource-intensive cartel cases, the backlog of pending cases was further reduced, with the number of closed cases exceeding the number of new cases.

8. In 2002, the Commission's input-driven activity of scrutinising mergers and alliances further slowed down significantly after an initial stagnation of the growth trend in 2001, but nevertheless remained at a high level (277 new cases). In terms of output, 275 formal decisions were taken during the year (against 340 in 2001). The number of cases requiring in-depth investigation decreased considerably and was back to the level seen in the mid-1990s (7 initiations of phase II proceedings in 2002 compared with around 20 per year in 1999-2001). However, additional resources had to be devoted to the follow-up of previous decisions in court proceedings.

9. In the field of state aid, the number of notifications and new cases of non-notified aid increased compared with 2001, while requests for the review of aid schemes were back to the level of previous years after a surge in 2001. The number of proceedings initiated remained stable (62 in 2002 against 66 in 2001), whereas negative final decisions showed a slight upward trend (37 in 2002 against 31 in 2001). Overall, the number of cases pending in the field of state aid showed a clear reduction in the backlog (from 621 in 2001 to 582 in 2002, of which 255 were complaints).

Box 1: A more meaningful role for consumers

One of the main purposes of European competition policy is to promote the interests of consumers, that is, to ensure that consumers benefit from the wealth generated by the European economy. This objective, which Commissioner Monti has emphasised on various occasions and continues to consider one of his top priorities, is horizontal in nature: the Commission thus takes the interest of consumers into account in all aspects of its competition policy, namely in countering anticompetitive agreements, in particular hardcore cartels, and abuses of dominant positions, but also in the control of concentrations and state aid granted by Member States.

The Commission is well aware that it is usually difficult for individual consumers to appreciate the impact which competition policy has on their daily lives. This is because of the complexity of many individual competition cases and the fact that the Commission's action in this field often impacts indirectly on their interests. While, for example, termination of a cartel relating to consumer goods or the prohibition of excessive prices charged by a dominant telecommunications operator may directly result in a drop in prices which is felt in the budget of every household, an efficient merger control system may not necessarily be perceived as beneficial by the consumers who profit from it. This is indeed because merger control in the EU serves to pre-empt negative effects of concentrations on consumer welfare which may otherwise occur.

The positive results of merger control are therefore often only apparent in the longer term. State aid control also plays a part in efficient resource allocation within the European economy, thus contributing to a sound economic environment for companies and consumers alike. In its state aid decisions, the Commission takes into account aspects related to the proper functioning of services of general interest [1].

[1] See Chapter IV.

In order to receive essential input from, and raise awareness among, consumers about its work in the competition field, the Commission pursues a number of avenues. Twice a year a "European Competition Day" is held in the country holding the EU Presidency [2], with the active participation of the Commission and the European Parliament. These events serve to make competition matters more accessible to consumers and their representatives. The Commission also cooperates intensively with consumer organisations, notably BEUC [3], the Europe-wide consumer association, and encourages national consumer organisations to become more actively involved in pointing out areas of particular concern to consumers. This Report is another channel of communication with consumers.

[2] European Competition Days in 2002: 26.2.2002 (Madrid) and 17.9.2002 (Copenhagen).

[3] Press release IP/02/415, 14.3.2002.

The reform currently being undertaken in the antitrust field and in relation to the control of concentrations will help to bring the decision-making process closer to consumers. Specifically, the decentralised application of antitrust rules will allow consumers to address their grievances to national competition authorities which will be fully involved in the implementation of European antitrust rules. These rules are directly applicable in all Member States and the reform also strengthens the role of national courts in punishing infringements [4]. In the context of the proposed reform of the Merger Regulation, there are plans to create a consumer liaison function within the Commission [5] to enhance the possibility for consumers and their representatives to make their views on specific concentrations known in good time.

[4] See Chapter I.A.2., in particular point 17.

[5] See points 312-313.

Last but not least, this year's revision of the block exemption for the motor vehicle industry will change both the way cars are sold and the after-sale services provided in Europe [6]. As the purchase of a (new) car is one of the major investment decisions of most consumers, the fundamental changes to the system of car distribution and after-sale services is clearly of great importance to consumers, even if it is, as yet, too early to assess the effects of the reform on car prices in the EU and the quality and availability of after-sales service.

[6] See Chapter I.C.6.

As regards casework in 2002, consumers should refer in particular to the anti-cartel decision in the Plasterboard case [7], which covered a product familiar to anyone who has ever built or refurbished his home. The Nintendo case [8], in which anticompetitive agreements between Nintendo and its distributors concerning console game cartridges were brought to an end, is equally deserving of particular mention in this respect.

[7] See points 50 et seq.

[8] See points 61 et seq.

In conclusion, the attention of consumers is drawn to Part C of this Report, "Sector-based developments". Here they will find information relating to the energy, telecommunications, postal and transport sectors, which are of crucial importance to consumers. Also of particular consumer interest are details of antitrust cases in the media, financial services, liberal professions and information society sectors.

I - Antitrust - Articles 81 and 82; state monopolies and monopoly rights - Articles 31 and 86

A - Modernisation of the legislative and interpretative rules

1. Expiry of the ECSC Treaty

10. The Treaty establishing the European Coal and Steel Community (ECSC) expired on 23 July. This means that as from 24 July the sectors previously covered by the ECSC Treaty and the procedural rules and other secondary legislation derived from the ECSC Treaty are subject to the rules of the EC Treaty as well as the procedural rules and other secondary legislation derived from the EC Treaty.

11. In order to cover issues related to this transition and specifically arising in the areas of antitrust, mergers and state aid, the competent Commission departments (Competition Directorate-General, Transport and Energy Directorate-General) prepared a Commission communication on certain aspects of the treatment of competition cases resulting from the expiry of the ECSC Treaty [9], which was adopted on 21 June. The communication is meant to give guidance to undertakings which are subject to the antitrust and merger rules, as well as to Member States which are subject to the state aid rules, providing information, reassurance and planning security in the context of the expiry of the ECSC Treaty. Without prejudice to the interpretation of the ECSC and EC rules by the Court of First Instance and the European Court of Justice, the communication summarises the most important changes with regard to the applicable substantive and procedural law and explains how the Commission intends to deal with specific issues raised by the transition.

[9] OJ C 152, 26.6.2002.

12. As a general message, the communication explains that the substantive and procedural changes arising from the expiry of the ECSC Treaty are unlikely to cause major problems thanks to the efforts made for many years now to align practice under the ECSC and EC Treaties.

13. These are the most important differences in substance between the old and the new regimes:

(a) Antitrust

- Under the EC rules, the Commission no longer enjoys exclusive jurisdiction as under the ECSC Treaty.

- An effect on trade between Member States is a prerequisite for applying these rules, contrary to the previous situation under the ECSC Treaty.

(b) Merger control

- The Commission has no exclusive jurisdiction independently of any thresholds, as used to be the case under the ECSC rules.

14. The communication also tackles specific issues raised by the transition, and in particular by cases which from a factual or legal point of view started before, but continue after, the expiry of the ECSC Treaty. The basic principle with regard to procedural law is that the rules applicable are those in force at the time of taking of the procedural step in question.

Antitrust, mergers and state aid:

The Commission will apply EC procedural rules in all pending and new cases as from 24 July. Unless otherwise stated in the communication, procedural steps validly taken under the ECSC rules before expiry of the ECSC Treaty will after the expiry be considered to have fulfilled the requirements of the equivalent procedural step under the EC rules.

Furthermore, the communication addresses a variety of issues in the three areas:

(a) Antitrust

- The exemption provisions of Article 65(2) ECSC and Article 81(3) EC are largely similar and - in view of the forthcoming modernisation of the antitrust enforcement rules - the Commission's action in the antitrust field should concentrate on prohibition procedures. Therefore,

- the Commission informs the undertakings of its intention not to initiate Article 81 EC procedures in respect of the future implementation of agreements formerly exempted under the ECSC regime, subject, however, to any substantial new elements of fact or law which may appear afterwards and which may clearly call the exemptability under Article 81(3) EC into question.

(b) Merger control

- The treatment of joint ventures differs in that more joint ventures would be classed as concentrations under Article 66 ECSC than is the case under the EC Merger Regulation, which covers only full function joint ventures. Where notifications of joint ventures lodged under the ECSC Treaty are pending on the expiry of that Treaty, some might not be notifiable as concentrations under the EC Merger Regulation.

- The communication indicates that such notifications may be converted into notifications of cooperative agreements under Regulation No 17/62 if the requirements of Article 5 of the Implementing Regulation are met, in particular if the notifying parties request such conversion.

