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Brussels, 10.04.1996 
COM(96) 126 final 
XXVth REPORT ON 
COMPETITION POLICY (1995) 
(presented by the Commission) 
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TABLE OF CONTENTS 
Page 
Introduction 
I. Anti-trust : Articles 85 and 86 12 
A. Ensuring the benefits of the internal market 12 
1. Car distribution 12 
2. Restrictions on parallel trade 13 
3. Restrictions on access to the market by new entrants 15 
4. Green Paper on vertical restraints 17 
5. Cross-border credit transfers 17 
6. Leniency programme 19 
7. Access to the file 19 
B. Cooperation and competition in a rapidly changing and 
increasingly global economic environment 20 
1. The application of articles 85 and 86 in the 
telecommunications sector 20 
1.1 Strategic alliances 20 
1.2 Access and interconnection agreements 22 
2. Globalization of markets 23 
3. Transfer of technology 23 
C. Transport 24 
1. Maritime transport 24 
1.1 Liner shipping consortia 24 
1.2 Inland rate fixing by ship liner conferences 25 
2. Air transport 26 
2.1 IATA tariff consultations 26 
2.2 Cooperation between airlines 26 
D. Trans-European networks and competition rules 27 
E. Competition and environment 28 
F. Secondary product markets 29 
G. Liberal professions 30 
H. Subsidiarity and decentralization 31 
1. De minimis agreements 31 
2. Decentralization 31 
I. Statistical overview . 33 
II. State monopolies and monopoly rights : Articles 37 and 90 35 
A. Introduction 36 
1. Services of general economic interest at the heart of the 
Commission's liberalization policy 36 
2. Article 90(3) Directives 36 
3. Other instruments available to the Commission 37 
B. Telecommunications 38 
1. General measures 38 
2. Cable TV liberalization directive. 38 
3. Mobile telephony liberalization directive 39 
4. Full competition directive 40 
5. Infringement proceedings under Article 90(3) 41 
C. Energy 42 
D. Postal services 43 
E. Transport 43 
1. Airports 43 
1.1 Landing fees 44 
1.2 Ground handling 44 
2. Ports 45 
F. Other state monopolies of a commercial character 45 
1. Swedish and Finnish alcohol monopolies 45 
2. Austrian alcohol monopoly 46 
3 . Austrian salt monopoly 46 
4. Austrian manufactured tobacco monopoly 46 
III. Merger control 48 
A. Introduction 48 
B. In-depth investigations 48 
1. Media cases 48 
2. Other in-depth investigations 50 
C. Other major cases 52 
D. Legitimate interests of Member States 53 
E. Mergers in the coal and steel industries 54 
F. Perrier 54 
G. Statistical overview 55 
IV. State aid 57 
A. General policy 57 
New measures to enforce compliance with the notification requirement 58 
1. Recovery of illegal aid 58 
2. Cooperation between the Commission and national courts 59 
B. Concept of aid 59 
C. Assessment of compatibility of aid with the common market 62 
1. Sectoral aid 62 
1.1 Sectors subject to specific rules 62 
1.1.1 Aid to shipbuilding 62 
1.1.2 Steel 62 
1.1.3 Coal 63 
1.1.4 Motor vehicle industry 63 
1.1.5 Synthetic fibres industry 65 
1.1.6 Transport 65 
1.1.7 Agriculture 68 
1.1.8 Fisheries 69 
1.2 Specific sectors not subject to special rules 70 
1.2.1 Banking 70 
1.2.2 Postal sector 71 
1.2.3 The audiovisual sector 71 
2. Horizontal aid 72 
2.1 Research and development 72 
2.2 Employment aid and general social measures 73 
2.3 Aid for environmental protection 75 
2.4 Aid to small and medium-sized enterprises (SMEs) 75 
2 .5 Export aid 76 
2.6 Rescue and restructuring aid 76 
2.7 Treuhandanstalt 78 
3 . Regional aid 78 
D. Procedures (rights of complainants) 78 
E. Statistics 79 
V. International activities 82 
A. European Economic Area 82 
B. Central and Eastern Europe, Baltic States, New Independent 82 
States and Mediterranean countries 
1. Central and Eastern Europe 82 
2. Baltic States, Slovenia and New Independent States 83 
3 . Mediterranean countries and Mercosur 83 
C. North America 84 
D. Japan 85 
E. Australia and New Zealand 85 
F. Multinational organizations and other international issues 85 
1. OECD 85 
2. World Trade Organization 86 
3 . UNCTAD 86 
4. International cooperation 86 
VI. Information policy 88 
Annex : cases discussed in the report 89 
Introduction 
1. A competitive environment as a prerequisite for competitiveness 
1. It is widely recognized that competition policy has a key role 
to play in ensuring that EU industry remains competitive. 
Competition policy serves as an instrument to achieve the optimal 
allocation of resources, technical progress and the flexibility to 
adjust to a changing environment. In that respect, competition and 
competitiveness belong together. Experience shows that only those 
companies which are used to strong competition and perform well in open 
and dynamic markets will be able to function effectively on a wider 
scale - be it in other geographic areas or in a more global economy in 
general. 
Competition policy and competitiveness policy are thus not 
contradictory but rather serve the same goals of creating the essential 
conditions for the development and maintenance of an efficient and 
competitive Community industry, bringing better products and services 
to European citizens, and providing a stable economic environment. 
2. Internal market and competition policy 
2. The complementarity between those two policies is also clearly 
shown by the Community's objective of creating an internal market. On 
the one hand, the internal market is an essential condition for the 
development of an efficient and competitive industry. On the other 
hand, competition policy is an important tool for achieving the goal 
of, and maintaining, an internal market, in particular via the 
enforcement of rules ensuring that the regulatory barriers to trade 
which have been removed are not replaced by private or other public 
restrictions having the same effect. 
2.1 Factors affecting competition in the internal market 
3. While the legislative steps spelt out in the 1985 Commission 
White Paper on the internal market have almost all been adopted and 
transposed at national level, preliminary evidence suggests that some 
product and service markets remain fragmented.1 
Internal market integration, in tandem with the progressive 
globalization of markets, is expected to widen geographic markets (not 
necessarily to Community level - relevant geographic markets may 
contain a distinct set of regional or national areas) . It may therefore 
redefine the structural parameters of the market within which the 
implications of actions of public- or private-sector operators for 
competition must be judged. No definitive judgement can be made at this 
early stage as to whether the pro-competitive impact of the internal 
market has manifested itself. In some markets, there is tentative 
evidence that competition is increasingly defined at a supranational 
level, while in others there is reason to believe that markets remain 
segmented along national lines. The latter can be explained by 
reference to a range of factors which must be taken into account when 
assessing the consequences of internal market integration in terms of 
the geographical expansion of "relevant markets". 
4. A first factor relates to the effectiveness of legislative action 
(and ancillary measures such as European standardization) in 
During 1996 the Commission intends to present the findings of an overall analysis of the 
impact and effectiveness of the internal market programme pursuant to Council Resolution 
92/1218 of 7 December 1992. 
dismantling legal and administrative barriers to cross-border 
transactions. Where the legislative framework is incomplete or 
inadequate, the Commission intends to press for its reinforcement. 
There may also be situations where there are no entry barriers but 
where discrepancies in national arrangements result in differences in 
economic conditions that are capable of distorting trade and 
competition (e.g. pharmaceutical pricing, taxation, monetary 
fluctuations). Where these factors result in differences in economic 
conditions between national markets, leading operators to distinguish 
between them, this may need to be taken into account in defining the 
relevant market for competition. "Natural barriers" such as language, 
taste and habits, or structural characteristics which reduce the 
tradability of products or services, may also require that national 
markets be regarded as separate entities. These issues have arisen in 
the context of the Commission's investigation of mergers in TV 
broadcasting and the media sector, where linguistic and cultural 
factors require that the EU market be regarded as consisting of a 
series of distinct national markets. This cultural diversity 
contributes to the richness of our shared European heritage and must 
be taken into account in the analysis of cases by the Commission, even 
if cases of dominance are more frequently encountered as a result 
(Nordic 'Satellite; RTL/Veronica/Endemol). 
2.2 Role of competition policy 
5. While internal market integration shapes the economic context 
within which Community competition policy must be applied, it is also 
the case that the application of Community competition policy will help 
to reinforce the functioning of a single market. Three main areas of 
activity can be identified: anti-competitive agreements and practices, 
the regulated or monopolized sectors, and state aid. It is an essential 
consideration here that the Commission has at its disposal a set of 
interdependent competition policy instruments. The anti-trust rules, 
merger control, the policing of state aid and the rules on 
liberalization, all serve the same objective of ensuring that 
competition in the internal market is not distorted. 
6. The Commission is vigilant in applying Community competition 
rules where firms attempt to stifle the pro-competitive effects 
emanating from internal market integration through anti-competitive 
behaviour designed to sustain market segmentation. Examples of 
behaviour which give rise to such concern are restrictions on parallel 
trade, certain types of vertical agreements and/or distribution 
systems, and unjustified refusal to provide (non-discriminatory) access 
to facilities which third parties require in order to compete. 
7. The liberalization of traditionally monopolized markets, such as 
utilities, is an essential step in the establishment of an internal 
market. It is strongly believed that, without a stronger and more 
competitive base in the fields of energy, public transport and 
telecommunications, the European economy, including consumers and 
medium-sized enterprises, will be at a disadvantage.2 The Madrid 
European Council in December 1995 concluded that it is essential to 
introduce increased competition in different sectors in order to 
enhance competitiveness and so create new jobs. The Commission has 
therefore pursued its efforts to open up these markets to competition 
and intra-Community trade while ensuring that the measures proposed or 
adopted are compatible with the performance by public services of tasks 
Competitiveness Advisory Group, Enhancing European Competitiveness, Second Report to the 
President of the European Commission, the Prime Ministers and Heads of State, December 
1995 ("Ciampi Report") . In the same context, it is argued that "what matters most is not 
so much that the ownership - and management - of public utilities moves from the State 
to the private sector, as that competition is introduced and extended wherever possible" . 
of general economic interest, such as the provision of a universal 
service to all citizens at affordable prices. 
8. Telecommunications is a strategic area of considerable interest 
for the European Union3. Ongoing liberalization of this sector has 
forced telecom operators to launch new services and to reduce prices. 
Both industry and consumers benefit from the opening-up of telecom 
markets. The introduction of competition in this sector is also vital 
to facilitate the transition to the information society, and thus for 
our ability to survive in an increasingly competitive and global 
market. In this context, cultural diversity and equal access to the new 
services are essential objectives that need to be addressed. 
Much of the legislation at Community level has either been adopted or 
is well under way for complete liberalisation by 1998. This must of 
course be transposed into national legislation and effectively applied 
in order to ensure the introduction of real competition. The role of 
the Commission will not be reduced once the legislative acts are in 
place. On the contrary, the Commission must ensure that, once removed, 
the legal barriers will not be replaced by agreements or practices of 
a similar nature, such as anti-competitive mergers, market-sharing 
agreements, abusive behaviour of the incumbents against newcomers -for 
example, by denying non-discriminatory access to essential facilities-
or by illegal state aid. Where exclusive rights are maintained in 
reserved areas, cross-subsidization of the operator's non-reserved 
areas should be avoided. 
In the meantime, industry moves on to anticipate new emerging markets. 
New alliances having global implications have been submitted to the 
Commission for scrutiny. The Commission's assessment of these cases 
demonstrates how the existing competition rules, when applied 
realistically, are capable of grasping the dynamics of innovation and 
globalization. But newly emerging markets is not a password for 
approval. While alliances should be allowed, or even encouraged when 
pro-competitive, they cannot be accepted where they thwart or threaten 
the demonopolization process. Where big players join forces, the 
Commission should aim to prevent market foreclosure. 
9. To an even greater degree than the télécoms sector, the air 
transport sector, where full liberalization will be completed by the 
end of 1997, demonstrates that legislation is necessary but not 
sufficient to achieve a fully competitive environment. In this sector, 
where airlines fight to secure or retain a sufficient share of a 
modestly growing and competitive market, there is an ever-present 
danger that the incumbents might use unfair methods to protect their 
interests. Strict application of competition rules, mainly in the field 
of state aid and control of abusive behaviour, is absolutely necessary. 
In particular, state aid is seen as a counterproductive measure which 
tends to protect the inefficient against the efficient, simply delaying 
the necessary restructuring. State aid might even be used to fight new 
competitors by means of predatory pricing and other measures. While 
restructuring is necessary to achieve efficiency gains and 
competitiveness in a growing market, the Commission has to make sure 
that a high degree of concentration does not foreclose routes and 
slots, thereby re-erecting legally removed barriers. 
10. Energy is another key factor for industry and was mentioned as 
such in the Ciampi Report. However, this year has not produced any real 
progress in the liberalization of this sector. 
Green Paper on the liberalization of telecommunications infrastructure and cable 
television networks : Part One (COM(94) 440, 25.10.1994) and Part Two (C0M(94) 682, 
25.01.1995). 
11. According to the fourth survey on state aid in the European 
Union, published in 1995, the total amount of national aid in the 
period 1990-1992 has decreased, but - at around ECU 94 billion on 
average per year for the Community as a whole - is still too high for 
the Commission's objectives to be attained, notably with respect to the 
richer Member States. Vast amounts of state aid are not the way to 
achieve competitiveness. They delay necessary restructuring, distort 
competition between the companies and regions, and are a burden on 
public budgets. 
However, it would be unrealistic to suggest that all state aid be 
simply eliminated, and this has never been envisaged by the authors of 
the Treaty or by the Commission. Market forces alone, in a market which 
is not perfect, do not allow the attainment of certain fundamental 
objectives of the Member States and the European Union, such as 
economic and social cohesion, a sufficient degree of R&D and 
environmental protection, the development of SMEs, and the necessity 
of allowing time for structural adjustment, in particular for social 
reasons. For the Commission, it is essential to ensure that, where 
state aid is allowed by derogation, the negative effects on competition 
and trade between Member States are limited to what is strictly 
necessary and that they are offset by the realization of objectives of 
general Community interest. 
3. International cooperation 
12. The increasing globalization of the world economy and the 
changing pattern of modern trade makes international cooperation 
between competition authorities inevitable. 
First, companies operating worldwide must be aware of, and must comply 
with, differing competition laws and practices in different 
jurisdictions. This necessarily entails a cost for the companies 
concerned. Moreover, when transactions fall within the jurisdiction of 
multiple competition authorities, there is an increased risk of 
conflicting measures being imposed. Competition authorities for their 
part may have difficulties in gaining access to information evidencing 
an anti-trust violation located outside their jurisdiction. 
Alternatively, competition rules aimed at preserving effective 
competition on the home market may be less effective in dealing with 
anti-competitive conduct at the global level. Finally, it is widely 
recognized that greater application of competition rules must accompany 
trade liberalization if it is to be effective - private barriers must 
not replace dismantled public barriers. 
For all these reasons greater cooperation at international level is 
clearly in the interests of industry and consumers. 
13. On a bilateral level, the Agreement with the United States 
(confirmed in April 1995 by the Council) already offers scope for 
cooperation and its provisions on coordination of enforcement 
activities to some extent allow the parties to work together to tackle 
anti-competitive situations affecting the EU and US markets. 
In a report on competition policy in the new trade order drafted by it 
at the request of Mr Van Miert, an independent group of experts 
recommends as a "priority" the deepening of the current EC/US 
Agreement. It also formulates recommendations in relation to 
plurilateral cooperation as it believes that bilateral agreements 
cannot of themselves adequately address all the problems which could 
arise at international level. 
4. Role of the Commission in applying the competition rules 
14. It is fair to say that the development phase of Community 
competition policy is completed. Policy and law are now well 
established through the Commission's administrative practice and the 
principles developed by the European Courts. On the other hand, the 
Commission has at its disposal limited resources to deal with an ever-
increasing number of cases. In 1995 in particular, the number of new 
cases, especially state aid and Articles 85/86 cases, increased 
significantly as a result of the accession of three new Member States. 
15. Accordingly, the Commission has been considering how to focus on 
those arrangements which have a significant effect on competition and 
are likely to affect trade between Member States appreciably. For this 
purpose, several instruments and concepts have already been developed. 
Preparatory work is under way to broaden and refine them further. 
Particularly relevant in this respect are the application of the de 
minimis principle (in the fields of both anti-trust and state aid) , 
group exemptions (which allow firms to make agreements without 
notifying them to the Commission so as to obtain legal certainty) , and 
the notion of Community interest in the case of complaints. 
16. Where the Commission must deal as a priority with cases having 
an appreciable effect on intra-Community competition, the role of 
national authorities and courts in competition cases becomes more 
important. The decentralized application of the competition rules is 
often a quicker and more efficient way to bring infringements to an end 
. More frequent application by national courts and authorities reminds 
the Community citizen that these rules are part of the "living law" of 
each Member State and are aimed at protecting their rights. 
17. The Commission therefore continued to encourage the decentralized 
application of Community competition rules, in particular as far as 
cases falling within the scope of Articles 85 and 86 are concerned. 
It's aim is to establish effective cooperation between the national 
courts, competition authorities and itself. In this respect, the 
preparatory work for a new notice on cooperation between the Commission 
and national competition authorities is well advanced and will 
complement the existing notice on cooperation with the national courts. 
This policy of decentralization should however be implemented gradually 
and with care. The actual decentralization process goes hand in hand 
with a continuing effort on the part of the Commission to clarify and 
simplify the rules of substance in order to enable the Member States 
to use the same concepts when applying the Community competition rules. 