(c) State aid

- Where after the expiry of the ECSC Treaty the Commission has to take a decision assessing the compatibility of aid put into effect without prior Commission approval before the expiry, the question of the appropriate criteria to be applied arises.

- The Commission will apply the Commission Notice on the determination of the applicable rules for the assessment of unlawful state aid [10]. According to this notice, the Commission will always assess the compatibility of unlawful state aid on the basis of the substantive criteria set out in any instrument in force at the time the aid was granted.

[10] OJ C 119, 22.5.2002.

2. Modernisation of the rules implementing Articles 81 and 82 of the EC Treaty

15. On 16 December, the Council adopted Regulation 1/2003 [11]. This new regulation, for which the Commission submitted its proposal in September 2000, enshrines the most comprehensive antitrust reform undertaken since 1962. Indeed, Regulation 1/2003 replaces the 40-year-old procedural rules embodied in Regulation 17, which govern how the Treaty provisions on agreements between undertakings which restrict competition (Article 81 EC) or commit abuses of a dominant position (Article 82 EC) are enforced. The new rules will apply from 1 May 2004, the date of the enlargement of the European Union to include 10 new Member States.

[11] Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003).

16. Without altering the substantive content of Articles 81 and 82 EC, the reform will fundamentally simplify the way in which the Treaty's antitrust rules are enforced throughout the European Union. While reducing the compliance burden for undertakings by abolishing the notification system for agreements between undertakings, the new regulation will allow a more vigorous antitrust enforcement by means of a better and more effective sharing of enforcement tasks between the Commission and national competition authorities (NCAs). It will allow both the Commission and NCAs to focus their resources on the fight against those restrictions and abuses that are most harmful to competition and consumers.

17. The core features of the reform are:

1. The shift from a system of authorisation under which all agreements have to be notified to the Commission in order to obtain antitrust approval towards a legal exception system

Maintaining the system of notifications after decades of case law of the Court of Justice and Commission practice on the application of Articles 81 and 82 EC would entail an unjustified prolongation of unnecessary bureaucracy and legal costs for companies. Also, in view of enlargement the notification system no longer seemed workable. The reform thus places greater responsibility on companies, which will need to assess themselves whether their agreements restrict competition and, if so, whether the restrictions qualify for exemption under Article 81(3) EC. Of course, where cases give rise to genuine uncertainty because they present novel or unresolved questions for the application of the EU competition rules, companies may wish to seek informal guidance from the Commission. The latter may then decide to issue a written opinion.

2. The direct applicability of Article 81(3) EC

Ending the exclusive competence of the Commission to grant exemptions under Article 81(3) EC makes it possible for the Commission, NCAs and national courts to jointly enforce the rules governing restrictive practices. All competition authorities involved will closely cooperate in applying the antitrust rules. Since the treatment of a great number of individual cases has contributed to the establishment of case law of the Court of Justice and Commission practice on the exemption criteria of Article 81(3) EC, NCAs and national courts can have recourse to this case law to determine the conditions under which the latter provision can be applied. In order to assist NCAs and national courts in this regard, the Commission also intends to issue a notice on the application of Article 81(3) EC which will go over the main points of the relevant acquis.

The application of EU competition rules by national courts will furthermore be facilitated by the extended possibility for those courts to ask the Commission for information or for its opinion on questions concerning the application of those rules. It will also be possible both for the Commission and for NCAs to submit amicus curiae briefs to national courts applying Articles 81 or 82 EC.

3. The European Competition Network

The Commission and Member States' competition authorities will put in place a network of competition authorities, called the European Competition Network (ECN), which will be a key plank in the new enforcement system. It will allow for consultation, cooperation and information exchange between European competition authorities for purposes of applying Articles 81 and 82 EC. These processes are provided for at any stage of decision-making, from the time a case is allocated to a competition authority to the time a final decision is taken. As guardian of the Treaty, the Commission will bear ultimate responsibility within the network for ensuring consistent application of the EU competition rules. The modalities of the cooperation between the Commission and national competition authorities are laid down in a joint statement of the Council and the Commission on the functioning of the network of competition authorities, which is annexed to the new regulation.

4. The relationship between Articles 81 and 82 EC and national competition laws

Although NCAs and national courts can continue to apply national competition rules to agreements, decisions of associations of undertakings or concerted practices which may affect trade between Member States, they are obliged to apply Articles 81 or 82 EC at the same time, and the application of national competition rules may not produce an outcome which deviates from that resulting from the application of Article 81 EC. The resulting convergence of the rules applicable to transactions falling under Article 81 EC, the so-called level playing field, will facilitate doing business in Europe and will be central to completion of the single market and to consistent application of EU competition law once the Commission has given up its monopoly of granting exemptions under Article 81(3) EC.

5. The extended investigation powers of the Commission

In order to keep the Commission's central role as enforcer of the EU competition rules as effective as possible, its investigation powers have been extended. These extended powers include the possibility for the Commission to interview any person who may be in possession of useful information within the framework of a specific investigation and the possibility of affixing seals for the period necessary for an inspection. The Commission will also be able to enter any premises where business records may be kept, including private homes. The Commission may enter private homes only if it has reasonable grounds for suspecting that incriminating information is likely to be found there and only after it has received authorisation from a national judge. Such authorisation will depend among other things on the proportionality of the home search having regard to the seriousness of the suspected infringement and the importance of the evidence sought.

3. Review of the Commission's leniency policy

18. On 13 February, the Commission adopted a new leniency policy which creates greater incentives for companies to "blow the whistle" on one of the most serious violations of antitrust rules. The new policy not only increases legal certainty for companies wishing to cooperate, but also enhances the overall transparency and predictability of the Commission's practice in this respect. The 2002 Commission Notice on immunity from fines and reduction of fines in cartel cases [12] thus marks another important step towards uncovering and suppressing price-fixing pacts and other hardcore cartels. The new rules update the previous Leniency Notice of 1996 and apply to classic horizontal cartels [13].

[12] OJ C 45, 19.2.2002; see also http://europa.eu.int/comm/competition/ antitrust/leniency

[13] As opposed to cases in which illegal price-fixing occurs between undertakings in a vertical relationship, that is, between actors on different levels of the production and/or distribution chain, for example a producer and his distributors.

19. Under the 2002 notice, the Commission will grant immunity from fines to the first company to submit evidence of a cartel unknown to, or unproved by, the Commission. More precisely, complete immunity is granted in the following cases:

- the undertaking is the first to submit evidence which in the Commission's view may enable it to adopt a decision to carry out an investigation within the meaning of Article 14(3) of Regulation No 17 (or the equivalent procedural regulations for particular sectors) in connection with an alleged cartel affecting the European Union; or

- the undertaking is the first to submit evidence which in the Commission's view may enable it to find an infringement of Article 81 EC in connection with an alleged cartel affecting the European Union, when the Commission is already in possession of enough information to launch an inspection, but not to establish an infringement. This type of immunity is available only in cases where no other cartel member has been granted "conditional immunity" (see point 21 below) under the conditions set out in the previous indent.

20. To obtain full immunity, a company must also

- cooperate fully and on a continuous basis with the Commission and provide all evidence in its possession,

- put an end to the infringement immediately, and

- not have taken steps to coerce other undertakings to participate in the cartel.

21. A company fulfilling the conditions summarised in point 19 above will promptly receive a letter from the Commission confirming that full immunity will be granted if the conditions set out in the notice are observed.

22. The 2002 notice provides also for a reduction of fines for companies that do not qualify for immunity but provide evidence that represents "significant added value" to that already in the Commission's possession and terminate their involvement in the cartel. The first company fulfilling these conditions receives a reduction of 30-50% of the fine which would otherwise have been imposed, the second successful applicant 20-30% and subsequent successful applicants a reduction of up to 20%. Within each of these bands, the final amount of any reduction will depend on the time of submission of the evidence and the quality of the evidence provided.

23. Successful applicants for reduction of fines will also be given a letter indicating the band to which they will, in principle, be entitled. This letter will be sent no later than the day the statement of objections is notified.

24. The 2002 notice came into force on 14 February and applies to companies which file for leniency in a cartel case after that date, unless another firm is already cooperating with the Commission in an investigation into that same cartel on the basis of the 1996 notice.