18. The principle of subsidiarity dictates that the most appropriate 
authority should take action. Therefore, certain cases which fall 
within the jurisdiction of several national authorities should be 
handled by the Commission. Thus, in the case of mergers, it is 
preferable for firms to have their proposed mergers examined by the 
Commission alone rather than having to submit them to a number of 
national authorities. In 1995 the Commission embarked on a new review 
of the Merger Regulation, inter alia to consider whether the turnover-
based criterion for determining those cases which must be submitted to 
the Commission and those which fall within the exclusive jurisdiction 
of the Member States is still appropriate. 
19. In the field of state aid, the subsidiarity principle dictates 
that the Community must have exclusive competence because Member States 
cannot be asked to control their own state aid expenditures in a fair 
way vis-à-vis their neighbours. However, one aspect can be handled at 
national level : national courts may act upon complaints by the 
competitors of the firm receiving state aid, and in particular it may 
control whether the necessary notification and approval procedures have 
been followed by the Member State. The Commission has published a new 
notice in this area which has a threefold purpose : to strengthen and 
decentralize enforcement of state aid rules, to clarify the legal 
position for the benefit of all interested parties and to offer 
assistance to judges. 
5. Transparency 
20. Competition rules are often complex because the economic, legal 
and political context in which they operate is complicated and 
constantly evolving. This does not mean that there is no room left for 
more transparency and simplification. The Commission has indeed found 
several ways to increase information about its policy and to simplify 
the legal framework. They include : the newly adopted group exemption 
for technology transfer agreements, which will replace the two 
regulations concerning know-how and patent licensing; the use of 
notices and communications to provide guidelines on the application of 
the competition rules in certain sectors (cross-border credit 
transfers; postal services); the use of green papers for the purpose 
of public consultation (i.e. the planned green papers on vertical 
restraints and merger review to be published in 1996) ; and the 
publication of explanatory brochures (new car distribution regulation) . 
In the field of state aid, the obligation to notify, which is laid down 
in the Treaty, is central to ensuring transparency. The Commission has 
indicated in a communication that it intends to utilize all the powers 
which the Treaty confers on it to ensure that Member States respect 
this obligation. It has also started working on a revised and 
consolidated regional aid framework and has adopted a new framework for 
aid for research and development. Lastly, it pursued its active 
campaign to inform the public of competition policy matters : press 
releases and conferences, DG IV s Information Service, publications, 
the Competition Policy Newsletter and, last but not least, the Annual 
Report on Competition Policy, all of which serve the same purpose, 
namely to enhance transparency, legal certainty and predictability. 
6. Democratic accountability 
21. Competition policy cannot simply be a technocratic or 
administrative exercise, but has everything to gain by bringing about 
a wide democratic consensus. The Commission accordingly attaches great 
importance to a fruitful dialogue with the other Institutions of the 
European Union on all aspects of its competition policy. 
22. The Annual Report on Competition Policy serves as a basic 
instrument of communication and information to the other Institutions 
of the European Union, in particular the European Parliament, the 
Council and the Economic and Social Committee. The fruitful exchanges 
of view and discussions concerning the previous report were clearly of 
help to the Commission in implementing its tasks and contributed to 
better information on, and comprehension of, European competition 
policy. Moreover, where appropriate, the Commission takes the 
initiative of consulting the other Institutions on newly proposed 
provisions or on other policy documents. In particular, in the context 
of the adoption of Article 90 liberalization directives, it has 
carefully considered the observations made by the European Parliament, 
the Council, the Economic and Social Committee, and the Committee of 
the Regions. 
23 . The Commission has also collaborated closely with the Council on 
various aspects of its policy, in particular as regards the 
10 
relationship between competition policy and competitiveness. 
24. Member States are closely involved in the Commission's decision­
making process through the Advisory Committee on Restrictive Practices 
and Dominant Positions, the Advisory Committee on Concentrations and 
the Conference of national government experts. Moreover, Commission 
officials have regular and constructive informal contacts with their 
colleagues at national level. 
25. On 3 and 4 April the Commission organized the First European 
Competition Forum in Brussels on the issue of vertical restraints.4 
More than 260 participants including competition authorities and judges 
from 3 5 European countries attended. The purpose of such a forum is to 
promote exchanges of experience and discussions among Community and 
Member State officials whose responsability is to enforce competition 
law, and to encourage decentralized application of competition law. A 
second Forum is planned in 1996. 
26. The Commission's XXVth Annual Report on Competition Policy (1995) 
differs in presentation from the previous annual reports. 
27. In recent years the Commission's competition report has increased 
steadily in size, to reach more than 600 pages in 1994. Since the 
Commission's separate brochure "European Community competition policy 
- 1994", which summarizes the Commission's policy and decisions in a 
"user-friendly" format, has been well received, the Commission has been 
asked, in particular by the Economic and Social Committee, to present 
a shorter and more readable document. 
The Commission therefore decided to produce a shorter report than in 
the past, focusing on the main policy developments in the field of 
competition, which are illustrated, where applicable, by the 
Commission's major decisions and new legislative measures. 
In addition to the present Annual Report, the Directorate-General for 
Competition (DG IV) of the European Commission prepared a "Report on 
the application of the competition rules in the European Union - 1995", 
which describes the important individual cases decided by the 
Commission. It also contains lists of references to the new legislative 
provisions and notices, the Commission decisions and press releases, 
and decisions by the Court of Justice and the Court of First Instance. 
It furthermore gives a description of the application of competition 
rules in the Member States. 
7. Statistics 
28. There has been a large increase in the overall number of new 
cases registered. The total number of new cases (anti-trust, mergers, 
state aid) rose from 1 081 in 1994 to 1 472 in 1995 - an increase of 
36%. New Articles 85 and 86 cases increased by more than 42%, merger 
notifications rose by nearly 16% and the number of new state aid cases 
grew by 35%. A significant part of this increase, in particular in the 
field of anti-trust-and state aid, is due to the accession of three new 
Member States to the European Union on 1 January 1995. 
29. The total number of cases closed in 1995 remained almost at the 
same level as in 1994 : 1 210 cases compared with 1 200. 
Competition Policy Newsletter, No 5, Volume 1, summer 1995, p. 7. 
11 
I - Anti-trust : Articles 85 and 86 
A - Ensuring the benefits of the internal market 
30. An essential aim of European competition policy is to ensure that 
the completion of the internal market brings consumers and the European 
economy as a whole all the benefits of a Community-wide market. 
Competition policy must create the appropriate framework allowing 
companies to adjust to the new possibilities opened up by the 
elimination of national barriers. However, where companies try to slow 
down the process of market integration or even obstruct cross-border 
trade by anti-competitive practices, it is necessary to pursue a 
vigilant policy, including the imposition of severe sanctions in case 
of hard-core infringements of the competition rules. 
Vertical arrangements between suppliers and distributors are a core 
element of European competition policy in this field. Some of these 
arrangements may be necessary to penetrate new markets, launch new 
products or promote efficient distribution networks and might thereby 
benefit consumers. Problems may, however, arise where there is not 
enough competition between producers or between distributors in the 
same markets or where the arrangements are used for anti-competitive 
purposes, i.e. for market-partitioning or for restricting access to the 
market by new entrants. 
1. Car distribution 
31. Because motor vehicles are consumer durables which require expert 
maintenance and repair, manufacturers cooperate with selected dealers 
and repairers in order to provide specialized distribution and 
servicing for the product. Such arrangements are likely to enhance 
efficient distribution of the products concerned, and the exclusive 
and/or selective nature of the distribution system can be regarded as 
indispensable for attaining rationalization and efficiency in the motor 
vehicle industry. 
This was and still is the basic motivation for allowing restrictive 
distribution and servicing agreements in the car sector. However, the 
new group exemption relating to the distribution and servicing of motor 
vehicles,5 which the Commission adopted on 28 June 1995 to replace the 
existing Regulation No 123/85,6 contains several adjustments aimed at 
intensifying competition in the markets for cars and spare parts and 
improving the position of consumers by guaranteeing them the full 
benefits of the internal market. 
32. In particular, the new regulation secures greater independence 
for dealers vis-à-vis car manufacturers. Most importantly, dealers are 
allowed to sell cars of other manufacturers provided that this is done 
on separate sales premises, under separate management, in the form of 
a distinct legal entity and in a manner which avoids confusion between 
brands. To ensure effective competition on the maintenance and repair 
markets, car manufacturers or suppliers are not allowed to impede 
access by independent spare part producers and distributors to the 
markets or to restrict the dealer's right to procure spare parts of 
equivalent quality from firms of his choice outside the network 
Furthermore, car manufacturers must provide repairers outside the 
Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85 
(3) of the Treaty to certain categories of motor vehicle distribution and servicing 
agreements (OJ L 145, 29.6.1995, p. 25). 
Commission Regulation (EEC) No 123/85 of 12 December 1984 (OJ L 15, 18.1.1985). 
12 
network with the technical information they need to enable them to 
repair and maintain cars produced by them, provided that the 
information is not covered by an intellectual property right. 
33. Multidealerships, opening-up of the market in spare parts, 
greater competition in the field of repairs, all serve the aim of 
increasing consumers' choice in accordance with the principles of the 
single market. The same objective requires that consumers are able to 
buy a car and to have it maintained or repaired wherever in the 
European Union prices or terms are most favourable. 
This is all the more important in the car sector, where price 
differences between Member States are significant. In its latest six-
monthly survey of car prices, published in July, the Commission noticed 
that price differentials had risen dramatically since November 1994.7 
Since the beginning of 1995 it has received an increasing number of 
complaints from individuals in the European Union, mostly from Austria, 
Germany and France, who have been prevented from purchasing a car in 
Italy and Spain, where, following currency devaluations, prices were 
relatively low.8 
The new regulation expressly bans any practices designed to prevent 
parallel trade.9 Dealers must be allowed to meet demand from outside 
their allotted sales area and may in future undertake certain means of 
advertising outside their territory. 
34. The Commission departments published on 26 September 1995 in all 
Community languages a brochure which explains the new regulatory 
framework for manufacturers, dealers, spare part producers and 
independent repairers. It also provides consumers with information on 
their freedom to buy a car anywhere in the Community.10 
2. Restrictions on parallel trade 
35. It is one of the most well-established principles of Community 
competition law that producers are forbidden to divide the internal 
market by private agreements and to maintain price differences by 
arranging anti-competitive absolute territorial protection. However, 
such behaviour continues to occur on the market and, where it comes to 
light, one can expect severe action by the Commission. 
BASF/Accinauto 
36. In a decision of 12 July 1995,X1 the Commission imposed a fine of 
ECU 2.7 million on the German car refinish paint producer BASF Lacke 
+ Farben, a subsidiary of the BASF group, and a fine of ECU 10,000 on 
BASF' s exclusive distributor in Belgium and Luxembourg, Accinauto S.A.. 
The case originated with a complaint by two English parallel importers 
of Glasurit car refinish paint products. They alleged that Accinauto, 
from whom they bought the Glasurit products, had ceased deliveries to 
them in the summer of 1990 on the instructions of BASF. The Commission 
carried out investigations on the premises of BASF and Accinauto and 
found out that Accinauto was bound by a contractual obligation to 
Commission press releases IP/95/50 of 19.1.1995 and IP/95/768 of 24.7.1995. 
"The impact of currency fluctuations on the internal market", Communication from the 
Commission to the European Council, 31.10.1995, point 25. 
See also judgments of the Court of Justice of 24 October 1995 in Cases C-70/93 Bayerische 
Motorenwerke AG and ALD Auto-Leasing D GmbH and C-266/93 Bundes/cartellamt and Volkswagen 
AG, VAG Leasing GmbH (not yet published). 
"Distribution of motor vehicles", Explanatory brochure, European Commission, DG IV, 
IV/9509/95. More than 7 000 copies of this brochure have already been distributed. 
OJ L 272, 15.11.1995, p. 16. 
13 
transfer to BASF all orders from customers from outside its exclusive 
distribution territory. The Commission concluded that this obligation 
constitutes an unacceptable restriction of competition as it hinders 
the export by Accinauto of the relevant products from Belgium to the 
United Kingdom. In fact, as a result of this obligation, BASF itself, 
and not the exclusive distributor, decides on and controls supplies to 
parallel importers from other Member States. . 
Pharmaceutical products :• Organon 
37. Prices for pharmaceutical products differ significantly between 
Member States. This is usually explained by the differences in national 
price control and health care systems. On several occasions, the Court 
of Justice has ruled that parallel imports should not be blocked, 
irrespective of the factors that determine price differences. Hence, 
in the pharmaceutical sector, the Commission has consistently applied 
the competition rules to agreements or conduct which restrict parallel 
trade in drugs. It is believed that the unrestricted operation of 
market forces in this way is likely to act as a catalyst for the 
gradual convergence not only of prices but also of price control 
mechanisms. Prices in the high-cost countries should fall, while those 
in the low-price countries should, if they fail to offer pharmaceutical 
companies a reasonable return on investment, ultimately increase in 
reaction to the real threat of product withdrawal. Some Member States 
with high drug prices even stimulate parallel imports in order to bring 
about a reduction in their country's overall drug bill. 
38. Organon is a British subsidiary of Akzo (Netherlands) which 
specializes in the manufacture and marketing of contraceptive pills. 
On 4 May 1994 Organon changed the price regime applicable to its 
contraceptive pills Mercilon and Marvelon, the latter holding 
substantial market shares throughout the Community. Before that date, 
ORGANON applied a discount of 12.5% on all products supplied to its 
customers, irrespective of their final destination. The new price 
regime differentiated between those pills to be sold in the UK and 
those intended for export. Only the former qualified for the 12.5% 
discount rate. 
Following several complaints and Organon's notification of the new 
pricing system, the Commission initiated proceedings against Organon 
and issued a statement of objections aimed at withdrawing the immunity 
from fines brought about by notification. For the Commission, the new 
price regime, which forms part of continuous business relations between 
Organon and its wholesalers and therefore constitutes an agreement 
within the meaning of Article 85(l),12 constituted a serious 
infringement of the competition rules in that it gave rise to 
discrimination in the prices of the products according to their 
geographical destination. As a result, consumers could no longer enjoy 
the benefits of parallel trade.. In the Netherlands in particular, where 
the Marvelon pill of Dutch origin is not fully reimbursed by the social 
security scheme, whereas the price of the British pill allows it to be 
offered at a price equal to the Dutch social security reimbursement 
level, consumers were no longer able to opt for the UK produced 
Marvelon and thus to benefit from not having to pay an amount over and 
above the reimbursement price. 
Organon, however, decided to abandon the new pricing regime, which the 
In its judgment of 24 October 1995 in Cases C-70/93 and C-266/93 (see footnote 9), the 
Court confirmed its prior jurisprudence that a call by a company to its dealers does not 
constitute an unilateral act which falls outside the scope of Article 85(l) but is an 
agreement within the meaning of that provision if it formed part of a set of continuous 
business relations governed by a general agreement drawn up in advance. 
14 
Commission had opposed, and reintroduced the previous price conditions. 
The status quo having being restored, the Commission suspended its 
proceedings and reserved the right to examine the forthcoming pricing 
system which Organon intends to bring in. 
3. Restrictions on access to the market by new entrants 
39. A truly competitive internal'market also implies that companies 
are free to enter the market to compete with existing market players. 
The Commission is therefore particularly keen to keep open markets and 
has in fact intervened where companies, be it through restrictive 
agreements or by unilateral action, have impeded access to the market 
by new entrants. 
40. New competitors can be prevented from entering the market by 
vertical arrangements between existing suppliers and distributors. This 
is in particular the case where a large number of retailers on the 
market are tied by an obligation to sell only the products of the 
manufacturer with which they have a contract or arrangements having a 
similar exclusionary effect on third parties. The cases concerning the 
impulse ice cream market (Unilever/Mars) are examples of such 
arrangements. 
In other cases, access by third parties to the market is impeded 
through a horizontal agreement or concerted practice between actual or 
potential competitors. This is what happened on the Dutch crane-hire 
market (Van Marwijk/FNK-SCK) . 
Access to the market can also be blocked through abuse by a monopoly 
or dominant provider of essential facilities or services. This is a 
problem of increasing importance in various sectors. Where a dominant 
company owns or controls a facility access to which is essential to 
enable its competitors to carry on business, it may not deny them 
access, and it must grant access on a non-discriminatory basis. Be it 
dn the transport sector, in particular air transport, in banking or in 
the telecommunications sector, the Commission applies this general 
principle of EU competition law13 in order to foster new competition. 
The case concerning access to the port of Roscoff in France (ICG/CCI 
Morlaix) raises the same issue. 
Unilever/Mars 
41. Unilever is market leader in most EU Member States in "impulse" 
ice cream products (i.e. single wrapped items of industrially 
manufactured ice cream sold for immediate consumption in places like 
newsagents, petrol stations, etc.). 
In the Republic of Ireland, it is by far the largest ice cream 
producer. Unilever's distribution system consisted in providing freezer 
cabinets to retailers subject to a condition of exclusivity whereby 
only Unilever products could be stored in the cabinets ("freezer 
exclusivity"). Moreover, the cost of cabinet provision was included in 
the price of the ice cream charged to all retailers, irrespective of 
whether they had a Unilever freezer cabinet. 