4. Review of the car block exemption regulation

25. In July, the Commission adopted Regulation 1400/2002 on the application of Article 81(3) to vertical agreements and concerted practices in the motor vehicle sector. While this regulation deals with sector-specific problems, it is nevertheless based on the Commission's general policy for the assessment of vertical restraints as laid down in Regulation 2790/1999 and the Commission's respective guidelines. The details of the new rules applicable to vertical distribution in the motor vehicle sector are presented in Section C 6.

B - Application of Articles 81, 82 and 86

1. Article 81

1.1. Cartels

1.1.1. Overview of developments in anti-cartel enforcement activity and application of the 2002 Leniency Notice

26. Hardcore cartels are among the most serious violations of competition rules. What distinguishes them from all other anticompetitive practices is that they are secret agreements or concerted practices between competitors. It is due to this characteristic that they are considered "cardinal sins". Cartels are particularly harmful to European industry and consumers. They diminish social welfare, create allocative inefficiency and transfer wealth from consumers to the participants in the cartel by modifying output and/or prices in comparison with market-driven levels. Cartels are harmful also over the long run. Engaging in cartels to avoid the rigours of competition can result in the creation of artificial, uneconomic and unstable industry structures, lower productivity gains or fewer technological improvements and sustained higher prices. Furthermore, the weakening of competition leads to a loss of competitiveness and threatens sustainable employment opportunities.

27. For all these reasons, the detection, prosecution and punishment of secret hardcore cartel agreements is one of the central elements of the Commission's competition policy. To that effect, a panoply of instruments has been put into place.

28. The Commission has devoted resources specifically to the fight against cartels since 1998, when a special anti-cartel unit was created within the Competition Directorate-General. The decision to create a special unit was triggered by the fact that cartel members make use of ever more sophisticated tools enabling them to conceal their activities and to cover their tracks.

29. In 2002, this gradual increase in resources culminated in the creation of a second cartel unit. The two new units have benefited from the introduction of a more flexible and efficient management methodology. These units make use of advanced information technologies developed in house in the realm of inspections and the processing of documents. Officials are specifically trained in investigatory techniques and are also specialised in the complex procedural aspects of large contentious cases.

30. The priority given to the fight against cartels and the handling of cartel cases in 2001 continued apace and even intensified in 2002. The number of cases dealt with increased more than proportionally to the additional resources made available to the activity during this period.

31. After 2001, 2002 was again a record year in terms of cartel decisions. The Commission adopted nine decisions imposing fines totalling about one billion euro: Austrian Banks, Methionine, Industrial and Medical Gases, Fine Art Auction Houses, Plasterboard, Methylglucamine, Concrete Reinforcing Bars, Specialty Graphites and Food Flavour Enhancers.

32. The number of unannounced inspections also surged considerably, among them being the biggest inspection the Commission has ever undertaken. This drive stems from the top priority given by the Commission to stopping illegal cartel activity, and to do so swiftly. In this regard it should be noted that, once there is awareness of an illegal cartel, time for reaction is very brief, between four and six weeks. Experience so far shows that, following an inspection, cartels generally collapse and hence stop their illegal activities.

33. The politically most important occurrence was the adoption of the new Leniency Notice of February 2002 [14]. Since 1996, the Commission's leniency policy has been one of the cornerstones of the Commission's anti-cartel policy. The new Leniency Notice improves on the 1996 Leniency Notice in several respects. It incorporates a number of changes designed to make it more attractive for companies to come forward, and thereby to make the Commission's fight against cartels even more effective. Key elements of the new notice are: first, full immunity from fines is available to the first company that comes forward; second, the evidence supplied should be enough for the Commission to order an inspection; third, the Commission allows hypothetical applications, where actual evidence only needs to be supplied in a second stage; fourth, taking decisions granting conditional immunity within a matter of weeks provides up-front legal certainty to the applicant; fifth, even after the Commission has undertaken an inspection, immunity is still available under certain circumstances; sixth, if immunity has already been granted, or the Commission already has enough evidence to find an infringement, reductions of fines of up to 50% remain possible for companies that provide significant added value to the Commission's case; last but not least, with a view to introducing more certainty with respect to reductions, the Commission takes a preliminary decision on the band of reduction to be applied as soon as possible following the application.

[14] OJ C 45, 19.2.2002.

34. The fact that, in its first 10 months of operation, the new notice has led to the uncovering of around 10 different cartels in Europe is a clear indication of its effectiveness. This also has a broader effect. The fear that a cartel member might go to the authorities and obtain immunity tends to destabilise cartel activity in general. On this basis, the application of the 2002 notice is likely not only to ensure the detection and punishment of a large number of cartels in the future, but also to significantly undermine the stability of other, already existing cartels.

35. In the course of 2002, the Commission had the opportunity to highlight another aspect deterring companies from engaging in cartel activities, namely the increase applied to any fines in case of repeated infringements of competition rules. The Plasterboard decision is an example of this approach. In this case, two companies that had previously been found to have committed a similar infringement, for which they had been fined, incurred higher fines by reason of their repeated infringement. In this context and in connection with the leniency program, it should be underlined, however, that even companies with recidivistic behaviour can still qualify for leniency if they choose to cooperate with the Commission.

36. Deterrence is also the underlying objective in cases where the Commission imposes higher fines or penalties to counteract companies' practices of obstruction and refusal to cooperate during inspections. As a response to certain obstructionist and uncooperative practices that occurred mainly in 2002, the Commission will take the necessary measures to ensure compliance with the competition rules, in particular as regards inspections.

37. On the other hand, the Commission will in future not consider, pursuant to its guidelines on the method of setting fines, as an aggravating circumstance to be taken into account in determining the amount of a pecuniary penalty to be imposed on a company, the fact that in-house legal advisers had warned the management of the illegality of the conduct forming the subject-matter of the Commission's decision. Such a communication may, however, be used as evidence of the existence of an infringement.

38. Finally, the high level of international cooperation was maintained in 2002. In particular, the coordination of investigations and the exchange of non-confidential information with the US and Canadian anti-cartel authorities was very successful. Moreover, the Commission was involved in three US civil litigations that raised issues regarding the impact of US discovery proceedings on the Commission's leniency policy.

1.1.2. Individual cases in 2002

Austrian Banks [15]

[15] Case COMP/D-1/36.571; IP/02/844, 11.6.2002.

39. On 11 June, the Commission imposed fines totalling EUR 124.26 million on eight Austrian banks for their participation in a wide-ranging price cartel. For details, please refer to the chapter on financial services below [16].

[16] See points 190 et seq.

Methionine [17]

[17] Case COMP/37.519; IP/02/976, 2.7.2002.

40. On 2 July, the Commission fined Degussa AG and Nippon Soda Company Ltd EUR 118 million and EUR 9 million respectively for participating in a price-fixing cartel in methionine with Aventis SA (together with its wholly-owned subsidiary Aventis Animal Nutrition SA). Methionine is one of the most important amino acids used in compound animal feeds and premixes for all animal species. Following an investigation which started in 1999, the Commission found that these companies had participated in a worldwide cartel between February 1986 and February 1999.

41. Aventis (formerly Rhône-Poulenc) was granted full immunity from fines under the Commission's Leniency Notice because it revealed the cartel's existence to the Commission and provided decisive evidence on its operation.

Industrial and Medical Gases [18]

[18] Case COMP/36.700; OJ L 84, 1.4.2003.

42. On 24 July, the Commission fined AGA AB, Air Liquide BV, Air Products Nederland BV, BOC Group plc, Messer Nederland BV, NV Hoek Loos and Westfalen Gassen Nederland NV a total of EUR 25.72 million for participating in a secret cartel in the industrial and medical gases sector in the Netherlands.

Carlsberg and Heineken [19]

[19] Case COMP/F-3/37.851.

43. On 4 November, the Commission closed its investigation into an alleged market-sharing agreement between Danish brewer Carlsberg and Dutch brewer Heineken, having found no evidence to suggest that the suspected infringement had continued after May 1995. Any infringement would therefore have fallen outside the time limit for fines.

44. On 1 March, the Commission issued statements of objections to Carlsberg and Heineken, alleging that the two brewers had reached an informal agreement to limit their activities, in particular their acquisition activities, in each other's "home market" during the period 1993-96 [20]. The Commission's case was based on documents found during surprise inspections at the two companies in spring 2000.

[20] IP/02/350, 1.3.2002.

45. Both parties replied in writing to the statement of objections, rejecting the Commission's allegations and stressing how difficult it was to enter each other's home market. Carlsberg also presented its case at an oral hearing. In the light of the parties' arguments, the Commission decided to complete its fact finding by carrying out further inspections at the two brewers' offices in August. However, these inspections yielded no fresh evidence falling within the five-year limitation period for imposing fines [21]. On this basis, the Commission decided to close its case [22].

[21] Council Regulation (EEC) No 2988/74 of 26 November 1974 concerning limitation periods in proceedings and the enforcement of sanctions under the rules of the EEC relating to transport and competition (OJ L 319, 29.11.1974). In this case, the limitation period ran from May 1995, five years before the date of the Commission's first inspection at Carlsberg's premises.

[22] IP/02/1603, 4.11.2002.

Fine Art Auction Houses [23]

[23] Case COMP/37.784.

46. In a decision adopted on 30 October, the Commission found that Christie's and Sotheby's, the world's two leading fine art auction houses, had breached EU competition rules by colluding to fix commission fees and other trading terms between 1993 and early 2000. The purpose of the cartel agreement was to reduce the competition between the two leading auction houses that had developed during the 1980s and early 1990s. The most important aspect of the agreement consisted in an increase in the commission paid by sellers at auction (the so-called vendor's commission). But the collusive agreement also concerned other trading conditions, such as advances paid to sellers, guarantees given for auction results and payment conditions.

47. In applying the 1996 Leniency Notice, the Commission considered that Christie's ought to benefit from full immunity because it provided decisive proof of the cartel at a time when the Commission had no investigation open and because it was the first to come forward with such evidence. Sotheby's fine was set at EUR 20.4 million, i.e. 6% of its worldwide turnover. The amount included a 40% reduction for its cooperation in the investigation.

Methylglucamine [24]

[24] Case COMP/37.978; IP/02/1746, 27.11.2002.

48. On 27 November, the Commission fined Aventis Pharma SA and Rhône-Poulenc Biochemie SA (jointly and severally liable) EUR 2.85 million for participating in a price-fixing and market-sharing cartel in methylglucamine together with Merck KgaA. Methylglucamine is a chemical used for the synthesis of X-ray media, pharmaceuticals and colourings. The Commission found that the companies had participated in a worldwide cartel between November 1990 and December 1999.

49. Merck was granted full immunity from fines under the Commission's Leniency Notice because it revealed the cartel's existence to the Commission and provided decisive evidence on its operation.

Plasterboard [25]

[25] Case COMP/37.152.

50. On 27 November, the Commission adopted a decision imposing fines totalling EUR 478 million on Société Lafarge SA, BPB plc, Gebrüder Knauf Westdeutsche Gipswerke KG and Gyproc Benelux SA/NV. The Commission characterised these companies' behaviour as a very serious infringement of European competition law. The Commission's investigation, which it had opened on its own initiative, revealed that the main European plasterboard producers had taken part in a secret cartel covering the four main markets of the European Union (Benelux, Germany, France and the United Kingdom), whereby they had agreed to restrict competition on these markets in line with their interests, exchanged information on their sales volumes and informed one another of price increases on the German and UK markets. The value of the relevant markets is one of the highest encountered in any Commission cartel decision over the past decade. BPB, Knauf and Lafarge were involved in the cartel from 1992 to 1998 and were joined by Gyproc in 1996.

51. The amount of the fines was justified by the duration of the infringement and, in the case of Lafarge (EUR 249.6 million) and BPB (EUR 138.6 million), by the fact that for these companies it was a repeat infringement of Article 81, which constituted an aggravating circumstance. Only BPB and Gyproc cooperated with the Commission's services, and they alone benefited from a reduction in their fines on that score.

52. This decision is further proof of the Commission's determination to uncover and punish infringements of competition law, whether on the basis of investigations opened on its own initiative or on that of requests for application of the leniency policy. In its fight against cartels, the Commission gives priority to the important sectors of the European economy and in particular to sectors where its action is directly capable of enhancing consumer welfare. The decision confirms, moreover, the Commission's determination to suitably punish companies which repeat manifestly anticompetitive behaviour by increasing the amount of their fine.

Food Flavour Enhancers [26]

[26] Case COMP/37.671; IP/02/1907, 17.12.2002.

53. On 17 December, the Commission fined Ajinomoto Co. Inc. (Japan), Cheil Jedang Corporation (South Korea) and Daesang Corporation (South Korea) EUR 15.54 million, EUR 2.74 million and EUR 2.28 million respectively for participating in a price-fixing and customer allocation cartel in nucleotides together with Takeda Chemical Industries Ltd (Japan). Nucleotide, or nucleic acid, is made from glucose and is used in the food industry to add flavour to foods. Following an investigation which started in 1999, the Commission found that these companies had participated in a worldwide cartel between 1988 and 1998.

54. With regard to the Leniency Notice, it is important to note that Takeda was granted full immunity from fines because it submitted decisive evidence on the operation of the cartel at a time when the Commission had no knowledge of the cartel.

Specialty Graphite [27]

[27] Case COMP/37.667; IP/02/1906, 17.12.2002.

55. On 17 December, the Commission fined SGL Carbon AG, Le Carbone-Lorraine SA, Ibiden Co., Ltd, Tokai Carbon Co., Ltd, Toyo Tanso Co., Ltd, NSCC Techno Carbon Co., Ltd, Nippon Steel Chemical Co., Ltd, Intech EDM BV and Intech EDM AG a total of EUR 51.8 million for taking part in a price-fixing cartel on the market in isostatic specialty graphite [28]. In addition, SGL Carbon AG was fined EUR 8.81 million for its involvement in another price-fixing collusion affecting the market in extruded specialty graphite. GrafTech International, Ltd (formerly UCAR), which was also found liable for both infringements, benefited from a 100% reduction in its fine because it revealed the cartel's existence to the Commission and provided decisive evidence on its operation.

[28] "Specialty graphites" is the general term widely used in the industry to describe a group of graphite products for diverse applications.

Concrete Reinforcing Bars [29]

[29] Case COMP/37.956.

56. On 17 December, the Commission adopted a decision imposing fines totalling EUR 85 million on nine undertakings, corresponding to 11 companies (Alfa Acciai SpA, Feralpi Siderurgica SpA, Ferriere Nord SpA, IRO Industrie Riunite Odolesi SpA, Leali SpA and Acciaierie e Ferriere Leali Luigi SpA in liquidation, Lucchini SpA and Siderpotenza SpA, Riva Acciaio SpA, Valsabbia Investimenti SpA and Ferriera Valsabbia SpA) and one trade association (Federacciai) for their involvement in a cartel covering the Italian concrete reinforcing bars market. This constituted a very serious infringement of Article 65(1) of the ECSC Treaty.

57. The single, complex and continuous agreement in question consisted of several elements: the fixing of prices for "size extras" (a supplement based on the diameter of the concrete reinforcing bar, which is added to the basic price), the fixing of the basic price, the fixing of payment times, and the restricting or controlling of production and/or sales.

58. The companies were fined between EUR 26.9 million and EUR 3.57 million. The Commission took into account the fact that Riva and Lucchini are major groups whose turnover is much bigger than that of the other members of the cartel.

59. In accordance with the Eurofer judgment [30], Federacciai was an addressee of the Commission's decision but no fine was imposed on it. Ferriere Nord was a repeat offender, which constituted an aggravating circumstance; at the same time, it alone cooperated with the Commission's services and it therefore qualified for a reduction in its fine as provided for in the Leniency Notice.

[30] Case T-136/94, judgment of 11.3.1999.

60. In this case, the Commission applied the provisions of the ECSC Treaty after that Treaty had expired. In so doing, it was acting in accordance with its communication of 26 June 2002 concerning certain aspects of the treatment of competition cases resulting from the expiry of the ECSC Treaty [31], in which it stated its intention to follow the general principles of law in relation to the succession of laws. According to the communication: "If the Commission, when applying the Community competition rules to agreements, identifies an infringement in a field covered by the ECSC Treaty, the substantive law applicable will be, irrespective of when such application takes place, the law in force at the time when the facts constituting the infringement occurred. In any event, as regards procedure, the law applicable after the expiry of the ECSC Treaty will be the EC law".

[31] OJ C 152, 26.6.2002.

1.2. Vertical agreements

Nintendo [32]

[32] Cases COMP/C-3/35.587, COMP/C-3/35.706 and COMP/C-3/36.321.

61. On 30 October, the Commission imposed fines totalling EUR 167.9 million on Nintendo Corporation Ltd and Nintendo of Europe GmbH (respectively the ultimate parent company of the Nintendo group and its main European subsidiary); John Menzies plc; Soc. Rep. Concentra L.DA; Linea GIG SpA; Nortec SA; Bergsala AB; Itochu Corporation; and CD-Contact Data GmbH.