On a complaint from Mars, the Commission examined the distribution 
arrangements operated by Unilever in Ireland. It found that, where a 
retailer has only one or more Unilever freezer cabinets in his outlet, 
that outlet is in practice tied exclusively to the sale of Unilever ice 
This general principle has found support in the Judgment of the Court of Justice of 6 
April 1995 in Cases C-241/91 P and C-242/91 P Radio Telefis Eireann (RTE) and Indépendant 
Television Publications Ltd v Commission (Magill) [1995] ECR 1-743. 
15 
cream as a result; the majority of all outlets offering impulse ice 
cream in Ireland fall into this category. Such outlet exclusivity has 
already been condemned by the Commission in 1992 with regard to the 
German impulse ice cream market.14 The Unilever agreements had the 
cumulative effect of appreciably restricting competition by preventing 
third competitors' access to the market. The arrangements were also 
found to be an abuse of Unilever's dominant position on the market. 
Unilever, however, agreed to alter its practices with the aim of 
freeing up the market, in particular by giving wider choice to 
retailers. The Commission has accordingly announced that the new 
arrangements appear to meet the conditions for the granting of an 
exemption.15 
Van Marwijk/FNK-SCK 
42. In its decision of 29 November 199516, the Commission imposed 
fines17 on FNK and SCK for infringements of Article 85 (1) on the Dutch 
crane-hire market. 
FNK (Federatie van Nederlandse Kraanverhuurbedrijven) is an association 
of Dutch firms which hire out mobile cranes. SCK (Stichting 
Certificatie Kraanverhuurbedrijf) was set up on the initiative of FNK 
in order to guarantee, through a certification system, the quality of 
cranes and equipment used in the crane-hire business. Most of the 
firms which participate in SCK are also members of FNK. They account 
for between 50% and 80% of the Dutch market. Crane-h'irers themselves 
hire cranes from other crane-hirers on a.large scale. 
Apart from FNK's recommended prices for the hiring-out of cranes and 
the concerted prices applied between members of FNK, the Commission 
attacked the ban on SCK certificate-holders hiring cranes from firms 
not affiliated to SCK. It considered that the SCK hiring ban was caught 
by the prohibition of Article 85 (1) as the SCK certification system did 
not fulfil the conditions of openness and acceptance of other 
equivalent quality guarantee systems. It concluded that the ban not 
only restricted the freedom of action of the affiliated firms but also 
considerably impeded access by third parties to the Dutch market. 
In its decision, the Commission indicated that, while its policy on 
certification allows scope for private-law certification systems 
designed to provide supplementary monitoring of compliance with 
statutory provisions, such systems should be in accordance with the 
competition rules. 
ICG/CCI Morlaix 
43. Irish Continental Group (ICG) applied to the Chambre de Commerce 
et d'Industrie de Morlaix (CCI Morlaix) for access to the port of 
In 1992 the Commission took a negative decision against Langnese (Unilever) and Schôller, 
who are in a duopolistic position on the German impulse ice cream market. In that case 
the Commission acted against "sales outlet exclusivity" arrangements under which a 
retailer undertakes to sell only the products of the manufacturer with whom he has a 
contract. The Commission decided that the cumulative effect of the agreements in question 
amounted to an appreciable restriction of competition by Langnese and Schôller. This 
finding was appealed against by the parties but was upheld by the Court of First Instance 
in its judgments of 8 June 1995 in Case T-7/93 Langnese-Iglo GmbH v Commission [1995] 
ECR 11-1533 and in Case T-9/93 Schôller Lebensmittel GmbH & Co. KG v Commission [1995] 
ECR 11-1611. 
OJ C 211, 15.08.1995, p.4. 
OJ L 312, 23.12.1995, p.79. 
The immunity from fines resulting from the notifications by FNK and SCK in early 1992 was 
withdrawn under Article 15(6) of Regulation No. 17 by Commission Decision of 13 April 
1994 (OJ L 117, 7.5.1994). 
16 
Roscoff (Brittany) for the purpose of commencing a ferry service 
between Ireland and Brittany in the summer of 1995. Brittany Ferries 
was at that time the only ferry company operating between Ireland and 
Brittany. Initially, an agreement in principle was reached between the 
parties following which ICG started to market and take bookings for its 
new ferry service. Negotiations were however suspended in January 1995 
and no final agreement could be reached between CCI Morlaix and ICG 
after ICG had complained to the Commission and further negotiations had 
taken place. 
The Commission found that CCI Morlaix, being the operator of the port 
of Roscoff, which was the only port capable of providing adequate port 
facilities in France for ferry services-between Brittany and Ireland, 
was prima facie in a dominant position. It also found that, by its 
unjustified refusal to give ICG access to the port facilities of 
Roscoff, CCI Morlaix had prima facie abused its dominant position. The 
Commission could therefore order interim measures on 16 May 1995 
obliging CCI Morlaix to take the necessary steps to allow ICG access 
to the port of Roscoff until the end of the summer season. 
After the Commission's intervention, the parties concluded a five-year 
contract for the use of the Roscoff port facilities by ICG; this was 
not only to their mutual benefit but, more importantly, to the benefit 
of travellers, who now have a wider choice of transport services and 
activities in the Roscoff area. 
4. Green Paper on vertical restraints 
44. Vertical arrangements between suppliers and distributors in the 
various Member States have always received particular attention under 
Community law in view of the goal of market integration. It has been 
a core element of Community policy to keep channels for parallel trade 
open and free from restrictions by private business. Even though 
competition policy towards vertical restraints has served the Community 
well to date, it is felt necessary to undertake a review in order to 
ascertain whether Community policy in this field is still adapted to 
the distribution and consumer needs of the future. 
For example, the application of information technology and just-in-time 
methods is changing not only production methods but also the form and 
systems of distribution. The implications of this must be fully 
reflected in policy so as not to stifle the highly innovative and 
rapidly changing distribution techniques. 
Moreover, the main block exemptions in the field of vertical restraints 
come up for renewal soon : exclusive selling and buying in 1997 and 
franchising in 1999. These renewals need to be prepared. 
The review will take the form of a Green Paper which will set out 
different alternatives for future policy. The intention is to submit 
this option paper next year to a wide and in-depth public consultation 
of all interested political and socio-economic partners (the European 
Parliament, Member States, producers, distributors and consumers). 
5. Cross-border credit transfers 
45. The banking sector is still not characterized by a properly 
functioning internal market. Payments for financial transactions are 
an important cost factor for companies and may act as ,a significant 
impediment to the smooth operation of the internal market. 
46. In September the Commission adopted a notice on the application 
17 
of the EC competition rules to cross-border credit transfers.18 
The notice is part of a package of measures adopted by the Commission, 
including a proposal for a directive, with a view to improving the 
cross-border credit transfer services offered by banks.19 These systems 
are used by banks to transfer money on behalf of customers between 
different countries in the Union. 
47. The notice updates and replaces competition principles published 
in 1992. It states that the Commission's general approach will be to 
view positively cooperation agreements between banks that in particular 
enable them to meet the requirements of the directive. This cooperation 
should not, however, go so far as to eliminate competition between 
banks. The notice therefore provides guidelines for banks as to how 
they can set up cooperation arrangements to handle cross-border credit 
transfers more efficiently without falling foul of the competition 
rules. It may therefore contribute to the development of payment 
systems which are more favorable to European citizens. 
48. The notice addresses two issues of particular importance: market 
entry, and price competition. 
As to market entry, the Commission wishes to ensure that smaller banks 
are not unfairly excluded from systems to which they must belong if 
they are, in practice, to be able to offer cross-border credit 
transfers to their customers. The conditions for access to such systems 
should be objectively justified and applied in a non-discriminatory 
manner. Conversely, the exclusion of newcomers from a system which is 
not an essential facility, e.g. a smaller system developed by groups 
of banks, will not normally give rise to competition concerns. 
As far as price competition is concerned, the notice distinguishes 
between bank-customer pricing agreements and inter-bank pricing 
agreements. 
Banks must not conclude agreements among themselves that determine the 
level of customer fees or the way in which they are to charge such 
fees. 
The key issue concerning inter-bank pricing agreements is the 
assessment of multilaterally agreed interchange fees, i.e. collectively 
agreed transaction fees paid by one bank (typically the sender's bank 
or its correspondent bank) to another bank (the beneficiary's bank). 
The Commission takes the view that a multilaterally agreed interchange 
fee is a restriction of competition falling within the prohibition of 
price agreements contained in Article 85(1). Such a fee can, however, 
be exempted under Article 85(3) where the conditions for exemption are 
met. In the case of OUR cross-border credit transfers (i.e. where the 
sender has asked to bear the costs) , a beneficiary's bank cannot charge 
the beneficiary an additional fee for handling a cross-border credit 
transfer. In such a case, banks may agree that the beneficiary's bank 
receive a multilaterally agreed interchange fee if that fee covers the 
costs actually and necessarily incurred by the bank when it handles 
cross-border credit transfers. The agreed fee should not exceed the 
average real costs incurred by the beneficiary's bank when it handles 
cross-border credit transfers. Furthermore, it should be expressed as 
a default fee, allowing bilateral agreements on amounts above or below 
the default. 
OJ C 251, 27.09.1995, p. 3. 
Commission Communication "EU Funds Transfers: Transparency, Performance and.Stability", 
COM(94)436, 19 October 1994; Bull. EU 9-1995, point 1.3.12. 
18 
6. Leniency programme 
49. The Commission continued its active pursuit of secret cartels, 
involving price fixing or market sharing, which still appear to exist 
in major industries. 
Fact-finding is accounting for an increasing share of the Commission's 
administrative resources for competition law enforcement. In 1995 the 
Commission undertook some 91 on-the-spot investigations, including 87 
surprise inspections. 
50. Cartels are typically operated in secrecy and considerable 
efforts are devoted by participants to avoid detection by the 
authorities, including the use of information technology. 
In certain cases, the benefit which may accrue to consumers from the 
detection and prohibition of secret cartels outweighs the interest the 
Community may have in fining companies which cooperate with the 
Commission, thereby enabling or helping it to detect and prohibit a 
cartel. For this reason, the Commission is considering granting lenient 
treatment to companies which cooperate in the preliminary investigation 
or proceedings in respect of an infringement.20 It published a draft 
notice which specifies the conditions under which firms cooperating 
with the Commission can receive immunity from fines or significant 
reductions in the fine which would otherwise have been imposed upon 
them. Before it adopts the notice, the Commission has invited all 
interested persons to submit their observations on its draft notice.21 
7. Access to the file 
51. The European Community's anti-trust enforcement procedures must 
not be arbitrary or unfair. The Commission is required to observe 
procedural safeguards aimed at protecting the interests of firms 
affected by its decisions. Take, for instance, preservation of the 
rights of defence, in particular the right to a fair hearing. 
Addressees of formal decisions and interested parties also have the 
ultimate safeguard of the right of appeal to the European Courts. 
52. The Court of First Instance annulled a series of Commission 
decisions of 19 December 199022 sanctioning infringements of the 
competition rules on the market in soda ash. One of the decisions 
related to a concerted practice by which Solvay and ICI divided the 
European market between them. In addition, the Commission found that 
both Solvay and ICI abused their dominant positions in western Europe, 
in the United Kingdom and Ireland respectively.23 
The decision, which was based on Article 85, has been annulled on the 
ground that the Commission did not respect the parties' rights of 
defence. The Court found that the Commission should have given Solvay 
access, in the context of the Article 85 procedure, to certain 
documents contained in the Commission's file for the Article 86 case 
against ICI.24 Conversely, the Court, acting on the same basis, decided 
On 10 August 1993 the US Department of Justice Antitrust Division issued its corporate 
leniency policy. This was followed by a leniency policy for individuals that was issued 
on 10 August 1994. 
OJ C 341, 19.12.1995, p. 13. 
OJ L 152, 15.6.1991. 
XXth Report on Competition Policy (1990), points 92 and 113. 
Judgment of the Court of First Instance of 29 June 1995 in Case T-30/31 Solvay v 
Commission [1995] ECR 11-1775. 
19 
in favour of ICI.25 
The Commission is examining the exact impact of these decisions on its 
current practice, also in view of the new mandate of the Hearing 
Officer, which provides that, if a company believes that the Commission 
has not provided it with all the documents necessary for its defence, 
the Hearing Officer should examine any such claim and decide on the 
merits .2S 
B - Cooperation and competition in a rapidly changing and increasingly 
global economic environment 
53. Today's economic environment is characterized by a sharp increase 
in competitive pressures. Several factors have contributed to this : 
the continuing shortening of product life-cycles; the growing 
globalization of industries and markets; and the completion of the 
legislative programme for the achievement of the internal market. These 
economic realities must be taken into account in applying the 
competition rules. As a result, economic market analysis is becoming 
increasingly important in competition cases. The Commission has to take 
account of the specific economic features of a particular market in 
placing the relevant case in its proper context. 
In an economic environment characterized by dynamic markets, innovation 
and globalization, cooperation between firms is often vital to enable 
them to remain competitive on the market by improving their R&D 
efforts, reducing costs and developing new products. None the less, 
such cooperation must not lead to anti-competitive situations which are 
incompatible with the competition rules of the Treaty. 
1. The application of Articles 85 and 86 in the telecommunications sector 
1.1. Strategic alliances 
54. The ongoing liberalization of the telecommunications sector, 
together with the increasing convergence of telecommunications, 
information technologies and media, are spurring substantial commercial 
activity in the core sectors of the information market. Market players 
are now positioning themselves to take advantage of the new 
opportunities. This has resulted in a wave of new alliances and 
partnerships being announced or implemented.27 
Strategic alliances between incumbent telecommunications operators 
(TOs) moving into global markets are one type of such alliances 
(BT/MCI; Atlas-Phoenix). Other alliances (conglomerate alliances) are 
set up either between companies with no prior presence in the 
telecommunications market but which benefit from synergies through 
market entry -such as electricity utilities or banks that have 
substantial internal networks as well as financial means and know-how -
or between the latter and TOs (Cable & Wireless and Veba; BT-Viag; BT-
BNL, Albacom) . Large consortia are also being formed to offer mobile 
satellite telecommunications services on a worldwide basis (Inmarsat-P, 
Iridium, Globalstar and Odyssey). 
55. The application of the basic competition rules to these alliances 
Judgment of the Court of First Instance of 29 June 1995 in Case T-36/91 Imperial Chemical 
Industries pic v Commission [1995] ECR 11-1847. 
Commission Decision of 12 December 1994 on the terms of reference of hearing officers in 
competition procedures before the Commission (OJ L 330, 21.12.1994, p.67). 
A comprehensive overview of case decisions and publications in this field is given in 
Community Competition Policy in the Telecommunications Sector, European .Commission, 
Official Documents, Update July 1995 (IV/18571/95). 
20 
has become one of the major challenges for EU competition policy in 
recent years. The Commission must ensure that the current restructuring 
process will lead to competitive and growth-oriented market structures . 
The Community's policy aimed at liberalizing telecommunications is 
generating new services and products at competitive prices for 
consumers, reducing costs for the industry and creating new jobs. 
However, these efforts would serve little purpose if new restrictive 
agreements, practices or market structures were allowed to develop 
which prevented competition from emerging on liberalized markets or if 
TOs could engage in abusive behaviour aimed at preserving their 
position. This shows that there is a close inter-relationship between 
different Community policy areas and that all competition instruments 
must be applied together in a coherent way. . 
56. The Concert joint venture between British Telecommunications and 
the US MCI Corporation was the first major télécoms strategic alliance 
which the Commission dealt with, and it was granted an exemption under 
Article 85 (3) ,28 
Alliances intending to offer new global services, with features sought 
in particular by large corporations (e.g. seamlessness, end-to-end, one 
stop shopping and billing, etc.), will in general improve the quality 
and the availability of advanced telecommunications services and will 
also contribute to the creation of trans-European networks, which is 
one of the objectives of the EC Treaty (Article 12 9b). Consumers, 
including large multinational companies, but also innovative small and 
medium-sized enterprises, can benefit from more advanced global 
services and efficiency gains, thereby improving their competitive 
position both globally and within the European Union. 
However, to the extent that alliances offer domestic as well as 
international services, the indispensability required under 
Article 85(3) and the possible elimination of competition at the 
national level are important elements in the Commission's analysis. 
Important elements in the Commission's favourable attitude to the 
creation of Concert were the genuinely global nature of the services 
concerned and the fact that the markets of both parent companies are 
open to competition. 
Atlas/Phoenix 
57. The Atlas agreement, which the Commission investigated during 
1995, differs from the BT-MCI alliance in two important respects: 
firstly, the domestic component of the services offered is much 
stronger than the global elements planned and, secondly, the home 
markets of the parties (France and Germany) are less liberalized than 
the home markets of BT and MCI (UK and US) . 
The Atlas transaction brings about a joint venture between the French 
and German public telecommunications operators, France Telecom (FT) and 
Deutsche Telekom (DT) . Atlas is also the instrument of DT's and FT's 
participation in the second transaction, named Phoenix, with the US 
company Sprint Corporation. 
Atlas targets two separate product markets for value-added 
telecommunications services, namely the market for advanced corporate 
telecommunications services and the market for standardized low-level 
packet-switched data communications services. The broader Phoenix 
alliance will address the same markets for value-added 
telecommunications network services and also the market for traveller 
Decision of 27 July 1994 (OJ L 223, 27.08.1994, p. 36); XXIVth Report on .Competition 
Policy (1994), points 156-160. 
21 
services and the market for so-called carrier's carrier services. 