62. In the decision, the Commission concluded that the addressees participated in an infringement of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement restricting parallel trade in Nintendo's consoles and game cartridges throughout the EEA. Apart from formal distribution agreements that restricted parallel exports, the parties collaborated closely to trace the origin of parallel trade and identify parallel traders.

63. The infringement was orchestrated by Nintendo, but the rest of the addressees, Nintendo's independent distributors in different EEA countries, actively and, in most cases, willingly cooperated with Nintendo in the implementation of the infringement and benefited from it. In determining the fines imposed, groupings were made to reflect the real impact on competition of each undertaking's offending conduct, given the large disparities between them. In addition, a multiplying factor was applied to the starting amount of the fine set for Nintendo, John Menzies and Itochu to ensure a sufficiently deterrent effect in view of their size and overall resources.

64. Several aggravating circumstances led to increases in the amounts of fines: acting as the leader and instigator of the infringement (Nintendo), continuation of the infringement after the Commission had started its investigations (Nintendo, John Menzies) and an attempt to mislead the Commission with regard to the real scope of the infringement by providing incorrect information in response to a formal request for information (John Menzies). The Commission also recognised attenuating circumstances in this case: a purely passive role (Soc. Rep. Concentra L.DA) and effective cooperation with the Commission in the course of the administrative procedure (Nintendo, John Menzies).

65. By granting large reductions to Nintendo and John Menzies following their cooperation, the Commission stressed the importance it attaches to such cooperation even where infringements of a vertical nature are concerned, to which the Leniency Notice does not apply. Finally, account was taken of the fact that Nintendo offered substantial financial compensation to third parties having suffered financial harm as a result of the infringement.

66. As this decision highlights, restrictions of parallel trade constitute a very serious infringement of Article 81 EC and will be prosecuted and punished by the Commission in a way similar to its enforcement action addressing classical horizontal cartels.

2. Articles 82 and 86

2.1. Article 82

67. While no formal decisions concerning the abuse of dominant positions were adopted in the course of the year, the Commission continued to pay great attention to the disruptive effects which abusive behaviour by dominant firms has on competition on the markets. A number of cases, both triggered by complaints and started on the Commission's own initiative, are currently under investigation, concerning a variety of sectors such as telecommunications, transport and the media [33].

[33] For more details, see the sectoral sections of this Report: Section I.C.4.3. on railway transport, point 133; Section I.C.8. on the Information Society, point 196.

IMS Health [34]

[34] Case COMP/38.044 IMS Health/NDC.

68. During 2002 there were a number of further developments in this case, in which the Commission had decided to impose interim measures [35] on IMS Health on 3 July 2001. This decision was subsequently suspended by the Courts pending a final judgment in the proceedings for its annulment [36]. These latter proceedings are suspended pending the outcome of a reference for a preliminary ruling [37] from the Frankfurt Landgericht (Regional Court) on questions related to the Commission decision.

[35] Decision of 3.7.2001 (OJ L 59, 28.2.2002), which ordered IMS to license its "1860 brick structure", which segments Germany into 1 860 sales zones.

[36] Orders of 26.10.2001 in Case T-184/01 R and of 11.4.2002 in Case C-481/01 P(R).

[37] Case C-418/01.

69. While the Commission continued its assessment of IMS' conduct in the main proceedings in 2002, the German courts delivered a number of rulings of relevance to IMS's intellectual property rights in the 1860 brick structure [38]. The Commission decision had been based on the premiss that the structure and derivatives thereof were covered by copyright [39]. The most recent ruling, made by the Frankfurt Oberlandesgericht (Higher Regional Court) on 17 September in IMS v Pharma Intranet (PI) [40], found that IMS did not have standing to sue to assert copyright law claims, either in respect of a copyright or a sui generis right, but that it could assert a cease and desist claim for PI's infringement of the German Unfair Competition Act. However, the court held that this latter right did not allow IMS to monopolise all structures similar to or derived from the 1860 structure. The Commission will continue to monitor ongoing cases in the German courts in deciding what action to take in the main proceedings in this case.

[38] Segmentation of the national territory into 1 860 geographical areas, or bricks, for the purpose of aggregating sales data for the pharmaceutical industry in Germany.

[39] Decision, paragraph 36.

[40] Pharma Intranet AG was bought by NDC on 16 October 2000.

2.2. Article 86

70. In its max.mobil judgment of 30 January 2002 in Case T-54/99, the Court of First Instance (CFI) had to decide upon an action for annulment brought under Article 230 EC by the second-ranking Austrian mobile phone operator max.mobil. The action was directed against a letter in which the Commission had informed max.mobil that it would not pursue the complaint by which the applicant had requested the Commission to intervene against Austria on the basis of Article 86(3) EC, given that Austria had allegedly infringed Article 86(1), read in conjunction with Article 82, EC in the context of fixing concession fees.

71. Article 86(3) EC empowers the Commission to ensure the application of Articles 86(1) and 86(2) and, where necessary, to address the appropriate directives or decisions to Member States. For a long time, the position of the Community judicature had been to confirm the Commission's view that it can exercise its discretion whether and how to make use of its powers under Article 86(3) without being limited in this exercise by the existence of complaints made by third parties. This meant that where the Commission did not act upon a complaint brought by an individual against a Member State for infringement of Article 86(1), or where the Commission refused to act, that individual had no standing for an application for failure to act or for annulment, as the case may be. In a judgment of 20 February 1997 [41], while again rejecting as inadmissible the application for annulment brought at the time by a complainant against the refusal by the Commission to intervene under Article 86(3), the European Court of Justice (ECJ) considered that it could not be ruled out that in exceptional circumstances an individual might have standing to bring such an action [42].

[41] Judgment of the Court of 20.2.1997 in case C-107/95 P Bilanzbuchhalter.

[42] On the basis of the ECJ's ruling in Bilanzbuchhalter, an action against the Commission for failure to act was for the first time considered admissible by the CFI in its TF 1 judgment (3.6.1999, Case T-17/96). The CFI was of the opinion that the complainant was in an exceptional situation. However, since the Commission had taken a position before the date of the judgment, there was no need to adjudicate upon the application for failure to act. On appeal, the ECJ (12.7.2001, Joined Cases C-302/99 and C-308/99 P) confirmed that, since the Commission had defined its position and thus deprived the action for failure to act of its object, it had not been necessary for the CFI to examine the admissibility of that action.

72. In its above-mentioned max.mobil judgment, the CFI substantially deviated from the previous case law. It held that individual complainants under Article 86(3) had a right to the Commission's examining their complaint in a diligent and impartial way. According to the CFI, that obligation was amenable to judicial review, which meant that the complainant had standing to bring an action under Article 230 EC for annulment of an act by which the Commission refused to use its powers under Article 86(3). In substance, the judgment held that the role of the Community judicature was limited to scrutinising the Commission's act with regard to three points, i.e. (1) whether it included a statement of reasons which was prima facie consistent and reflected due consideration of the relevant aspects of the case; (2) whether the facts relied on were materially accurate; and (3) whether the prima facie assessment of those facts was not vitiated by any manifest error.

73. Following those criteria when considering the Commission's letter at issue, the CFI rejected max.mobil's application as unfounded. Nevertheless, given that this case raised important questions of principle, the Commission has appealed to the ECJ, requesting that the CFI judgment be set aside and that max.mobil's action be rejected as inadmissible [43].

[43] OJ C 169, 13.7.2002.

C - Sector-based competition developments

1. Energy: liberalisation in the electricity and gas sectors

74. The year 2002 was very important for the liberalisation of the European gas and electricity markets. Significant progress was made towards the adoption of new legislation (a directive for the completion of the internal gas and electricity markets - hereinafter called the "Acceleration Directive", a regulation on cross-border electricity trade and a directive on security of supply in the gas sector). At the same time, the Commission concluded a number of very important competition cases relating to the energy sector.

75. The key event of the year was the Council meeting of energy ministers on 25 November. In the course of this meeting, EU Member States reached political agreement on the Acceleration Directive [44] (revision of Directive 96/92/EC for electricity and Directive 98/930/EC for gas) and on the regulation on cross-border electricity trade. This political agreement is a major step for energy liberalisation and - once formally adopted (expected for summer 2003) - will provide market participants with the required legal certainty to carry on their business activities in the energy sector in the years to come.

[44] Council Document 14867/02 of 27.11.2002 for gas and Council Document 14869/02 of 27.11.2002 for electricity.

76. As regards the Acceleration Directive, the essential elements of the political compromise reached between EU Member States in November can be summarised as follows: (1) market opening for all non-domestic gas and electricity customers as of 1 July 2004 and for all other customers - i.e. including private households - as of 1 July 2007; (2) reinforced universal service obligations in the electricity sector (guarantee of supply at reasonable prices); (3) legal and functional unbundling for transmission system operators as of 1 July 2004 (for distribution system operators, functional unbundling as of 1 July 2004 and legal unbundling as of 1 July 2007); (4) introduction of a regulated Third Party Access regime for transmission and distribution networks and LNG [45] facilities. For storage, EU Member States have a choice between regulated and negotiated Third Party Access regimes; (5) regulatory authorities need to be established, which have at least the authority to fix methodologies underlying the calculation of the network access tariffs, or to approve such methodologies prior to their entry into force; and (6) derogations from regulated tariffs might be permitted by the Commission for major new gas infrastructure.

[45] Liquified Natural Gas.

77. The regulation on cross-border trade in the electricity sector aims at setting fair rules for cross-border exchange in electricity, thus enhancing competition within the internal electricity market. The essential elements of the political compromise reached between EU Member States can be summarised as follows: (1) establishment of a compensation mechanism in favour of transmission system operators for costs incurred as a result of hosting cross-border flows of electricity, compensation to be paid by the operators of the transmission systems from which cross-border flows originate and the transmission system where those flows end; (2) setting harmonised principles on cross-border transmission charges, in particular, the application of non-discriminatory, transparent, non-distance-related charges for network use, although signals to reflect generation/consumption balance [46] are allowed; (3) setting rules to maximise availability of transmission capacity; (4) establishment of principles to deal with congestion; (5) setting rules on the use of revenues from congestion management; (6) involvement of regulators in tariff and capacity allocation issues; and (7) setting of penalties by Member States for regulation infringements and reporting obligation by Member States to the Commission, which monitors the implementation of the regulation.

[46] "Locational signals".

78. The political agreement reached by EU Member States is largely in conformity with the Commission's amended proposal for an acceleration directive and for a regulation on cross-border trade in the electricity sector, both adopted in June [47]. This proposal incorporated the results of the Barcelona European Council and of the discussions in the Council working groups and took into account a series of amendments adopted by the European Parliament in the course of its first reading of the legislative package. The Commission had, however, proposed an earlier date for full market opening.

[47] COM(2002) 304 final, 7.6.2002.

79. In addition to the internal market package, the Commission adopted a proposal for a directive on security of supply in the gas sector [48]. This proposal is aimed at clarifying and defining the responsibilities of market operators in the liberalised European gas markets as regards security of supply. In this respect, it is an important element of the proposal the proposal that Member States should introduce certain minimum standards for supplying non-interruptible customers, e.g. capacity and volume available under severe weather conditions or in the event of a major supply disruption. However these rules will not apply to companies with small market shares.

[48] COM(2002) 488 final, 11.9.2002.

80. The proposal for a directive also underlines the importance of long-term gas supply contracts for Europe's supply security in the gas sector. Whilst the proposal maintains that the degree to which long-term gas supply contracts are currently used is more than satisfactory at EU level, it also introduces a mechanism that allows for the monitoring of these contracts and for taking appropriate action should the degree to which such long- term contracts are used be considered to be no longer satisfactory. In this respect, it is also important to underline that long-term gas supply contracts are not ipso facto incompatible with EU competition law but the Commission will monitor whether such an incompatibility arises in individual cases. To the extent that restrictions in gas supply contracts are necessary to underpin significant investments, e.g. in a new gas field, the Commission will take this into account.

81. The adoption of legislation aimed at liberalising European energy markets must be accompanied by the strict application of European competition law. The contribution of European competition law to the liberalisation process is likely to increase over the next few years, when legislative measures in EU Member States create the appropriate legal framework for the introduction of effective competition in the energy markets. In this respect, it is the role of European and national competition authorities to ensure that state measures which prevent the creation of a common energy market are not replaced by measures taken by market operators.

82. Taking into account the modernisation exercise, which leads to the decentralisation of the application of European competition law, close cooperation between the Commission and national authorities will be required. In order to set the right priorities, this cooperation should not be limited to national competition authorities, but will also be extended as far as possible to national regulators, which have a decisive role to play when it comes to putting liberalisation policy into practice.

83. The Commission considers that the various energy markets are often still dominated by national champions, calling for strict application of the antitrust rules; that the liberalisation process will in all likelihood lead to further merger activity, calling for strict application of the merger control legislation; and that certain energy companies might try to benefit from state aid in order to improve their competitive situation in liberalised energy markets, calling for strict application of the state aid rules.

84. In the antitrust sector, the Commission continues to focus on aspects of supply competition and network issues. The Commission considers that arrangements between suppliers may artificially reduce choices for customers and restrict their ability to switch suppliers. As regards access to networks, the Commission takes the view that, without the introduction of an effective, transparent and non-discriminatory third party access regime, alternative suppliers will be prevented from reaching customers with competing offers.

85. As regards supply competition, the main achievement in 2002 was the settlement of the GFU case [49]. This case concerned the joint marketing of Norwegian gas through a gas negotiation committee (GFU). It was this committee, rather than individual companies, that decided who could buy Norwegian gas and at what price. The effect of the GFU scheme was that European customers could not choose between Norwegian gas producers, which together meet 10% of European demand, but could deal only with GFU. The case was closed by the Commission after the companies undertook to market their gas individually in future and after certain accompanying measures were taken by the two leading operators, Statoil and Norsk Hydro, which favour new customers.

[49] Case COMP/E-4/36.072; IP 02/1084, 17.7.2002.

86. Synergen is another case relating to the improvement of the supply structure [50]. This concerned the construction of a power plant in Dublin, Ireland, by the incumbent Irish electricity producer ESB and the Norwegian gas and oil company Statoil. In order to overcome the relevant competition concerns (due among other things to Statoil's commitment to leave the marketing of the electricity produced by Synergen to ESB), ESB undertook to make electricity available by means of auctions or direct sales. These volumes can be used by new market entrants to build up a customer base when constructing a new power plant.

[50] Case COMP/E-4/37.732; IP 02/792, 31.5.2002.

87. As regards the improvement of the network access regime, the Commission carried out a number of important investigations, most of which have, however, not yet been concluded. In 2002, the Commission dealt in particular with the operation of the UK-Belgium gas interconnector [51]. It was able to conclude this investigation after it became clear that the companies concerned had taken or would take certain measures in the near future facilitating third party access to this important pipeline linking the UK and Belgium.

[51] Case COMP/E-4/38.075; IP 02/401, 13.3.2002.

88. Merger activity in the energy sector continued in 2002, at both national and EU level. At the latter level, however, there was a tendency for the number of transactions to decrease slightly compared with previous years. However, there are indications that the liberalisation which is currently taking place in the gas sector may lead to more mergers in this area. The main area of concentration took place in the generation and supply of electricity and in the trading business. No full, in-depth investigation was undertaken into electricity mergers during 2002.

89. In the gas sector, one merger was of particular importance in 2002. The Commission authorised, subject to conditions, the joint acquisition of the Baden-Württemberg regional gas wholesaler Gas Versorgung Süddeutschland (GVS) by the German electricity firm Energie Baden-Württemberg AG (EnBW) and the Italian gas and petroleum company ENI SpA [52]. The operation, as initially notified to the Commission, would have led to the strengthening of GVS's dominant position on the regional gas wholesale market by securing a substantial part of GVS's customers, currently controlled by EnBW. In order to address these competition concerns, the parties undertook to grant early termination rights to all local gas distributors which entered into long-term supply contracts with GVS or with other subsidiaries currently controlled by EnBW.

[52] Case COMP/M.2822; IP 02/1905, 17.12.2002.

90. 2002 was also a very important year for state aid control in the energy sector. The investigations related most prominently to the question of stranded costs [53]. In this context, the Commission's departments published a first inventory of public aid granted in respect of different energy sources [54]. The inventory identifies and records the various national and EU measures taken in the field of energy, where the relevant information is available. The inventory goes beyond the strict legal concept of state aid, and is designed as a tool to monitor the future impact of aid on the various markets.

[53] See in this respect the section on state aid, points 386 et seq.

[54] http://europa.eu.int/comm/dgs/ energy_transport/home/aids/energy_en.htm

2. Postal services

2.1. New Postal Directive

91. On 10 June, the Council and the European Parliament adopted the new Postal Directive, Directive 2002/39/EC [55]. Following a Commission proposal, the Council had reached a common position on a text aimed at amending the existing Postal Directive on 15 October 2001. The main changes introduced by the Council at that time were as follows:

[55] Directive 2002/39/EC of the European Parliament and of the Council of 10 June 2002 amending Directive 97/67/EC with regard to the further opening to competition of Community postal services.