The Atlas and Phoenix arrangements raised a number of concerns from a 
competition point of view, in particular with respect to the home 
markets of the EU partners to the transactions, where FT and DT hold 
legal and de facto dominant positions with respect to a number of 
telecommunications services and the provision of infrastructure. It was 
argued therefore that competition could be eliminated and the positive 
effects of future full liberalization endangered. In response to this, 
the parties to the alliances as well as the French and German 
Governments have undertaken certain amendments and commitments to 
address these concerns. They relate to the non-intégrâtion into Atlas 
of the domestic French and German public switched data networks, the 
non-discriminatory access to these networks, and the avoidance of 
cross-subsidization. However, the main commitment made by the 
governments was that the use of alternative telecommunications 
infrastructure for the provision of liberalized telecommunications 
services (i.e. not basic voice telephony) will be liberalized as of 1 
July 1996. Without such liberalization, competition in the area of data 
communications would also be endangered or eliminated in other Member 
States by the alliance between the Union's largest telecommunications 
organizations. Full liberalization, i.e. including basic voice 
telephony and infrastructure, will be achieved by 1 January 1998. 
On this basis, the Commission has indicated that it is ready, subject 
to observations from third parties, to take a favourable view of the 
Atlas-Phoenix agreements.29 
58. Other strategic alliances of the same type which the Commission 
has begun to investigate are Unisource and its Uniworld alliance with 
AT&T. 
Global Mobile Satellite Systems 
59. The Commission has launched an in-depth and comprehensive 
examination of the newly emerging strategic alliances which are being 
formed to offer mobile satellite telecommunications services on a 
worldwide basis. 
In this sector, which has only a few global market players, it is 
essential, that competition is safeguarded in the downstream markets 
involved, namely local service provision, distribution and equipment 
supply. 
One of the systems examined, Inmarsat-P, has already been favourably 
viewed by the Commission.30 
1.2. Access and interconnection agreements 
60. 'An important problem for the application of EU competition law 
to the sector, and in general for the regulatory environment of the 
future telecommunications market, is the issue of access and 
interconnection agreements.31 In fact, the post-monopoly and future 
multimedia environment is likely to be characterized by situations 
where firms singly or jointly control facilities - such as networks, 
conditional access systems or critical software interfaces - which may 
provide an essential route to customers. 
Notices pursuant to Article 19(3) of Regulation No 17 (OJ C 337, 15.12.1995, pp. 2 and 
13) . 
Notice pursuant to Article 19 (3) of Regulation No 17 (OJ C 304, 15.11.1995, p. 6). 
G7 conclusions and Telecommunications Infrastructure Green Paper. 
22 
Access and interconnection agreements may, in principle, be seen as 
pro-competitive because they are aimed at extending the range of 
services available to customers. However, they may also generate 
substantial collusive behaviour and market foreclosure, as well as 
abuse of dominant positions.32 The non-discriminatory access to 
essential facilities on reasonable terms is of central importance in 
this context. The Commission therefore intends to present in 1996 a 
draft communication on the implementation of the competition rules in 
this area. 
2. Globalization of markets 
ATR/BAe 
61. The market for regional aircraft is an example of a sector with 
a worldwide dimension. The main manufacturers operate in all 
continents. 
62. On 18 August the Commission authorized, by means of a comfort 
letter, the regional aircraft joint venture between Aérospatiale and 
Alenia, already integrated in ATR, and British Aerospace. The ultimate 
objective of the project is to merge the parties' regional aircraft 
activities. The first stage of cooperation mainly concerns services 
direct to customers and the joint carrying-out of feasibility studies 
for new aircraft in this sector. 
The Commission's authorization is valid for only a limited period 
ending on 6 June 2000; this leaves it the option of reviewing the 
situation if, following the feasibility studies, the parties decide not 
to develop, produce or launch the programmes for new aircraft but to 
nonetheless maintain their cooperation in the areas of sales and after-
sales service. 
3. Transfer of technology 
63. One of the priority tasks of the Commission with a view to 
developing the large internal market is to encourage innovation and the 
dissemination of new technology in European industry. The prime role 
played by technology transfer in the development of technological 
innovation in the economy of the European Union and in strengthening 
the competitiveness of enterprises operating in this area was 
highlighted in the Commission White Paper on growth, competitiveness 
and employment. 
64. The Regulation on the block exemption of categories of technology 
transfer agreements,33 proposed in 1994 and substantially amended in 
1995 following third party hearings and the second meeting of the 
Advisory Committee on Restrictive Practices and Dominant Positions, is 
intended to promote economic growth and enhance competitiveness by 
simplifying the content of the two existing regulations on licensing 
agreements34 and combining them in a single regulation. 
65. The Regulation thus reduces the disparities between the 
Regulation on patent licensing and the Regulation on know-how licensing 
and removes several clauses preventing block exemption or transfers 
them to the so-called "opposition" procedure. It also provides for new, 
lawful clauses which give greater contractual freedom to the parties. 
Coudert Bros, Competition aspects of interconnection agreements in the telecommunications 
sector, Report to the European Commission, June 1995. 
The Regulation was adopted by the Commission on 31 January 1996. 
Regulations (EEC) Nos 2349/84 of 23 July 1994 and 556/89 .of 30 November 1988. 
23 
This relaxation of the rules, which will benefit most operators in the 
Community is, however, accompanied by a clear warning to enterprises 
with strong market positions: the benefit of the block exemption can 
be withdrawn if enterprises use their exclusive licences to monopolize 
the market for a product and prevent third parties from gaining access 
to new technologies. When assessing such cases, the Commission will 
pay particular attention to situations in which the market share of the 
licensee exceeds a threshold of 40%. 
C - Transport 
1. Maritime transport 
66. The European Union is the largest trading bloc in the world. The 
bulk of its trade with the rest of the world (and a significant part 
of intra-Union trade) is carried out by means of maritime transport. 
Liner shipping, i.e. scheduled maritime transport services, is of major 
importance in this respect. 
It is therefore essential for the European Union to have the best 
possible maritime transport service at the lowest possible cost. 
Competition policy is a tool well-adapted to help achieve this 
objective. 
67. It should also be noted that in the United States, a proposal to 
deregulate liner shipping and make it subject to a more competitive 
statutory regime was recently adopted by the House of Representatives 
and is currently before the Senate. If the proposal, the Ocean 
Shipping Reform Act, is passed, the US regime will more closely match 
the European rules. 
1.1. Liner shipping consortia 
68. The new regulation granting block exemption to liner shipping 
consortia35 is an important instrument for this purpose, as it will 
encourage shipowners to improve and rationalize their operations, 
thereby reducing costs and freight rates whilst at the same time 
allowing them to offer a better-quality service along with greater 
frequency. This is the second block exemption that has been adopted in 
the liner shipping sector. Regulation (CEE) No 4056/86, which lays down 
rules for the application of Articles 85 and 86 to maritime transport, 
already contains a block exemption for liner conferences.36 
69. The new block exemption entered into force on 22 April 1995 and 
applies for a period of five years. Liner shipping consortia are 
agreements between two or more shipping companies relating to the joint 
operation of liner transport services through cooperation in the 
technical, operational and/or commercial field, with the exception of 
price .fixing. It applies only to international liner shipping services 
to or from one or more Community ports intended exclusively for the 
carriage of cargo, chiefly by container. It also covers both consortia 
operating within a liner conference and consortia operating outside 
such conferences, except that it does not cover the joint fixing of 
freight rates. Consortium members that wish to fix rates jointly and 
do not satisfy the conditions of Regulation (CEE) No 4056/86 must apply 
for individual exemption. 
Commission Regulation (EC) No 870/95 of 20 April 1995 on the application of Article 85 
(3) of the Treaty to certain categories of agreements, decisions and concerted practices 
between liner shipping companies (consortia) pursuant to Council regulation (EEC) 
No 479/92 (OJ L 89, 21.04.1995, p. 7). 
Regulation (CEE) No 4056/86 of 22 December 1986 (OJ L 378, 31.12.1986, p. 4) . 
24 
The block exemption covers the following activities : the coordination 
and/or joint fixing of sailing timetables and the determination of 
ports of call; the exchange, sale or cross-chartering of space or slots 
on vessels; the pooling of vessels and/or port installations; the use 
of one or more joint operations offices; the provision of containers, 
chassis and other equipment and/or rental, leasing or purchase 
contracts for such equipment; the use of a computerized data exchange 
system and/or joint documentation system; temporary capacity 
adjustments;37 the joint operation or use of port terminals and related 
services; the participation in tonnage, revenue or net revenue pools; 
the joint exercise of voting rights in liner conferences; a joint 
marketing structure and/or joint bill of lading; and any other activity 
ancillary to any of these and necessary for its implementation. 
70. The Commission considers that consortia generally help to improve 
the productivity and quality of available liner shipping services by 
reason of the rationalization they bring to the activities of member 
companies and through the economies of scale they allow in the 
operation of vessels and utilization of port facilities. Transport 
users generally obtain a fair share of the benefits resulting from 
consortia if there is sufficient competition in the trades in which the 
consortia operate. 
In order to benefit from the block exemption, a consortium must 
possess, in respect of the ranges of ports it serves, a share of direct 
trade of under 3 0% when it operates within a conference and of under 
35% when it operates outside a conference. A simplified opposition 
procedure applies to consortia whose share of the trade exceeds the 
above limit but does not exceed 50% of the direct trade. 
1.2. Inland rate fixing by ship liner conferences 
71. On 8 June 1994 the Commission adopted a report38 on how it intends 
to apply the competition rules to liner shipping which it presented to 
the Transport Council. The report focuses on an analysis of the legal 
position with regard to price-fixing agreements concluded by shipowner 
members of liner conferences concerning the land section of multimodal 
transport services provided by them in the Community. It concluded 
that this practice was contrary to the Community competition rules and 
could not qualify for exemption as it stood. It suggested, however, 
that a new approach be established that was compatible with the 
competition rules and allowed inland container transport to be 
organized more efficiently and more to the advantage of shippers. 
72. At the Council meeting in November 1994, Mr Van Miert, 
Competition Commissioner, agreed to report to the Council on the 
implementation of the guidelines, on the basis of the work of a wise 
men's committee. This committee, known as the Multimodal Group, was 
set up in July 1995, and would be submitting an interim report to him 
at the beginning of 1996 which would be presented to the Council in the 
first half of 1996. 
73. In 1994 the Commission took two decisions prohibiting inland 
price fixing agreements : the TAA (Transatlantic Agreement) decision39 
This does not include arrangements concerning the non-utilization of existing capacity, 
whereby shipping line members of the consortium refrain from using a certain percentage 
of the capacity of vessels operated within the framework of the consortium; See Article 
4 of Regulation (CEE) No 870/95 and Commission Decision of 19 October 1994 concerning the 
Trans-Atlantic Agreement, in which the Commission prohibited an agreement for the non-
utilization of capacity (OJ L 376, 31.12.1994, p. 1). 
SEC(94)933. 
Decision of 19 October 1994 (OJ L 376, 31.12.1994, p. 1). 
25 
and the FEFC (Far Eastern Freight Conference) decision.40 
On 10 March 1995 the Court of First Instance ordered the suspension of 
the TAA decision in so far as it prohibited joint price fixing in 
respect of the inland portions within the Community of through-
intermodal transport services.41 That order was confirmed on appeal by 
the Court of Justice on 19 July 1995.42 
In the meantime, a modified version of the TAA, the Trans-Atlantic 
Conference Agreement (TACA), was notified to the Commission. The 
Commission sent the parties to the TACA a statement of objections 
setting out the reasons why it had formed the preliminary view that it 
was appropriate to withdraw any immunity from fines in respect of 
inland price fixing which may have been brought about by the new TACA 
notification.43 An application for interim measures preventing the 
Commission's anticipated decision to withdraw immunity from fines was 
dismissed by the Court of First Instance.44 
2. Air transport 
2.1. IATA tariff consultations 
74. Regulation (EEC) No 1617/93 of 25 June 199345 states that 
Article 85(3) is applicable in particular to the holding of 
consultations on tariffs for the carriage of passengers and freight on 
scheduled air services between Community airports. The exemption is, 
however, subject to the conditions set out in Article 4 of the 
Regulation, notably that the exemption is applicable only if the 
consultations give rise to interlining. 
75. According to the preliminary information obtained by the 
Commission in 1995, it would seem that, as a general rule, there are 
not many, if indeed any, interlining agreements on the carriage of 
goods. It is also clear that tariffs established through consultation 
by airlines are appreciably higher than normal market prices and 
therefore encourage airlines to increase their tariffs beyond the level 
normally set by competition. 
The Commission therefore considers it desirable to amend the above-
mentioned Regulation in order to exclude from its scope tariff 
consultations relating to the carriage of freight. The Commission has 
published a notice46 giving the airlines and other interested parties 
the opportunity to make known their views in advance. It will decide 
on further action in 1996. 
2.2. Cooperation between airlines 
76. Cooperation between airlines can facilitate the healthy 
restructuring of air transport in Europe and lead to an improvement in 
the quality of consumer services and better cost control. While the 
Commission does not intend to impede the restructuring of European air 
transport, it is monitoring operations to ensure they do not lead to 
restrictions of competition that are not indispensable and do not rule 
out opportunities for real competition from new operators on the main 
Decision of 21 December 1994 (OJ L 378, 31.12.1994, p. 17). 
Case T-395/94 R Atlantic Container Line and Others v Commission [1995] ECR 11-595. 
Case C-149/95 P (R) Commission v Atlantic Container Line and Others [1995] ECR 1-2165. 
Commission press release IP/95/646, 21.06.1995. 
Order of the President of the Court of First Instance of 22 November 1995, 
Case T-395/94 R II Atlantic Container Line and others v Commission (not yet published) 
OJ L 155, 26.6.1993, p. 18. 
OJ C 322, 2.12.1995, p. 15. 
26 
routes. 
* 
The conditions proposed by Swissair/Sabena which the Commission agreed 
when it. approved the merger of the two airlines, and the conditions 
imposed by the Commission when it exempted the cooperation between 
Lufthansa and SAS, satisfy that objective. 
Lufthansa/SAS 
77. The general cooperation agreement between Lufthansa and SAS 
provides for the setting-up of an integrated air transport system 
between the two airlines, based on long-term relationships in the 
commercial and operational fields. Commercial cooperation will be 
particularly close on the routes between Scandinavia and Germany where 
the parties are considering setting up a joint venture. 
78. The Commission stated47 that, although the agreement appreciably 
restricted competition on the markets in question, especially on the 
routes between Scandinavia and Germany, it could qualify for exemption 
provided that certain conditions were met, allowing existing and 
potential competition to be maintained. 
These conditions related chiefly to: a frequency freeze on certain 
routes operated by the two companies; the opening of frequent flyer 
programmes to airlines not operating such schemes; the obligation on 
Lufthansa and SAS to conclude, subject to certain conditions, 
interlining agreements with new entrants; termination of certain 
cooperation agreements with other airlines; transfer to new market 
entrants of slots in certain crowded airports. 
The Commission adopted a decision granting exemption on 16 January 
1996. 
D - Trans-European networks and competition rules 
79. In 1995, the Commission examined the question of the relationship 
between the private financing of trans-European networks and the 
application of the competition rules. Its conclusions were 
incorporated in the general report on trans-European networks, given 
a warm reception by the Madrid European Council on 15 and 16 December. 
In the report, the Commission set out the following guidelines on the 
handling of competition questions and announced that it would set up 
a "one-stop help-desk" (fax: 32.2.295 65 04) to provide project 
managers with additional information on the guidelines. 
80. The Commission proposes to apply the following principal criteria 
when processing cases submitted to it : (i) where the infrastructure 
operator wishes to give enterprises the opportunity to reserve capacity 
as soon as a project is launched, the opportunity should be offered to 
all Community enterprises likely to be interested; (ii) capacity 
reserved by an enterprise must be proportional to the direct or 
indirect financial commitments entered into by the enterprise and 
correspond to planned operational requirements covering a reasonable 
period; (iii) new infrastructure is generally not congested when it 
first enters into service. Therefore, an undertaking or group of 
undertakings within the meaning of Article 3 of Directive 91/440/EEC 
should not reserve all available capacity. Some of the capacity should 
remain available to enable other firms to operate competing services; 
(iv) enterprises holding operating rights may not object to the loss 
of such rights if they are not used; (v) the duration of agreements 
reserving capacity must be reasonable and adapted to each case. 
OJ C 201, 5.8.1995, p. 2. 
27 
This list of criteria is not exhaustive and does not prejudge the 
Commission's final position, which will be defined in the light of the 
specific characteristics of each project. 
81. The Commission will endeavour to deal rapidly with the 
notifications of agreements relating to the financing of trans-European 
networks. In particular, it is considering adopting a final decision 
in not more than six months' time, provided the parties have contacted 
the Commission before finalizing the agreements. 
Gas Interconnector 
82. In its White Paper on growth, competitiveness and employment, the 
Commission highlighted the importance of new European infrastructure 
networks that could help overcome the fragmentation of certain markets 
in Europe. 
On 17 May 1995 the Commission issued a comfort letter clearing a joint 
venture arrangement between nine leading European gas companies for the 
construction and operation of a UK-Belgium underwater gas 
interconnection, in particular a high pressure gas pipeline which will 
be the first connection between the United Kingdom and continental gas 
markets. 
Given the possibility for third parties to acquire, on freely 
negotiated terms, access to transport capacity through the 
interconnector, and in view of the fact that this project will create 
opportunities for competition between markets which so far are quite 
isolated, the Commission found that the pro-competitive effects of the 
joint venture clearly outweigh the restrictions of competition. In its 
comfort letter, the Commission also ensured that the agreements will 
operate in practice in such a way as to effectively meet demand for any 
reverse flow capacity which may arise. 
E - Competition and environment 
83. In 1995 the Commission once again made clear how it intended to 
apply competition policy to environmental matters, especially voluntary 
agreements .48 
84. Community environmental policy favours the "polluter pays" 
principle. The effectiveness of this principle depends, in particular, 
on the functioning of the pricing mechanism; this must reflect, in 
terms of costs, the negative effects of an economic activity on the 
environment. For the mechanism to act correctly as an indicator, 
enterprises must internalize the costs of environmental protection. The 
"polluter pays" principle does not preclude state aid for environmental 
protection, under certain conditions (see below). 
Distributing resources in ways which respect the environment can take 
the form of direct public regulation, taxation, "voluntary" agreements 
and self-regulation. Voluntary agreements are contracts between 
industry and public administrations which include a number of 
environmental objectives to be achieved by the industry in question 
according to a timetable. Voluntary agreements may relate both to 
objectives and to the means of achieving them. 
The use of voluntary agreements is growing in most OECD countries in 
parallel with a trend towards deregulation and less intervention by the 
See the document "Competition and the environment" presented by DG IV to the Round Table 
on the Environment and Competition held by the OECD Committee on Law and- Competition 
policy, Paris, May 1995. 
28 
state. 
Voluntary agreements and self-regulation are often regarded as a less 
bureaucratic and more flexible solution than more traditional 
approaches. Voluntary agreements or self-regulation, however, may 
contain restrictions of competition under Article 85(1) of the Treaty. 
The Commission is in fact currently examining several complaints on 
this matter. 
85. When the Commission examines individual cases, it weighs up the 
restrictions of competition arising out of an agreement against the 
environmental objectives of the agreement, and applies the principle 
of proportionality in accordance with Article 85(3). In particular, 
improving the environment is regarded as a factor which contributes to 
improving production or distribution or to promoting economic or 
technical progress. 
The Commission intends, however, to remain very firm with regard to the 
principle of non-closure of national markets to foreign operators. It 
will also be very vigilant about problems of access by third parties 
to a system and about agreements which could result in a product being 
squeezed out of the market. 
The Commission also takes a negative view of multilateral tariff or 
price fixing resulting from an agreement on the environment; its 
assessment will, however, be on a case-by-case basis and will look at 
whether any such agreement is indispensable. The aim of environmental 
protection is not necessarily sufficient in itself to warrant an 
agreement on prices being regarded as indispensable. 
F - Secondary product markets 
86. Several complaints which the Commission received concern the 
alleged abuse of a dominant position in secondary product markets such 
as spare parts, consumables or maintenance services. These products are 
used in conjunction with a primary product and have to be technically 
compatible with it (e.g. software or hardware peripheral equipment for 
a computer) . Thus, for these secondary products there may be no or few 
substitutes other than parts or services supplied by the primary 
product supplier. This prompts the question whether a non-dominant 
manufacturer of primary products can be dominant with respect to a 
rather small secondary product market, i.e. secondary products 
compatible with a certain type of that manufacturer's primary products. 
The question raises many complex issues. Producers of primary equipment 
argue that there cannot be dominance in secondary products if there is 
lack of dominance in the primary product market because potential 
buyers would simply stop buying the primary products if the prices for 
parts or services were raised. This theory implies a timely reaction 
on the primary product market due to consumers' ability to calculate 
the overall life-time costs of the primary product including all spare 
parts, consumables, upgrades, services, etc. It furthermore implies 
that price dicrimination is not possible between potentially new 
customers and "old" captive customers or that switching costs for the 
latter are low. On the other hand, complainants who produce consumables 
or maintenance services assume dominance in the secondary product 
market if market shares are high in this market, i.e. this approach 
focuses only on the secondary products without analysing possible 
effects emanating from the primary product market. 
In the Commission's view, neither of these approaches reflects reality 
sufficiently. Dominance has always been defined by the Commission as 
the ability to act to an appreciable extent independently of 
competitors and consumers. Therefore, an in-depth fact-finding1 exercise 
29 
and analysis on a case-by-case basis are required. In order to assess 
dominance in this context the Commission will take into account all 
important factors such as the price and life-time of the primary 
product, transparency of prices of secondary products, prices of 
secondary products as a proportion of the primary product value, 
information costs and other issues partly mentioned above. A similar 
approach was taken by the US Supreme Court in its 1992 Kodak decision. 
Pelikan/Kyocera 
87. The Commission took this approach when it rejected in 1995 the 
complaint of Pelikan, a German manufacturer of toner cartridges for 
printers, against Kyocera, a Japanese manufacturer of computer printers 
including toner cartridges for those printers. Pelikan's complaint 
alleged a number of practices by Kyocera to drive Pelikan out of the 
toner market and accused Kyocera, among others, of abusing its dominant 
position in the secondary market although Kyocera was clearly not 
dominant in the primary market. Apart from the fact that there was no 
evidence of behaviour that could be considered abusive, neither did the 
Commission find that Kyocera enjoyed a dominant position in the market 
for consumables. This was due to the particular features of the primary 
and secondary markets. Thus, purchasers were well informed about the 
price charged for consumables and appeared to take this into account 
in their decision to buy a printer. "Total cost per page" was one of 
the criteria most commonly used by customers when choosing a printer. 
This was due to the fact that life-cycle costs of consumables (mainly 
toner cartridges) represented a very high proportion of the value of 
a printer. Therefore, if the prices of consumables of a particular 
brand were raised, consumers would have a strong incentive to buy 
another printer brand. In addition, there was no evidence of 
possibilities for price discrimination between "old"/captive and new 
customers. 
G - Liberal professions 
88. The free movement of liberal professions in the Community means 
that certain restrictive practices in this field are increasingly 
likely to affect trade between Member States. One can expect a growing 
number of cases in this area. On several occasions the European 
Parliament has called on the Commission to apply the competition rules 
to the liberal professions.49 
Coapi 
89. On 30 January the Commission took a decision under Article 85 
applying the competition rules in this field. 
The Colegio Oficial de Agentes de la Propiedad Industrial (Coapi) is 
the professional association of industrial property agents in Spain. 
All agents practising in Spain are members. Industrial property agents 
give advice to the general public, and assist or represent clients in 
proceedings involving industry property rights. 
The Commission found that the fixing by the general meeting of Coapi 
of compulsary minimum scales of charges for the cross-border services 
provided by its members constitutes an infringement of Article 85(1) . 
In conformity with existing Community law, the Commission confirmed 
that the national legal framework within which such agreements or 
Resolution on the XlXth Report on Competition Policy, point 9 (iii), and Resolution on 
the XXth Report on Competition Policy, point 38 and the Commission's response hereto in 
the XXIst Report on Competition Policy, pp. 233 and 234. 
30 
decisions by liberal professions are made, is not relevant to the 
application of Article 85. Even if public authorities encourage such 
behaviour or delegate to an association of undertakings the power to 
fix the prices to be applied by its members, the association's exercise 
of that power does not fall outside the scope of Article 85 of the 
Treaty. 
H - Subsidiarity and decentralization 
90. In his address to the European Parliament on the occasion of the 
investiture debate of the new Commission, the President of the European 
Commission insisted on the necessity to make a constant effort to 
concentrate on essentials : "Less action, but better action". 
As far as cases falling within the scope of Articles 85 and 86 are 
concerned, this principle is applied by the Commission in limiting its 
action to those arrangements which have a significant effect on 
competition and which are likely to affect trade between Member States 
appreciably. Moreover, in view of the responsibilities incumbent on the 
Commission, which has the sole power to authorize certain agreements, 
the Commission is encouraging decentralization, in particular in cases 
which may lead to a prohibition decision. 
1. De minimis agreements 
91. Agreements whose effects on trade between Member States or on 
competition are negligible are not caught by the ban on restrictive 
agreements contained in Article 85(1). Only those agreements are 
prohibited which have an appreciable impact on market conditions. For 
this reason, it is essential for the Commission to make a proper 
analysis of the market in which those agreements operate. 
The Commission's notice on agreements of minor importance sets 
quantitative criteria to give guidance as to the concrete meaning of 
the concept of "appreciability". Despite the recent increases in 
thresholds,50 it is believed that a further review of the de minimis 
concept may be justified. The Commission has therefore started internal 
deliberations on this issue with a view to presenting new proposals for 
consultation during the course of 1996.' 
2. Decentralization 
92 . In its attempt to deal as a matter of priority with cases having 
a significant Community dimension, the Commission is also encouraging 
national enforcement of Community competition law. It considers that 
there is not normally a sufficient Community interest in examining a 
complaint when the plaintiff is able to secure adequate protection of 
his rights before national courts.51 In its SACEM judgments of 24 
January 1995, the Court of First Instance further specified the 
conditions under which the Commission has the right to reject a 
complaint on the ground that it lacks a significant Community 
interest.52 In 1995 several cases were closed on this basis. 
Commission notice concerning the updating of the 1986 communication on agreements of 
minor importance (OJ C 368, 23.12.1994). 
The Court of First Instance endorsed this practice for the first time in its judgment of 
17 September 1992 in Case T-24/90 Automec v Commission [1992] ECR 11-2223, paragraphs 91 
to 94. 
Case T-114/92 BENIM v Commission [1995] ECR 11-147 and Case T-5/93 Tremblay v Commission 
[1995] ECR 11-185. The Court of First Instance, referring to the Automec II judment, 
indicated that, in order to assess the Community interest, the Commission must balance 
the significance of the alleged infringement as regards the functioning of the common 
market, the probability of its being able to establish the existence of the infringement 
and the extent of the investigative measures required to enforce the competition rules. 
31 
93. An important step forward in the decentralization effort is the 
Commission's notice on cooperation between national courts and the 
Commission in applying Articles 85 and 86.53 In 1995 several national 
courts in Spain, France, Germany and Belgium have relied upon the 
cooperation mechanism laid down in this notice to obtain information 
from the Commission on competition issues. 
In its preliminary ruling of 12 December 1995,54 the Court of Justice 
found that the same principles of cooperation between the Commission 
and national courts apply in the field of agriculture, where Regulation 
No 26 determines the extent to which the Community competition rules 
apply. It is worthwhile noting that, according to the Court's judgment, 
the national court can, in its assessment, take into consideration the 
criteria established by the case-law of the Court, as well as the 
practice of the Commission, which practice is evidenced not only by the 
decisions, adopted by the Commission but also from other sources, 
including in particular its reports on competition policy and its 
communications. 
94. It is not only national courts, but also national competition 
authorities, that have an important role to play in raising the level 
of enforcement of Community competition law and, generally speaking, 
in ensuring unrestricted and fair competition in the Union. In cases 
where an appreciable economic effect is felt mainly in one Member 
State, national authorities are closer to the market and may thus be 
better placed to handle the case. 
The Commission has pressed ahead with its preparation of a notice on 
cooperation between the Commission and national competition 
authorities55, pursuant to which the Commission will inform and consult 
the national authorities when the latter apply Article 85(1) or 86 or 
national competition law in cases with a Community dimension. A draft 
has already been submitted to the Member States for consultation. 
Further consultation of interested third parties will follow on the 
basis of a draft notice which the Commission intends to publish in 
1996. 
95. Decentralized enforcement should not, however, lead to differing 
application of competition law in the European Union. The Commission 
is therefore also pursuing uniformity in the substance and application 
of national competition laws. This is done not through any formal act 
of harmonization but through a continuation of, and improvement in, 
communication and cooperation between Community and national 
enforcement officials. 
At present, nine Member States have competition laws with respect to 
restrictive agreements and abuses of a dominant position which 
substantially resemble those of the Community. Most of the others are 
considering amendments to national law aimed at bringing them into line 
with Community law. This process of "soft harmonization" is a natural 
consequence of the integration process, which creates pressure for a 
level-playing field throughout the Community. 
The fact that a national court or national competition authority is already dealing with 
a case concerning the the compatibility of an agreement or practice with Article 85 or 
86 is a factor which the Commission may take into account, 
OJ C 39, 13.2.1993, p. 6. 
Joined cases C-319/93, C-40/94 and C-224/94 Dijkstra/Frico Domo, van Roes sel/Campina 
Melkunie, de Bie/Campina Melkunie (not yet published). 
The conclusions of an ad hoc group of representatives of national authorities and the 
Commission which were approved by the Directors-General for Competition in. 1994 served 
as the basis for the Commission's draft. See XXIVth Report on Competition PoJ.icy (1994), 
points 40-42. 
32 
I - Statistical overview 
Graph 1 : New cases 
600 
500 4 
400 
300 
200 
100 • Cases opened on 
Commission's ow n 
initiative 
B Complaints 
• Notifications 
1991 1992 1993 1994 1995 
96. During the year the Commission registered 559 new cases, 
including 368 notifications, 145 complaints and 46 cases opened on the 
Commission's own initiative. This represents an increase of more than 
42% compared with 1994 and exceeds the average number of incoming cases 
over the last eight years by more than 32%. 
Almost half of the increase in new cases (78 cases) is attributable to 
the transfer of cases pending by the EFTA Surveillance Authority 
following the accession of Sweden, Finland and Austria to the Union. 
33 
Graph 2 : Cases dealt with 
1200 
1000 + 
800 
600 
400 4 
200 I Formal decisions 
I Informal procedure 
1991 1992 1993 1994 1995 
97. During the year the Commission closed 433 cases in total, of 
which 419 through an informal procedure (including comfort letter, 
discomfort letter, rejection of complaint and administrative closure 
of the file56) and 14 by formal decision. In 1995, the number of cases 
closed fel by 23.4% compared with 1994. 
Cases closed because agreements are no longer in force, because the impact was too slight 
to warrant further investigation, because complaints had become moot or had been 
withdrawn or because investigations had not revealed any anti-competitive practice. 
34 
Graph 3 : Stock of cases over time 
2500 
2000 
1500 4 
1000 
500 4 
1991 1992 1993 
I Input of cases r":—\ Output of cases 1994 
-•— Stock of cases 1995 
98. The overall net result of input and output in 1995 leads to an 
increase of the stock of cases remaining open at the end of the year 
for the first time since 1988. This increase is however rather modest; 
more specifically it is less than 12% and, if the number of additional 
files of the new Member States are not taken into consideration, less 
than 5%. The actual stock of cases is still considerably lower than the 
more than 3000 cases pending at the end of the 1980s and corresponds 
roughly to the number of cases being actively dealt with. 
The Commission is nonetheless aiming at a further reduction in the 
existing stock of cases, to be achieved in particular by further 
improving the efficiency of its proceedings and by encouraging the 
decentralized application of the competition rules where appropriate. 
35 
II - State monopolies and monopoly rights : Articles 37 and 90 
A - Introduction 
1. Services of general economic interest at the heart of the Commission's liberalization 
policy 
99. The Commission has pursued its policy of liberalizing and opening 
up to competition certain sectors traditionally subject to monopoly 
such as telecommunications, energy, postal services or transport. As 
these sectors are essential to individual consumers, competitiveness, 
growth and job creation in the European economy as a whole, the gains 
in efficiency resulting from the introduction of some competition will 
have generally positive results for the citizens of Europe. Otherwise, 
we will not have a true internal market while these essential sectors 
continue to be organized on a purely national and monopolistic basis. 
Because of the importance of these sectors to our society and because 
of their specific characteristics, e.g. their network structure, Member 
States have in the past granted exclusive or special rights to public 
or private operators or allowed other restrictions of competition in 
exchange for the operation of services of general economic interest 
such as the supply of a universal service to all citizens on specific 
terms and at affordable prices. 
The Commission has always acknowledged that these general economic 
interest objectives are legitimate but considers that the means 
traditionally used ,to provide them are no longer always justified, 
particularly in view of technological developments and the new needs 
of consumers, and also in view of European integration itself. This 
is particularly true for the information society, a source of growth, 
new services and new jobs in the years ahead. 
A thorough review is therefore needed, in the light of these new 
realities, of the instruments most likely to provide the public with 
the quality services it requires. The Commission considers that the 
introduction of competition can, in many cases, improve service 
quality, allow innovation and the creation of employment and help to 
cut consumer prices. The removal of obstacles to free competition is, 
however, only one aspect of the Commission's liberalization policy. 
On the one hand, the adoption of a new regulatory framework will 
frequently be necessary to ensure that universal service is provided 
in a competitive environment. On the other hand, where certain 
restrictions of competition prove essential in maintaining a universal 
service, the Commission recognizes the legitimacy of these restrictions 
under Community law (as in the case of state aid). 
The Commission therefore considers that the development of competition 
policy is fully compatible with public service. It should also be 
noted that the liberalization of a sector is different from the 
privatization of public enterprises operating in the sector. Whilst the 
introduction of competition can in certain cases stem from Community 
rules, the latter are neutral as regards the public or private nature 
of enterprises. 
2. Article 90(3) Directives 
100. In order to achieve the objective of introducing competition, 
Article 90(3) gives the Commission the power to adopt decisions or 
directives that are binding on the Member States. This latter 
possibility is occasionally objected to by certain parties. 
36 
In practice, even if Article 90(3) allows the Commission to adopt 
directives, the Court of Justice has stipulated that the provision 
empowers it only to establish general rules defining the obligations 
already imposed on Member States by the Treaty with regard to public 
undertakings or undertakings granted special or exclusive rights, or 
to take the necessary preventive measures to allow it to carry out its 
monitoring function. 