- A further opening of the market with a progressive reduction of the reserved area as of 1 January 2003 and as of 1 January 2006 [56].

[56] In particular, as of 2003 the non-reserved area will include letters weighing more than 100g; this weight limit will not apply if the price is equal to or more than three times the public tariff for an item of correspondence in the first weight step of the fastest category. As of 2006 the non- reserved area will include letters weighing more than 50g; this weight limit will not apply if the price is equal to or more than three times the public tariff for an item of correspondence in the first weight step of the fastest category.

- The possibility of completing the internal postal market in 2009 [57], by means of a Commission proposal to be approved by the European Parliament and the Council.

[57] In 2006 the Commission will complete a study evaluating, for each Member State, the impact on universal service of the completion of the internal postal market in 2009. On the basis of this study the Commission will submit a report to the European Parliament and the Council accompanied by a proposal confirming, if appropriate, the date of 2009 for the full completion of the internal postal market or determining any other step in the light of the study's findings.

- The liberalisation of outgoing cross-border mail except for those Member States where it needs to be part of the reserved services in order to ensure the provision of the universal service.

- The prohibition of cross-subsidisation of universal services outside the reserved area out of revenues from services in the reserved area, unless this is strictly necessary to fulfil specific universal service obligations imposed in the competitive area.

- The application of the principles of transparency and non-discrimination whenever universal service providers apply special tariffs.

92. The text was subsequently revised and approved by the European Parliament with three further amendments, which, however, do not influence the new elements listed above.

3. Telecommunications

3.1. New regulatory framework for electronic communications networks and services

93. On 14 February, the Council adopted a new regulatory framework for the ex ante regulation of electronic communications networks and services, which entered into force on 24 April. This new legislative package made up of five directives [58] in all is a major overhaul of the regulatory framework for telecommunications, aimed at bringing more competition into this crucial sector for the European economy. Four of the directives (Framework Directive 2002/21/EC, Access Directive 2002/19/EC, Authorisation Directive 2002/20/EC and Universal Service Directive 2002/22/EC) are to be transposed into national law by 25 July 2003 and applied from that date, while the directive on privacy and electronic communications, Directive 2002/58/EC, is to be implemented by 31 October 2003.

[58] OJ L 108, 24.4.2002 and OJ L 201, 31.7.2002.

94. The new regulatory package aims to be technology-neutral, treating all transmission networks in an equivalent manner. It ensures that market players are regulated only where necessary and in a consistent manner across the EU, inter alia by giving the Commission powers to require national regulatory authorities to withdraw draft decisions in key areas linked to the functioning of the internal market.

95. One of the most important features of the new framework is the new definition of the notion of "significant market power" (SMP), which is now based on the definition of dominance under Article 82 of the EC Treaty (see Article 14 of the Framework Directive). As a result of this change in definition, as a general rule, an ex ante regulatory obligation can only be imposed on undertakings in a single or collective dominant position within the meaning of Article 82. Under the previous regulatory framework, an undertaking was subject to ex ante regulation if it had a 25% market share. The new definition of SMP will thus have the effect of raising the regulatory barrier while at the same time ensuring consistency between ex ante regulation and ex post enforcement of the competition rules concerning dominant undertakings.

96. Another important aspect of the new framework is the obligation on national regulatory authorities (NRAs) to conduct a proper market analysis before imposing any kind of regulatory obligations on undertakings with SMP. In particular, NRAs will have to define the relevant product and geographic market in order to assess whether an undertaking has SMP. In that respect, the Commission [59] has adopted guidelines for market analysis and the assessment of SMP [60], setting out the methodology and competition law principles that NRAs should follow when carrying out their market analysis. In practice, NRAs are expected to focus their market analysis on those markets which justify ex ante regulation in view of certain criteria. These markets are listed in a recommendation that the Commission adopted on 11 February 2003 [61] pursuant to Article 15 of the Framework Directive. If an NRA decides to regulate a market which is not listed in the recommendation, it will have to seek the Commission's prior approval and follow the procedure set out in Article 7 of the Framework Directive.

[59] In accordance with Article 15 of the framework directive.

[60] OJ C 165, 11.7.2002.

[61] C(2003) 497.

97. Finally, the new framework provides that NRAs are expected to collaborate with national competition authorities (NCAs) when carrying out their market analysis. The role of NCAs will thus be reinforced since they will have to ensure that market definitions or issues related to dominance will be treated consistently from an ex ante and from an ex post perspective. Within the context of this cooperation, NRAs and NCAs will also be entitled to exchange confidential information provided that the receiving authority ensures the same level of confidentiality as the originating authority (Article 3(5) of the Framework Directive).

98. In its communication on the 1999 communications review [62] the Commission had envisaged codifying and simplifying Directive 90/388/EEC on competition in the markets for telecommunications services [63], at the same time as adopting a new regulatory framework for electronic communications networks and services.

[62] COM(1999) 539.

[63] As successively amended by Directives 94/46, 95/51, 96/2, 96/19 and 1999/64.

99. Following the adoption of a first draft directive on 12 July 2000, which was submitted for public consultation [64], the Commission proceeded to rework it to ensure consistency and establish a link with the directives of the new regulatory framework. The new directive, Directive 2002/77/EC, which was adopted on 16 September [65], pursues the same fundamental objectives as Directive 90/388/EEC, namely (a) the abolition of existing exclusive and special rights and the prohibition of the granting of new exclusive and special rights in the electronic communications sector in the broad sense, and (b) the recognition of the right of undertakings to exercise their fundamental freedom of establishment and to provide services within an undistorted competitive framework.

[64] OJ C 96, 27.3.2001.

[65] OJ L 249, 17.9.2002.

100. More particularly, only those provisions that are still necessary to attain the objectives of the original directives based on Article 86 have been maintained. A number of provisions that have become obsolete have been deleted, as have the provisions of the old "competition" directive which have been reproduced in the new regulatory framework and which concern harmonisation of the conditions of access to networks and services.

3.2. Closure of sector inquiry into leased lines

101. In November, the Commission decided to close the leased line sector inquiry it had launched in 1999, since the concerns relating to high prices and issues of possible discrimination were now being adequately addressed, both at national level through the enforcement of the EU sector-specific regulation by national regulatory authorities (NRAs), and through own-initiative procedures by the Commission relating to specific EU Member States [66].

[66] IP/02/1852, 11.12.2002.

102. The conclusions of the first phase of the inquiry had emphasised high prices and diverging pricing policies in the EU that were not justified by cost differences [67]. In November 2000, the Competition Directorate-General had opened five own-initiative investigations into possible excessive prices and/or discriminatory behaviour in the provision of leased lines in Belgium, Italy, Greece, Portugal and Spain. Two years later, the Commission found a considerable decrease in leased line prices across the EU. For example, since the launch of the sector inquiry in July 1999, 2Mbps international leased line prices have gone down by 30-40% on average [68]. A second important outcome is a pro-active stance on the part of NRAs regarding the provision of leased lines and pricing for such lines.

[67] For more details of the outcome of the sector inquiry, see working document of September 2000 at: http://europa.eu.int/comm/competition/ antitrust/others/sector_inquiries/leased_lines/

[68] For more details of the outcome of the sector inquiry and the individual own-initiative cases, see explanatory memorandum of November 2002 at: http://europa.eu.int/comm/competition/ antitrust/others/sector_inquiries/leased_lines/

103. The Commission therefore decided to close its own-initiative investigations regarding Belgium and Italy given the evidence of significant improvements in the competitive situation in those Member States. Similarly, subject to a further decrease in prices for international leased lines between neighbouring or nearby EU Member States or further justification of their level, the Spanish case might be closed. The Competition Directorate-General will continue to closely monitor the situation in Portugal and Greece.

4. Transport

4.1. Air transport

4.1.1. Renewal of block exemption Regulation 1617/93

104. On 25 June, the Commission adopted Regulation (EC) No 1105/2002 [69], renewing the block exemption for passenger tariff conferences for the purpose of interlining in Regulation EC No 1617/93 until 30 June 2005. The renewal is conditional on air carriers participating in conferences collecting certain data on the relative importance of the consultations for interlining. Interlining occurs when a passenger travels with more than one airline or alliance on the same ticket.

[69] OJ L 167, 26.6.2002.