The limited power conferred on the Commission by Article 90(3) is thus 
different from and more specific than the power of the European 
Parliament or the Council to adopt directives. The Commission may not 
impose new obligations on Member States; it may only determine, with 
regard to all the Member States, the specific obligations imposed on 
them by the Treaty. The extent of the Commission's duties and powers 
consequently depends on the scope of the rules that are to be complied 
with. 
The Commission has always used this instrument with caution. 
Directives under Article 90(3) have been used only in situations where 
the existence of many infringements of the fundamental rules of the EC 
Treaty made them necessary to avoid a multiplicity of infringement 
proceedings and to give operators a minimum amount of legal 
certainty.57 These initiatives have generally been taken in response 
to concerns expressed by the Council or Parliament. The Commission has 
always attached the greatest importance to the need for this instrument 
to be used as part of a transparent procedure involving the broadest 
possible dialogue with the other Union institutions, Member States and 
interested parties. 
This is the approach normally adopted in the initial assessment -stages, 
through the publication by the Commission of Green Papers or discussion 
papers intended to stimulate debate at the public consultation stage. 
On the basis of the results of the consultations, studies by experts 
and information obtained by it, the Commission adopts a draft directive 
which is presented for comments to Parliament, the Economic and Social 
Committee, the Committee of the Regions and the Member States. The 
draft text is also published in the Official Journal of the European 
Communities to enable other interested parties to submit their 
comments. 
The adoption by the Commission of the final Article 90(3) directive is 
in any event preceded by careful scrutiny of comments received, 
especially any comments from the European Parliament, the Economic and 
Social Committee and the Committee of the Regions. 
The discussions held during the year on the directives on cable 
television networks, mobile communications and the full liberalization 
of telecommunications are good illustrations of this approach. 
3. Other instruments available to the Commission 
101. Article 90(3) also enables the Commission to adopt individual 
decisions, where Community law is applied to specific cases; the 
Commission Directive 80/723/EEC of 25 June 1980 on the transparency of financial 
relations between Member States and public undertakings (OJ L 195, 29.7.1980, p. 35), as 
amended by Commission Directive 85/413/EEC of 24 July 1985 (OJ L 229, 28.8.198(,p. 20) 
and Commission Directive 93/84/EEC of 30 September 1993 (OJ L 254, 12.10.1993, p. 16); 
Commission Directive 88/301/EEC of 16 May 1988 on competition in the markets in 
telecommunications terminal equipment (OJ L 131, 27.5.1988, p. 73); Commission Directive 
90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services 
(OJ L 192, 24.7.1990, p. 10), as amended by Commission Directives 94/46/EC of 13 October 
1994 on satellite communications (OJ L 268, 19.10.1994, p. 15) and 95/51/EC of 18 October 
1995 on the abolition of the restrictions on the use of cable television networks for the 
provision of already liberalized telecommunications services (OJ L 256, 26..10.1995, p. 
49) . 
37 
decisions are very similar in substance to Commission decisions in 
other fields (aid) , and their legality is also monitored by the Court 
of Justice. 
In certain cases, the Commission may find it necessary, in order to 
enhance legal certainty and transparency, to explain the criteria it 
intends to follow in monitoring compliance of Community law by Member 
States and operators in a specific sector. The draft communication on 
the application of the Treaty rules to the postal service published in 
1995 is an example of this sort of initiative. 
B - Telecommunications 
1. General measures 
102. The Commission continued, with the support of the Council and the 
European Parliament, to promote liberalization in the field of 
telecommunications. 
On 25 January it adopted the second part of the Green Paper on the 
liberalization of telecommunications infrastructures. The Green Paper 
examined the regulatory conditions required to ensure full competition 
in the telecommunications sector within the time-frame agreed by the 
Council.58 After wide-ranging consultations on the Green Paper, the 
Commission adopted on 3 May a Communication on the consultations59 
summing up the results and listing the measures necessary to complete 
the moves towards full liberalization and establishment of a clear 
regulatory framework. This includes: 
setting the date of 1 January 1998 for the discontinuation of all 
remaining exclusive and special rights for both public voice 
telephony and network competition by way of Article 90 directives 
under EU competition law; 
ensuring the financing of a universal service and clarifying the 
interconnection of access conditions, via further development of 
the legislative framework ensuring Open Network Provision; 
further development of the regulatory framework at national and 
European level, including discussion of future interaction of 
national and EU regulation in this sector. 
Three Commission proposals for directives drafted in this connection 
under Article 90(3) were discussed and/or adopted during the year. 
2. Cable TV liberalization directive 
103. On 18 October the Commission adopted a directive allowing cable 
TV infrastructure to be used to provide already liberalized 
telecommunications services.60 The draft had been issued for public 
consultation on 21 December 199461. Although not bound by specific 
Treaty requirements, the Commission has sought to establish a 
transparent and open procedure for the adoption of Article 90(3) 
directives. The more than forty written comments received expressed 
their broad support for the Commission draft. 
Council Resolution of 22 December 1994 on the principles and timetable for the 
liberalization of telecommunications infrastructures (OJ C 379, 31.12.1994, p. 4). 
COM{95)158. 
Commission Directive 95/51/EC of 18 October 1995 amending Directive 90/388/EEC with 
regard to the abolition of the restrictions on the use of cable television networks for 
the provision of already liberalized telecommunications services (OJ L 256, 26.10.1995, 
p.49) . 
XXIVth Report on Competition Policy (1994), point 220. 
The directive provides for the abolition of restrictions on the use of 
transmission capacity on cable TV networks for all télécoms services, 
apart from public voice telephony from 1 January 1996, and ensures that 
cable TV networks are allowed (i) to interconnect with the national 
public télécoms network, and (ii) to interconnect with each other 
directly. It also calls on the Member States to impose accounting 
transparency and the separation of financial accounts between the two 
business activities as soon as a turnover of ECU 50 million is reached 
in the market for telecommunications. 
This directive is only a first step towards the objective of 
liberalizing the infrastructures, which will be achieved in the full 
competition directive. It will also facilitate from 1 January 1996, the 
effective provision of already liberalized services. 
3. Mobile telephony liberalization directive 
104. The second directive concerns the liberalization of mobile and 
personal communications. A draft was published for public consultation 
by the Commission on 1 August 1995,62 with a period of two months being 
allowed for comments. It was transmitted to the Council, the European 
Parliament, the Economic and Social Committee, and the Committee of the 
Regions. Comments were broadly in favour of the wording of the draft. 
At its meeting on 20 December 1995, the Commission agreed the 
Article 90(3) directive in principle. The directive was formally 
adopted by the Commission on 16 January 1996.63 The Commission's aim 
is to ensure fair competition as regards both the granting of licences 
to operators and the management of mobile telephony networks in the 
European Union. This should help new entrants to gain access to the 
market and facilitate the interconnection of national networks. 
The directive seeks to achieve this by requiring Member States to 
abolish all exclusive or reserved rights in the field of mobile 
communications and to put in place, if the Member States have not 
already done so, authorization procedures for the granting of licences. 
It also calls on the Member States to allow new entrants on the market 
in mobile telecommunications services to offer their services via their 
own infrastructures or via so-called alternative infrastructures. This 
is indispensable if competition is to be fostered since, as the 
Commission noted in its Communication on the 1992 review of the 
telecommunications sector,64 high tariffs for and lack of availability 
of the basic infrastructure over which liberalized services are 
operated or provided to third parties have delayed the widespread 
development of such services. 
However, the Member States who have less well-developed networks 
(Spain, Greece, Ireland and Portugal) may benefit, if they wish, from 
a five-year derogation period. Luxembourg, because of the small size 
of its network, may extend the deadline by two years. 
The legal reasoning for the removal of the special or exclusive rights 
under this directive is that they constitute a restriction on the 
freedom to provide services under Article 59. In addition, however, 
the directive is based on Article 86, with recital 10 reading as 
follows : 
Draft Commission Directive amending Directive 90/388 EEC with regard to mobile and 
personal communications (OJ C 197, 1.8.1995, p. 5). 
Commission Directive 96/2/EC of 16 January 1996 amending Directive 90/388/EEC with regard 
to mobile and personal communications, OJ L 20, 26.1.1996, p. 59. 
Communication of 21 October 1992 on the 1992 review of the situation in the 
telecommunications service sector (SEC (92) 1048). 
39 
"The exclusive rights that currently exist in the mobile 
communications field were generally granted to organizations 
which already enjoyed a dominant position in creating the 
terrestrial networks, or to one of their subsidiaries. In such 
a situation, these rights have the effect of extending the 
dominant position enjoyed by those organizations and therefore 
strengthening that position, which, according to the case-law of 
the Court of Justice, constitutes an abuse of a dominant position 
contrary to Article 90." 
4. Full competition directive 
105. In its resolution of 22 December 1994, the Council of Ministers 
reaffirmed that 1 January 1998 should be the date for the 
liberalization of telecommunications infrastructures and public voice 
telephony, services, subject to transitional arrangements for certain 
Member States ( i.e. Greece, Spain, Portugal, Ireland : up to five 
years; Luxembourg : up to two years) . The Commission responded to this 
by proposing a package of two measures: an Article 90(3) Commission 
directive concerning the introduction of full competition into the 
telecommunications markets, and a proposal for a Council and Parliament 
directive based on Article 100a of the EC Treaty with a view to 
harmonizing the rules for interconnection. The package thus 
demonstrates the need for competition policy to develop in close 
cooperation with the more general aspects of Community 
telecommunications policy. 
106. As regards the Article 90(3) directive, this was published for 
comments on 10 October 1995 and envisages the liberalization of all 
telecommunications services including voice telephony by 1 January 
1998, with transitional periods for certain Member States. 
Restrictions on the use of alternative infrastructures must be lifted 
by 1996 (except for public voice telephony, which is to be liberalized 
in 1998) , and the conditions and rules for the authorization of 
interconnection must be established by 1997. The directive also lays 
down the fundamental principles governing authorization of new entrants 
on the markets for voice telephony and telecommunications 
infrastructures. These principles guarantee the introduction of 
competition into these sectors and list the measures necessary to 
safeguard universal service in the Member States. The directive also 
provides that Member States must publish the authorization conditions 
and procedures, as well as the terms and conditions for 
interconnection. 
In addition, Member States with underdeveloped or small networks can 
benefit from derogations of five and two years respectively. 
107. In parallel with its action to establish the above-mentioned 
regulatory framework, the Commission pursued its efforts to ensure 
full • implementation of the existing directives in the 
telecommunications sector and in particular the Services Directive.65 
On 4 April, the Commission issued a Communication66 on the status and 
implementation of this directive,which affirmed the Commission's 
intention to ensure that the problems and gaps in implementation 
identified in the Communication are resolved. 
Commission Directive 90/388/EEC on competition in the markets for telecommunications 
services (OJ L 192, 24.7.1990, p. 10). The Services Directive provided for the removal 
of special and exclusive rights granted by Member States for the supply of all 
telecommunications services other than voice telephony; it came to be recognized as a 
cornerstone of the EU framework for liberalizing the European telecommunications market. 
Commission Communication of 4 April 1995 to the European Parliament and the Council on 
the status and implementation of Directive 90/388/EEC on competition in the markets for 
telecommunications services (OJ C 275 of 20.10.1995, p. 2). 
40 
5. Infringement proceedings under Article 90(3) 
108. As well as directives of general application the Commission is 
also authorized under Article 90(3) to take decisions against Member 
States in individual cases. It signalled its intentions to do this as 
regards possible discrimination against second mobile phone operators 
in several Member States. State operators already enjoy significant 
advantages over new entrants - such as the universal phone network, a 
dominant position on the market and an established mobile user base 
(often with permission to offer mobile services having been granted 
without any requirement of a selection process). The Commission has 
therefore taken care to ensure that second operators receive fair 
treatment from Member States. In particular, it was concerned about the 
auction procedure which a number of Member States included in the 
selection criteria for the second operator. Such an auction, critically 
analyzed in the 1994 Green paper on mobile and personal 
communications,67 results in the award of second licences not only on 
the basis of a comparison of intrinsic qualitative elements but also 
on the basis of a financial bid above a certain set threshold. 
Omnitel Pronto Italia 
109. On 4 October, the Commission took a formal decision under 
Article 90 (3)68 in the case of Italy for discriminating against Omnitel 
Pronto Italia and in favour of Telecom Italia Mobile (the state 
operator) . The discrimination which strengthened the dominant position 
of Telecom Italia Mobile, took the form of a requirement that Omnitel 
Pronto Italia pay an entry fee for a GSM licence, without a similar 
payment being required from Telecom Italia and without compensation for 
Omnitel in the form of an easing of the regulatory environment. The 
decision provided that the Italian Government must either require that 
Telecom Italia Mobile make an identical payment or adopt, after 
receiving the agreement of the Commission, corrective measures 
equivalent in economic terms. In addition, the measures definitively 
adopted must not undermine the competition introduced by the 
authorization of the second GSM operator. 
GSM Radiotelephony services in other Member States 
110. The Commission has also been taking action against a number of 
other countries (including Belgium, Spain and Ireland) with a view to 
establishing a level playing-field for the second GSM operator. For 
example, only after discussions with the Commission did Belgium give 
an undertaking to charge Belgacom (the state operator) a similar fee 
for its existing GSM licence as was to be paid by the second GSM 
provider, Mobistar. The Commission is continuing to monitor the 
operating conditions for second operators in the Member States. 
Vebacom 
111. The Commission has also taken action under Article 90 in other 
areas of telecommunications. In April, it received a complaint under 
Article 90 from Vebacom, the telecommunications subsidiary of VEBA AG, 
a German utilities holding company. Vebacom had made several 
unsuccessful attempts to obtain a licence for a broadband 
telecommunications network based on SDH (Synchronous hierarchy) 
technology which would allow the transfer of data between 36 different 
sites of the German public television broadcaster ARD. The Commission 
Towards the personal communications environment - Green paper on a common approach in the 
field of mobile and personal communications in the European Community (COM(94)145). 
OJ L 280, 23.11.1995, p. 49-57. 
41 
formed the preliminary view that the complaint was justified, in 
particular since Vebacom intends to offer a service based on a new 
technology (SDH) which was not offered by Deutsche Telekom AG, the 
holder of the infrastructure monopoly in Germany. After informal 
discussions with the Commission, the German Ministry of Posts and 
Telecommunications agreed to grant a licence for the establishment and 
operation of an alternative telecommunications network. 
C - Energy 
112. The Council continued its in-depth examination of the amended 
proposals for directives concerning common rules for the internal 
market in electricity and gas presented by the Commission on 7 December 
1993 . 
113. However, it has been impossible in 1995 to make any substantial 
progress with the liberalization of the Community's electricity and 
natural gas markets, which, with a few exceptions, are still dominated 
by exclusive rights or monopolies. The Council of Ministers, at its 
meeting on 2 0 December, was not in a position to agree on a common 
position with regard to the draft Directive concerning common rules for 
the internal market in electricity, although the Spanish Presidency 
could conclude that negotiations had reached the final stage and that 
it should be possible to take a decision early in 1996. 
114. Early in the year and at the request of the Council, the 
Commission examined the possibilities for coexistence between the 
Commission's negotiated access approach (consumers and producers 
negotiate access to the grid with its operator) and the so-called 
single buyer concept (one single entity within a system responsible for 
all buying and selling and for public services) . In its working paper 
on the organization of the internal electricity market,69 the 
Commission concluded that the original single buyer model was 
incompatible with the Treaty and would not provide equivalent economic 
results or reciprocity between the two systems. It also suggested a 
number of modalities for the single buyer model which would permit 
coexistence of the two systems. These modalities covered the degree of 
consumer choice for all eligible consumers, the possibility of imports 
and exports under objective conditions, measures to ensure transparency 
and to avoid any distortions of competition, guarantees for fair 
competition in generation and also its opening up to independent 
producers, and the possibility of establishing direct lines. The 
Council at its meeting in June accepted the Commission's position in 
principle by concluding that coexistence of the two systems could take 
place only on the basis of modifications to the single buyer model. 
However, little agreement was forthcoming on the list of modalities 
proposed by the Commission. 
115. The Spanish Presidency presented a compromise text in July which 
incorporated all the political agreements already reached in previous 
Council conclusions, including the conclusions of the Commission's 
March working paper, and attempted to come up with solutions to 
problems not yet solved. It accepted the coexistence of the negotiated 
access and single buyer systems, but modified the latter to take into 
account a number of the required changes. This compromise text was 
intensively discussed throughout the second half of the year. 
116. The two central issues outstanding concern the degree of market 
opening via the definition of eligible customers and especially the 
question whether distributors should be among the eligible customers 
that would be free to contract with the most efficient producers. 
SEC(95)464 of 22.3.1995. 
42 
Furthermore, some Member States fear that the proposed solution for 
public-service obligations may be abused in a manner that unduly 
restricts competition. 
117. The Commission deplores the fact that it has not been possible 
to reach agreement on the proposed directive, especially in view of the 
importance of the subject. As stated in the Ciampi report,70 the 
failure to liberalize the energy sector is having a very detrimental 
effect on the competitiveness of the European economy. 
D - Postal services 
118. On 26 July the Commission adopted a package of measures 
consisting of a proposal for a European Parliament and Council 
Directive establishing common rules for the development of postal 
services and a draft Commission communication on the application of the 
competition rules to the postal sector. The aim of the measures is to 
guarantee the provision of universal service and at the same time to 
open up the postal market to greater competition. 
The proposal,71 based on Article 100a of the EC Treaty, provides for 
mandatory universal services to be provided throughout the Community 
to all citizens at affordable prices, with a high degree of quality, 
including in remote areas and peripheral regions of the Community. In 
order to ensure the financial viability of the universal service, the 
proposal defines harmonized criteria for the services which may be 
reserved for the universal service providers. Thus, domestic mail in 
the Member States weighing not more than 350 g where the tariff is less 
than five times the rate for a standard letter (up to 20 g), direct 
mail and incoming cross-border mail may continue to be reserved until 
31 December 2000 (subject to review of the direct mail sector by 30 
June 1999). The proposal also requires the Member States to set, in 
particular, universal service tariffs at affordable prices fixed in 
relation to the costs and to define quality standards applicable to 
national services which are consistent with the Community measures. 
The draft communication,72 which will be the subject of a public 
consultation procedure, complements the proposal for a Directive. The 
Commission sets out the principles governing how it intends to apply 
the competition rules in the Treaty to the postal sector, in order to 
facilitate gradual, controlled liberalization of the postal market. 
It describes the approach it intends to adopt to analysing State 
measures restricting the freedom to provide services or to compete on 
the postal markets, in relation to the Treaty provisions. The 
Commission particularly raises questions of non-discrimination in 
access to the postal network, identifying cross-subsidies and defining 
the mandatory safeguards necessary to ensure fair competition. 
E - Transport 
1. Airports 
119. The Commission is pursuing its efforts to ensure that the 
liberalization of ' air transport in the European Union is not 
jeopardized by anti-competitive practices at airports. It continued 
See footnote 2 above. 
Proposal for European Parliament and Council Directive on common rules for the 
development of Community postal services and improved quality of service (OJ C 3 22, 
2.12.1995 p. 22). 
Draft Commission communication on the application of the rules of competition to the 
postal sector and in particular on the assessment of certain State measures relating to 
postal services (OJ C 322, 2.12.1995, p. 3). 
43 
its investigation of several complaints and took decisions aimed at 
improving competition at certain major airports of the European Union. 
1.1 Landing fees 
Brussels-National Airport 
120. The Commission adopted a decision under Article 90 (3 )73 concerning 
the system of discounts on landing fees charged at Brussels-National 
Airport under the Royal Decree of 22 December 1989. British Midland, 
the airline which lodged the complaint, considered that the system 
enabled the airline Sabena, its main competitor on the Brussels-London 
route, to benefit from a discount of 18% on its landing fees, although 
no other airlines qualified for a reduction. 
After examining the complaint, the Commission concluded that the system 
constituted a state measure within the meaning of Article 90(1), read 
in conjunction with Article 86, as it had the effect of applying to the 
airlines dissimilar conditions for equivalent transactions connected 
with landing and take-off and hence introducing distortions of 
competition. The Commission considered that such a system could be 
justified solely by economies of scale achieved by the airport 
operator. 
This did not apply in the case in question. The Commission therefore 
requested the Belgian authorities to put an end to the system. 
1.2. Ground handling 
121. The Commission also continued its investigation of 
anti-competitive practices in ground handling (ramp, terminal and/or 
cargo handling) . Positive results were achieved during the year, the 
Commission's approaches to the authorities of Member States having 
resulted either in a gradual opening-up of the market (e.g. in Ireland, 
where the ground handling market has been open to a second operator 
since 1 January 1995), or specific commitments to this end (e.g. in 
Greece and Spain, whose authorities notified the Commission of their 
plans to improve efficiency in this sector, as well as a liberalization 
timetable). 
The Commission also continued its examination of the complaints lodged 
under Article 86 of the Treaty against two private airport companies 
responsible for operating two of the largest airports in the Union: 
Frankfurt and Milan. 
122. A fresh development in this area was the agreement in principle, 
reached on 8 December, by the Transport Council, on the Directive 
relating to the liberalization of ground handling services in Community 
airports. The proposal, based on Article 84 of the Treaty, had been 
presented by the Commission in December 1994 and followed the Council 
Resolution of 24 October 199474 on the situation in European civil 
aviation and the Commission communication on 'The way forward for civil 
aviation in Europe'. 
Ground handling is an activity related to air transport without which 
carriers would be unable to carry on their business. Its 
liberalization forms part of the completion of the single market in air 
transport and follows the adoption of the Community rules on slot 
allocation and the operation of computerized reservation systems. It 
is also intended to help European airlines to improve control of their 
OJ L 216, 12.9.1995, p. 8. 
OJ C 309, 5.11.1994, p. 2. 
44 
operating costs and better match their services to customer 
requirements. 
The proposal also provides for a transitional market adjustment period, 
fixing different deadlines for entry into force based on certain 
reference thresholds. Full liberalization should take place, depending 
on the sector and the case at issue, between 1998 and 2003. 
2. Ports 
123. Following the judgment of the Court of Justice in Port of Genoa,7S 
Italy initiated a reform of its port system which led to the adoption 
in 1994 of Law No 84. 
In principle, the law provides for the opening-up to competition of the 
market for port handling operations (loading and unloading). In 
practice, however, this has not proved the case as in some Italian 
ports the local authorities have systematically refused to grant the 
necessary operating licences to potential competitors of the long-
established dockers companies. As this situation was contrary to its 
policy of competition in ports, the Commission decided that action was 
necessary. The port of Genoa was selected in view of its importance 
to the Union as a whole and its position as the leading Italian port. 
On 21 June, the Commission warned the Italian Government to issue an 
operating licence within ten days to the firm that had been unlawfully 
denied that right by the local port authority. 
On 11 July the Italian authorities informed the Commission that the 
licence had been issued within the period stipulated. The licencie 
opened up the port operations sector in the Port of Genoa to other 
service providers. The measure will benefit port users, a number of 
local enterprises, chiefly small and medium-sized firms, and generally 
increase the dynamism of the port with regard to international 
competition. 
124. The Commission is also pursuing its different infringement 
proceedings instituted against Italy concerning aspects of port work 
which continue to pose problems with regard to Community law. 
F - Other state monopolies of a commercial character 
125. The adjustment of national monopolies of a commercial character 
in the new Member States was the subject of extensive discussions 
between the Commission and the governments concerned. The aim was to 
adjust the laws governing the monopolies to Community legislation and 
to Article 37 of the Treaty in particular. 
1. Swedish and Finnish alcohol monopolies 
126. The adjustment of the alcohol monopolies in Sweden and Finland 
was discussed by the Commission and the two new Member States with a 
view to adjusting the monopolies to Community law. In the light of 
these objectives, the two Member States agreed to abolish the exclusive 
rights to import, export, produce and sell wholesale, including 
wholesale sales to cafés and restaurants. The Commission was able to 
ensure that these exclusive rights, which should already have been 
abolished when the EEA Agreement entered into force, were finally 
abolished by the new laws on alcohol adopted by Sweden and Finland at 
Judgment of 10 December 1991, in Case C-179/90 Porto di Genova v. Siderurgicn Gabrielli, 
[1991] ECR 1-5889. 
45 
the end of 1995.76 
The Commission considers that the exclusive rights to retail alcohol 
may, without prejudice to future developments in the caselaw of the 
Court of Justice, be justified under existing Community legislation, 
in particular in view of legitimate national concerns about alcoholism, 
provided that there is no discrimination between national products and 
products imported from other Member States. To ensure that retail 
monopolies conformed to these requirements, the Commission considered 
it necessary to be closely involved in detailed and regular monitoring 
of their operation. 
2. Austrian alcohol monopoly 
127. Austria holds a national monopoly of a commercial character in 
pure alcohol and certain alcoholic beverages which involves exclusive 
import and wholesale rights but which, unlike the exclusive retailing 
rights, are considered to be clearly incompatible with Article 37 of 
the EC Treaty, without any of the above-mentioned requirements being 
applicable. The exclusive rights should therefore have been abolished 
by 1 January 1995. As this had not been carried out, the Commission 
was compelled to initiate the infringement procedure provided for in 
Article 169 of the EC Treaty against Austria. 
3. Austrian salt monopoly 
128. With regard to the national monopoly of a commercial character 
in the salt.sector, Austria, following action taken by the Commission, 
finally agreed to abolish the exclusive rights to import and sell 
products from other Member States wholesale; the rights should have 
been abolished by the start of 1995.77 
4. Austrian manufactured tobacco monopoly 
129. The Austrian monopoly of manufactured tobacco, characterized by 
exclusive import and marketing rights, is subject to the requirements 
of Article 71(1) to (3) of the Act of Accession of Austria.78 Under 
that Article, Austria is required gradually to adjust its monopoly of 
manufactured tobacco by the progressive opening, as from the date of 
accession, of quotas for the import of products from Member States so 
that, by 31 December 1997 at the latest, no discrimination regarding 
the conditions under which goods are procured and marketed exists 
between nationals of Member States. Compliance with this obligation 
entails the abolition of exclusive import rights and exclusive 
wholesale rights. As regards retail sale of products imported under 
quotas, distribution of such products to consumers must be carried out 
in a non-discriminatory manner. 
Finding that Austria had not taken the necessary measures to comply 
with these provisions, in particular as regards the opening of quotas 
as required, the Commission was obliged to initiate the infringement 
procedure provided for in Article 169 of the EC Treaty. 
The Commission also checks that the retail sale of products imported 
under quotas is carried out in a non-discriminatory manner. Thus, for 
instance, the Commission must ascertain that licensing and distribution 
Regarding Sweden, see the Alcohol Act (1994:1738) promulgated 16.12.1994 and entered into 
force 1.1.1995. For Soumi-Finland, see new Alcohol Act (1143/94) adopted on 8.12.1994 
and entered into force on 1.1.1995. 
Bundesgesetzblatt (Austrian Official Journal) No 518/1995, 4.8.1995. 
OJ C 241, 29.8.1994, p. 35. 
46 
agreements between Austria Tabakwerke and other European operators are 
not liable to jeopardize the effectiveness of adjusting the Austrian 
manufactured tobacco monopoly and are compatible with the Treaty 
competition rules. 
47 
Ill - Merger control 
A - Introduction 
130. Concentrations falling under the Merger Regulation were even more 
numerous than in 1994. The Commission received 114 notifications (1994: 
100) and took 109 final decisions (1994: 90) . Activity in 1995 was over 
24% higher than the previous year, which itself had been about 50% 
higher than in the three years 1991 to 1993. A total of 7 second-phase 
investigations were begun compared with 6 a year earlier and 2 
operations were prohibited compared with 1 in 1994. 
This year marked the fifth anniversary of the entry into force of the 
Merger Regulation.79 In those five years the Commission took 382 final 
decisions, an average of about one decision every three and a half 
working days or over 70 decisions per year. The sectoral breakdown of 
cases indicated a continuing significant number of notifications in 
telecommunications, financial services, the media and pharmaceuticals . 
The revised Implementing Regulation80 came into force on 1 March 1995. 
In addition, four interpretative notices which were published at the 
end of 1994 were applied for the first time in 1995.81 They concern the 
distinction between concentrative and cooperative joint ventures, the 
notion of a concentration, the notion of undertakings concerned and the 
calculation of turnover. 
These changes in the operation of the Merger Regulation were adopted 
by the Commission as a result of its 1993 review exercise. A new review 
exercise was launched during the year. The Commission carried out a 
wide-ranging consultation exercise on the issue of lowering the 
thresholds contained in the Merger Regulation as well as on other 
aspects of the Regulation which might need to be revised. Among those 
consulted were the Member States, other Community institutions, 
individual businesses, trade associations and legal advisers. A Green 
Paper on the operation of the Merger Regulation was published early in 
199682 with a view to full public consultations on the issues involved. 
Legislative proposals are likely to be made later in the year. 
B - In-depth investigations 
131. A total of 7 in-depth (phase-two) investigations were completed 
under the Merger Regulation. As a result, 2 operations were prohibited 
which were both in the media sector - the Nordic Satellite Distribution 
(NSD) joint venture in the Nordic area and the RTL/Veronica/Endemol 
(Holland Media Groep - HMG) transaction in the Netherlands. The 
remaining 5 operations were all cleared, 2 unconditionally and 3 with 
conditions which removed the competition problems identified by the 
Commission during its investigation. 
1. Media cases 
132. The Commission has received an increasing number of notifications 
in the media sector which reflect the changing patterns of ownership 
Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations 
between undertakings (OJ L 395, 30.12.1989, p. 1). 
Commission Regulation (EC) No 3384/94 of 21 December 1994 on the notifications,- time 
limits and hearings provided for in Council Regulation (EEC) No 4064/89 on the control 
of concentrations between undertakings (OJ L 377, 31.12.1994); XXIVth Report on 
Competition Policy (1994), points 234-235). 
XXIVth Report on Competition Policy (1994), points 237-260. 
COM(96)19. 
48 
and the convergence of previously separate technologies, e.g. 
telecommunications and media. The majority of these cases have 
presented no competition problems and have been approved after a first-
phase enquiry. 
The decisions in the NSD and HMG cases indicate the importance which 
the Commission attaches to cases in this sector. These transactions 
involved significant horizontal and vertical effects, with new 
companies being created which would restrict access to TV networks -
terrestrial, satellite or cable - in the future. In 1994 the Commission 
had prohibited the MSG Media Service joint venture, which had been 
proposed by Bertelsmann, Kirch and Deutsche Telekom with a view to 
providing services for pay-TV in Germany. In its prohibition of the NSD 
operation, the Commission invited the parties' to present new proposals 
which could be considered compatible with the common market. This 
emphasizes the Commission's willingness to see new companies being set 
up in this sector, provided that they do not create or strengthen a 
dominant position. 
Nordic Satellite Distribution 
133. NSD was designed to transmit satellite TV programmes to cable TV 
operators and households receiving satellite TV via their own dish. 
However, the Commission concluded that the establishment of NSD in its 
proposed form would have led to a concentration of the activities of 
its parents, creating a vertically integrated operation extending from 
production of TV programmes to retail distribution services for pay-TV 
channels. 
NSD's parents are strong media players in the Nordic area. Norsk 
Telekom A/S is the largest cable operator in Norway, has pay-TV 
distribution activities in Norway and also controls satellite capacity 
suitable for Nordic viewers. TeleDanmark A/S (TD) is the dominant cable 
TV operator in Denmark. In addition, TD, with Kinnevik, controls most 
of the remaining satellite capacity suitable for Nordic viewers. 
Kinnevik, a Swedish conglomerate, is the most important provider of 
Nordic satellite TV programmes and a major pay-TV distributor in the 
Nordic countries and has an important stake in cable and advertising-
financed TV in Sweden. 
The Commission found that NSD would have resulted in the creation or 
strengthening of a dominant position on three markets: 
the provision of satellite TV transponder capacity to the Nordic 
region (Denmark, Norway, Sweden, and Finland); 
the Danish market for operation of cable TV networks; 
the market for distribution of satellite pay-TV and other 
encrypted TV channels to direct-to-home households. 
The vertically integrated nature of the operation would have meant that 
the parties would have been able to foreclose the Nordic satellite TV 
market to competitors and obtain a "gatekeeper" function for the Nordic 
market for satellite TV broadcasting. As the affected markets are 
currently in a transitional phase the Commission acted to ensure that 
these future markets would not be foreclosed. 
RTUVeronica/Endemol 
134. The Commission began an examination of the RTL/Veronica/Endemol 
case following a request from the Dutch Government under Article 22 of 
the Merger Regulation. This Article allows a Member State to refer a 
case to the Commission even if it does not have a Community dimension, 
provided there is an effect on trade between Member States. Although 
49 
the Commission took the view that the relevant geographic market was 
the Netherlands, it concluded that the concentration affected trade 
between Member States because it would influence conditions for new 
entrants on the Dutch TV broadcasting market and would have an impact 
on the acquisition of foreign-language programmes and because the joint 
venture itself is based in Luxembourg, where two of its channels are 
"licensed" by the Grand Duchy of Luxembourg. The examination followed 
the normal procedure except that the usual suspension provisions did 
not apply. Therefore, in this case, the parties were able to complete 
the operation despite the Commission's decision that the joint venture 
would result in a dominant position for the parties. 
The case concerned a joint venture, Holland Media Groep (HMG) , between 
RTL, Veronica and Endemol. RTL transferred its broadcasting activities 
in the Netherlands to HMG, in particular the two commercial TV channels 
RTL4 and RTL5. A third commercial channel was introduced through 
Veronica, which left the public broadcasting system in the Netherlands 
to participate in the joint venture. The other main parent, Endemol, 
is the largest independent producer of TV programmes in the 
Netherlands. 
Following its investigation, the Commission concluded that the new 
company would have at least 4 0% of the market for free access TV 
broadcasting in the Netherlands and over 6 0% of the TV advertising. 
In addition, Endemol's position as the largest independent TV producer 
in the Netherlands would be strengthened by its participation in HMG. 
The Commission adopted a prohibition decision and invited the parties 
to propose measures to restore effective competition on the Dutch TV 
advertising and production markets within three months. The 
Commission's decision has been challenged before the Court of First 
Instance. 
2. Other in-depth investigations 
135. The remaining operations in which in depth investigations were 
opened were all ultimately declared compatible with the common market. 