105. The block exemption applies to just one organisation, the International Air Transport Association (IATA). Most EEA airlines (including all flag carriers) are members of IATA and take part in twice-yearly conferences where they agree fares for interline journeys. Having considered the arguments advanced by the various respondents to a consultation paper that the Competition Directorate-General issued in 2001, the Commission concluded that the block exemption should be extended for a further three years. The tariff conferences result in a benefit in the form of fully flexible interlining and it is unlikely that such a benefit could currently be completely achieved using other less restrictive means. While prohibiting the tariff conferences would not mean the end of interlining altogether, it would reduce the fare products available for a significant number of consumers and, in the short term at least, could make it harder for small airlines to compete.

106. However, as alliances develop, it might be argued that in the longer term the need for tariff conferences becomes less obvious, in particular on high-traffic routes. In order to enable it to examine in future whether a block exemption is still necessary, the Commission has imposed a further condition on the airlines participating in the conferences, obliging them to collect data providing concrete information on the extent to which tickets issued in the EEA are tickets at IATA tariffs, and the relative importance of such tickets for interlining.

107. The new regulation also extends the current block exemption for slot allocation and airport scheduling until 30 June 2005. This block exemption is closely related to Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports. Together, the block exemption and the Council regulation set out the conditions under which air carriers can take part in the scheduling conferences at which slots at congested airports are allocated. The Commission has proposed certain amendments to Regulation 95/93 and the possibilities of further amendments that are more than purely technical are currently being examined. The extension of the block exemption for airport scheduling will also ensure that the two remaining exemptions in Regulation 1617/93 are synchronised and will allow the Commission to reconsider that regulation in its entirety before 30 June 2005.

4.1.2. Competition policy in international aviation

108. In order to ensure that competition is preserved and promoted in the field of international air transport, it is an essential prerequisite that the Commission has effective and efficient enforcement tools. In the past the Commission has submitted several proposals, most recently in 1997, to the Council for extending the scope of Regulations (EEC) No 3975/87 and (EEC) No 3976/87 to transport between the EU and third countries. So far, the Council has not decided on these proposals [70]. The Court's judgments in the "open skies" cases, confirming the need for a coordinated international air transport policy, also imply the need for a review and re-launching of these proposals [71]. A fully effective competition policy in international aviation can only be achieved by overcoming the Commission's existing investigation and enforcement limitations. The Commission is currently preparing a new proposal, which it envisages submitting to the Council in the course of 2003.

[70] COM(97) 218 final.

[71] Cases C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 and C-476/98 against the United Kingdom, Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany.

4.1.3. Transatlantic alliances

109. On 21 February, British Airways and American Airlines confirmed that their alliance agreements, which had been investigated by the Commission in close cooperation with the United Kingdom Office of Fair Trading, were terminated. As a consequence, the Commission decided to close the procedure it had opened in this case.

110. On 28 October, the Commission decided [72] to close the proceedings it had initiated in 1996 with a view to examining the alliance between KLM and its US partner NorthWest under the EU competition rules, as well as that between Lufthansa, SAS and the US carrier United Airlines. In the case of LH/SAS/UA the Commission came to its conclusion on the basis of a package of commitments proposed by the parties to address the competition concerns on a number of routes from Frankfurt airport to the United States, as well as on the basis of a declaration by the German Government, removing possible regulatory barriers for new entrants on those routes. In the case of KLM/NorthWest no commitments were held necessary.

[72] OJ C 264, 30.10.2002.

111. In November, the Commission also closed its investigation in the bmi British Midland/United Airlines case. In this case the Commission had not launched formal proceedings but had cooperated actively with the UK Office of Fair Trading (OFT) [73]. The OFT adopted a formal decision on 1 November granting the alliance an individual exemption under Article 81(3) of the Treaty. Both authorities have come to the conclusion that the alliance agreement between bmi and United Airlines fulfils the necessary requirements to merit such an exemption.

[73] For procedural reasons the OFT took the lead in this case, using its powers under the EC Competition Law Enforcement Regulations 2001. It should be recalled that Council Regulation 3975/87, which lays down detailed rules for the application of Articles 81 and 82, relates only to air transport between EU airports. However, the OFT has powers under the Enforcement Regulations to make a decision on the application of Articles 81 and 82 in relation to (inter alia) air transport between Member States and third countries. In the absence of such powers, the Commission would have had to investigate the alliance using its powers under Article 85, under which it would only have been able to propose measures to be taken to bring infringements to an end.

112. The Commission is continuing to investigate the Skyteam Alliance, between Air France, Alitalia, Delta, CSA, Korean Air and AerMexico, which was officially launched in July 2000. To that end a notice was published in the Official Journal of the European Union in March, inviting third parties to comment [74]. The Commission is currently examining the comments submitted by third parties and other information received in the meantime.

[74] OJ C 76 of 27.03.02 p. 12.

4.1.4. Intra-European alliances and mergers

113. On 1 July, the Commission sent a letter of serious doubts to Air France and to Alitalia concerning their cooperation on certain routes between France and Italy. The Commission believes that their cooperation agreement cannot be approved in its current form, since it would eliminate competition on a large number of routes between Italy and France. Sending a letter of serious doubts is the first formal step in the Commission's investigation. It could lead to a prohibition decision unless the companies address the Commission's concern.

114. On 5 July, subject to substantive undertakings from the parties, the Commission approved the partnership between Lufthansa and Austrian Airlines [75]. The conditions imposed in the decision aim to reduce entry barriers and to encourage inter-modal competition. Given the serious effects of the alliance on competition, the Commission imposed a number of remedies on the parties that had not been required in previous decisions, in particular a price reduction mechanism and the obligation to enter into special prorate agreements and inter-modal agreements.

[75] OJ L 242 of 10.9.2002 p. 25.

115. During 2002 the Commission also started to investigate alliance agreements between British Airways, Iberia and GB Airways and between British Airways and SN Brussels Airlines. In the latter case a notice summarising the cooperation agreements was published in the Official Journal of the European Union [76].

[76] OJ C 306, 10.12.2002.

116. The Commission also examined the SAS/Spanair merger and took a decision clearing the merger in March [77]. Furthermore, the Commission did not oppose a global freight exchange distribution channel set up by Lufthansa, British Airways and Air France.

[77] OJ C 93, 18.4.2002.

4.2. Maritime transport

4.2.1. Case-law developments

117. On 28 February, the Court of First Instance (CFI) delivered three judgments of great significance for EU maritime competition policy [78].

[78] Cases: T-18/97 Atlantic Container Line and Others v Commission (TACA) [2002] ECR II-1125; T-395/94 Atlantic Container Line v Commission (TAA) [2002] ECR II-875; and T-86/95 Compagnie générale maritime and Others v Commission (FEFC) [2002] ECR II-1011.

118. All three cases concern the application of Council Regulation 4056/86, the main maritime competition regulation. The regulation provides for a block exemption for various activities of liner shipping conferences. Article 3 of Regulation 4056/86 thus permits a liner shipping conference not only to fix a common freight rate but also, inter alia, to regulate the capacity offered by each member of the conference [79].

[79] The Commission has interpreted this provision as allowing capacity regulation only under certain strict conditions (see further below).

119. In the TAA case, the CFI found that the TAA (Trans-Atlantic Agreement) was not a liner conference, because it failed to meet the basic criterion of operating under common or uniform freight rates. Not being a conference, it obviously could not enjoy the benefit of the liner conference block exemption. Nor did its activities - consisting not only in maritime and inland price fixing but also in the collective limitation of available vessel capacity - qualify for individual exemption, as they variously failed to satisfy the conditions of Article 81(3) relating to improvement of production, indispensability, and non-elimination of competition.

120. The FEFC case concerned the dividing line between Council Regulation 1017/68 (inland transport) and Regulation 4056/86 (maritime transport). The FEFC (Far Eastern Freight Conference) parties argued that when inland transportation was provided as part of an intermodal (land and sea) transport operation, the applicable regulation for both transport legs was Regulation 4056/86. It followed, in the FEFC's view, that the liner conference block exemption applied not only to the maritime leg of the intermodal operation but also to the inland leg, and that a conference was therefore entitled to fix rates for both legs. The CFI rejected this interpretation, finding that inland transport, even when provided as part of an intermodal operation, was a service distinct from maritime transport and was therefore governed by Regulation 1017/68 rather than Regulation 4056/86.

121. The liner conference block exemption could not therefore cover inland price fixing by a conference.

122. Nor had the FEFC parties shown that their price-fixing arrangements were necessary in order to achieve the stated objective of stability and that they were therefore eligible for individual exemption.

123.