Siemens/Italtel, a joint venture in the telecommunications equipment 
industry in Italy, and Mercedes Benz/Kàssbohrer, the acquisition by 
Mercedes of one of the other German bus and coach manufacturers, were 
both cleared unconditionally. In each case, however, the parties made 
certain statements which were included in the decision concerning their 
future business conduct. However, these statements were not an integral 
part of the Commission's competition analysis but were offered by the 
parties. For example, STET, the parent company of Italtel, undertook 
not to influence the purchasing policy of Telecom Italia in favour of 
the joint venture; and Mercedes announced that it would supply engines 
at competitive prices to third-party manufacturers who lacked their own 
engine production capability. 
136. In Siemens/Italtel, Siemens and STET, the holding company for 
the Italian telecommunications operators, including Italtel, intended 
to contribute their respective telecommunications equipment 
manufacturing subsidiaries to a joint venture. The operation raised 
both horizontal and vertical issues. Horizontally, the joint venture's 
highest market share occurred in switching equipment where the parties' 
combined share was 50-60% of the Italian market, and around 30% of 
overall EU sales (combined shares in transmission equipment were 
lower). Vertically, the joint venture would be partially owned by its 
largest customer. 
In concluding that the proposed joint venture was compatible with the 
common market, the Commission took into account : 
the potential effects of new technologies which are likely to alter 
50 
the telecommunications markets significantly; 
the effects of standardization and public procurement directives in 
opening up national markets; 
the further liberalization of telecommunications services and, in 
particular, of telecommunications infrastructure, which will lead 
to world markets for telecommunications equipment. 
13 7. In the Mercedes Benz/Kâssbohrer case, although the bus market 
throughout Europe would be affected, the Commission considered that the 
German bus market in particular required in-depth investigation. Three 
markets were identified with the parties combined share reaching 44% 
in city buses, 54% in tourist coaches and 74% in intercity buses. With 
a share of 57% of the entire bus market in Germany, however, the 
Commission- concluded that there would be adequate constraints on 
Mercedes' freedom of action on the German market because there were two 
German competitors, as well as potential entrants from elsewhere in 
Europe. According to customers these potential entrants could be 
expected to provide additional leverage to German bus operators. Lastly 
the Commission found that public procurement directives, which make 
Community-wide tendering compulsory for the main part of the market for 
city and intercity buses, were also leading to the development of a 
wider European market. 
138. In the other cases, the Commission's clearance of the respective 
operations was conditional on undertakings given by the parties in the 
course of the proceedings. 
139. In ABB/Daimler Benz, the Commission considered that the market 
for local trains had remained national in Germany although, in other 
Member States, the lack of major national rail transportation 
industries had already led to wider geographic markets. The proposed 
operation would have led to the creation of a dominant duopoly in the 
German market for local trains. The concentration would also have 
impeded market entry by foreign suppliers by eliminating independent 
German suppliers of electrical components. No competitive issues were 
identified in relation to other relevant product markets. 
In order to alleviate the Commission's concerns, the parties agreed to 
the sale of Kiepe Elektrik GmbH, a Daimler-Benz subsidiary specializing 
in electrical supplies for local trains. As a result of this 
divestiture, a competent producer of electrical components that was 
independent of the parties would remain on the German market and would 
be able to supply or cooperate with suppliers of the mechanical 
components of local trains. Kiepe is an established and successful 
supplier and played an important role in opening up the German market 
through its cooperation with the Canadian firm Bombardier. 
The transaction was the subject of a request for referral by the German 
authorities under Article 9 of the Merger Regulation. Although the 
competition problems were concentrated on two product markets in 
Germany, the proposed operation - which created the largest supplier 
of railway equipment in the world - had significant effects throughout 
Europe. The request for referral was thus refused. 
140. In Orkla/Volvo, the acquisition was approved subject to the 
divestiture of Orkla's brewing company Hansa. The parties would 
otherwise have had a 75% share of the Norwegian beer market and neither 
the retail nor the hotel and catering industries were considered 
capable of deploying any countervailing purchasing power. 
141. In Crown Cork and Seal/Carnaud MetalBox, following a detailed 
second-phase analysis of both the horizontal and vertical issues 
raised, the Commission determined that the only market in which the 
proposed concentration threatened to create a dominant position was the 
51 
market for tinplate aerosol cans. In the European Economic Area (EEA), 
both parties produce and sell tinplate aerosol cans and food cans, as 
well as certain closures for beverage cans and bottles, including 
beverage can ends, metal crowns, and plastic and aluminium caps. 
Consequently, the Commission concluded that Crown's commitment to 
divest a specified group of tinplate aerosol can operations would be 
sufficient to overcome its competition concerns. 
The parties agreed to divest substantial manufacturing activities for 
tinplate aerosol cans in five different Member States; these activities 
accounted for almost 22% of the EEA tinplate aerosol can market. 
Without the divestiture, the combined European market shares of the two 
parties would have been more than 6 0%, with the next largest competitor 
having a 15%-20% market share and with the major share of the excess 
capacity in this market being held by the parties. 
C - Other major cases 
142. A number of major operations were cleared without in-depth 
investigations within one month of their notification. They included 
several in the pharmaceutical sector, among which were Glaxo/Wellcome, 
Behringwerke/Armour Pharmaceutical, Hoechst/Marion Merrell Dow, Rhone 
Poulenc Rohrer/Fisons and Upjohn/Pharmacia. In order to remove any 
possible doubts as to compatibility, Glaxo agreed to grant to a third 
party an exclusive licence for one of the anti-migraine compounds 
currently under development by either Glaxo or Wellcome. It appears 
that recent mergers in the pharmaceutical industry are intended to 
increase the range of products offered by companies, thereby making 
them more competitive as suppliers to the wholesalers, hospitals and 
pharmacy chains. As a result, the operations to date have been largely 
complementary in nature and have not in general led to any competition 
problems. 
143. In Swissair/Sabena, the Commission secured remedies for 
resolving the competition problems raised by the operation which 
consisted of Swissair acquiring a 49.5% stake in Sabena. The 
transaction would have led to a monopoly in air transport between 
Switzerland and Belgium. Moreover, Swissair was a participant in the 
European Quality Alliance with SAS and Austrian Airlines, while SAS had 
proposed a cooperation agreement with Lufthansa. The operation, taken 
together with these arrangements, would have enabled the participating 
airlines to create an extensive route network carrying about 3 5% of 
passenger traffic within Europe, twice as much as the next largest 
carrier. In order to clear the operation, the Commission secured 
undertakings from the two airlines and from the Belgian and Swiss 
Governments that they would make available the necessary traffic rights 
and airport slots to enable competitors to operate flights between 
Belgium and Switzerland. Swissair and Sabena were also required to 
provide competitors with interlining arrangements and with the 
opportunity to participate in frequent flyer programmes. Lastly, 
Swissair was required to sever its previous links with SAS through the 
European Quality Alliance. This transaction was notified twice, on the 
second occasion following modifications to the operation. At that time, 
it was fully evaluated (including consultations with the Member States) 
without it being necessary to initiate a second-phase procedure. 
144. The Commission approved an operation by which the Finnish 
companies Repola Corporation and Kymmene Corporation entered into a 
full merger. Repola and Kymmene are large international companies 
active in the fields of printing paper and packaging materials. The 
operation involved, among other products, the markets for newsprint, 
magazine paper and paper sacks. 
As regards paper sacks, the Commission's investigation led to the 
52 
conclusion that there is a separate Finnish market for this product and 
that the concentration would lead to the creation of a dominant 
position on that market. The new company would be virtually the sole 
supplier of paper sacks to Finnish customers.The parties have given 
commitments involving the divestiture of some of their paper sack 
capacity on the Finnish market. 
The markets for newsprint and magazine paper are at least Western 
European in scope and Repola/Kymmene, like all the other major European 
paper producers, transport and market their products in almost all 
Member States. As a result of the operation, the new company will be the 
major European player in newsprint and magazine paper. However, the 
combined market shares will not exceed some 20% in either of the two 
product markets; what is more, several competitors have strong market 
positions. 
Along with five other Finnish paper producers, Repola is a member of 
Finnpap Marketing Association, a joint sales organization which markets 
the paper products of the members on a worldwide basis. Kymmene has its 
own sales network and is not a member of Finnpap. The parties have 
undertaken not to sell paper products through the Finnpap joint sales 
agency. 
D - Legitimate interests of Member States 
145. On 6 March the United Kingdom authorities made, in the context 
of the proposed acquisition of Northumbrian Water by Lyonnaise des 
Eaux, the first application under Article 21(3) of the Merger 
Regulation for the recognition of a legitimate interest. The 
application concerned legislation which regulates the water supply 
industry in the United Kingdom. This legislation has specific merger 
provisions which are designed to enable the regulatory system to 
achieve its objective of safeguarding the provision of a vital service 
and protecting the consumer. Accordingly, whenever a merger takes place 
or is expected to take place, the case is referred to the Monopolies 
and Mergers Commission (MMC) for it to decide whether it would be 
expected to operate against the public interest. The criteria for the 
public interest test for water industry mergers include the number of 
independently controlled water companies among which the water 
regulator could make comparisons for the purpose of calculating the 
price regulatory formula. The United Kingdom's application covered 
these provisions as the reference to the MMC is automatic and not 
discretionary. 
The Commission, in acknowledging the United Kingdom's legitimate 
interest, set specific limits to the MMC investigations in these 
circumstances. Its decision of 29 March 1995 acknowledged that the MMC 
could assess potential mergers on the basis of the public interest test 
but that the public interest in those cases was limited to those issues 
which were directly related to the operation of the water regulatory 
legislation. The United Kingdom authorities were required to inform the 
Commission of any measure taken under the decision so that the 
Commission could check that the measure was appropriate. 
Soon after the Commission's decision, the United Kingdom authorities 
referred the proposed takeover bid to the MMC. Following the MMC 
report, which found the merger to be against the public interest unless 
substantial price reductions for consumers were achieved, OFWAT 
consulted Lyonnaise and Northumbrian and proposed a measure which 
included a price reduction formula with which Lyonnaise subsequently 
formally agreed. As required by the decision, the Commission was 
informed of the proposed measure by the United Kingdom government and 
had no observations to make on it. 
53 
E - Mergers in the coal and steel industries 
146. During the year the Commission took seven decisions on 
concentrations under Article 66 of the ECSC Treaty. Three of these 
cases involved the sale to the private sector of steel companies that 
had previously been State-owned : the acquisition by the RIVA group 
of Ilva's flat products operation; a joint venture between Usinor 
Sacilor and Hoogovens to take over the Portuguese flat products company 
SN-Planos; and another joint venture between RIVA and FREIRE involving 
the takeover of SN-Longos. 
F - Perrier 
147. On 27 April the Court of First Instance (CFI) ruled on two 
cases, one brought by the employees of Perrier and the other by the 
employees of Vittel and Pierval against the Commission's decision of 
22 July 1992 in the case Nestlé/Perrier. The Commission had approved 
the concentration with conditions and obligations. The principal 
points of the judgments were as follows: 
while recognizing that the Merger Regulation is concerned 
primarily with questions of competition, the CFI concluded that 
this does not preclude the Commission from taking into account 
the social effects of a concentration if these affect the level 
or conditions of employment at the level of the European 
Community or a substantial part of it; 
the fact that a third party has not directly intervened in the 
course of the administrative procedure does not in all cases 
exclude that third party from being entitled to challenge the 
decision; 
the representatives of the workers of a company are not, in 
principle, directly concerned by a merger procedure and so are 
not entitled to request the annulment of a decision, except to 
protect their procedural rights; 
third parties do not have the right to be treated in the same 
way as the parties to the concentration in the administrative 
procedure. 
54 
G - Statistical overview 
Graph 1 : Number of final decisions adopted each year since 1990 
Final decisions taken under the Merger Control Regulation 
120 
100 
1990 1991 1992 1993 1994 1995 
Graph 2 : Breakdown for 1995 by type of operation 
Type of concentration (total 1990-95) 
Others 
Agreed bid 7% 
Acquisition of majority 
39% Joint venture / control 
49% 
55 
Graph 3 : Country of origin of the enterprises involved in the operations in 1995 
49 Breakdown of enterprises by country of origin 
(for 1995; in cases where a final decision was taken) 
56 
IV - State aid 
A - General policy 
148. In July, the Commission published its Fourth survey on state aid 
in the Community83 covering 1991 and 1992. The survey is an essential 
quantitative instrument in defining aid policy. The trend recorded in 
the period 1981-1990 showing a slow but steady fall in total aid has 
continued, despite the high costs of German unification, recession and 
stronger international competition. However, total aid granted remains 
high, with an average of ECU 94 billion a year for the Community as a 
whole, or 1.9% of its GDP and ECU 704 per person employed. In 
November, the Industry Council met and approved the Commission's 
analysis indicating that, whilst taking account of other Community 
objectives, it was necessary to continue to reduce aid levels by 
strengthening control mechanisms and improving their transparency. 
149. The obligation to notify aid imposed by the Treaty is central 
to aid transparency. In a communication adopted in May, the Commission 
stated that it intended to use all the powers it had under the Treaty 
to compel Member States to comply with that obligation. By publishing 
a communication on cooperation between the Commission and national 
courts, it demonstrated its will to assist national courts in their 
role of protecting the rights of firms affected by illegal aid that has 
been granted to competitors. 
150. The publication of guidelines and communications defining the 
criteria applied by the Commission in assessing the compatibility of 
state aid with the common market is another important feature of the 
Commission's policy of transparency and simplification. All 
instruments in force at 31 December 1994, including the manual of 
procedures and a list of Court of Justice judgments, have been 
collected in a single volume entitled "Competition law in the European 
Communities. Volume II: Rules applicable to state aid". However, as 
the rules have accumulated over the years, it would be desirable to 
consolidate certain instruments and revise others. Those on regional 
aid are therefore being consolidated, and the Commission has adopted 
a new framework on research and development aid, which was discussed 
at a multilateral meeting between the Commission and Member States' 
experts in April. At that meeting, there was also a discussion on the 
criteria for distinguishing between state aid and the "general" 
measures not covered by Article 92(1), and the problems of aid granted 
in connection with the sale of publicly-owned land and in the form of 
loan guarantees. A detailed questionnaire on state guarantees was sent 
to all Member States. 
151. Two other multilateral meetings were held in 1995. In July 
Member States' experts reviewed the de minimis rule and the Guidelines 
on State aid for small and medium-sized enterprises, as well as draft 
guidelines on state aid to the arts and cultural activities, especially 
the audiovisual sector. In December, they examined the future control 
of aid to the synthetic fibres industry and a first draft for a 
horizontal framework on regional aid for major investment plans and the 
problems of defining and collecting the reference and discount rates 
that are crucial to calculating aid. 
152. Over the year the Commission took a record number of state aid 
decisions, partly because of the accession of three new Member States. 
Much of the aid examined was intended to offset the social consequences 
Fourth Commission Survey on state aid in the European Union in the manufacturing.and certain 
other sectors, COM(95)365 final. 
57 
of restructuring in certain sectors. The Commission is also 
endeavouring to increase control of aid in sectors that have 
traditionally been protected from international competition and less 
obvious forms of aid that have often escaped checks in the past. 
Because firms are increasingly sensitive to aid granted to their 
competitors and are better informed about the opportunities for fair 
competition afforded them by the Community competition rules has 
resulted in their submitting more and more complaints to the Commission 
and more appeals to the Court of First Instance against Commission 
decisions to approve aid to their competitors. 
New measures to enforce compliance with the notification requirement 
153. The Commission continued its efforts to enforce compliance with 
the requirement that Member States notify all plans to grant state aid. 
Experience has shown that this obligation, provided for in 
Article 93(3), must, if it is to be effective, be accompanied by a 
package of incentives or, if necessary, penalties. 
1. Recovery of illegal aid 
154. Again the Commission emphasised the importance it attaches to 
the system of prior control of aid plans and the concrete expression 
of the system, i.e. the rule that prior notification must be given. 
Thus, in May, it adopted a communication84 that details the principles 
it intends to apply in ensuring compliance with its policy on the 
recovery of aid granted in breach of that obligation. 
The communication forms part of a wider movement aimed firstly at 
ensuring that Member States comply more strictly with Article 93 (3) of 
the EC Treaty and, secondly, at encouraging economic operators to be 
more vigilant about the lawfulness of the aid granted to them. The 
Commission had already tackled the matter before when it sought the 
recovery of incompatible and unlawful aid,85 a position upheld and 
indeed strengthened by the Court of Justice.86 More recently, the 
Court of First Instance again upheld Commission policy in this area. 
In its judgment of 13 September in joined cases T-244/93 and T-486/93, 
Textilwerke Deggendorf GmbH v. Commission, the CFI upheld the 
Commission's decision to make its authorization of a new aid package 
subject to a suspension of the payment of that aid, until a prior aid 
to the same company which had been declared incompatible had been 
recovered, because it was clear from the Commission's decision that the 
cumulation of the incompatible aid and the new aid package would render 
the totality of the aid incompatible. 
However, in terms of its effectiveness, such temporary suspension was 
of limited usefulness inasmuch as it would not have any immediate 
effect on the part (or all) of the aid already paid. These means were 
therefore not sufficient to tackle and settle the problem of potential 
distortion of competition, the effects of which could continue until 
the final Commission decision. Even if they repay the aid eventually, 
firms benefitting from illegal aid nevertheless continue to have an 
edge over their competitors, either in financial terms or by having a 
longer period of solvency in the case of firms in crisis. 
This is the problem the Commission communication seeks to tackle. It 
stipulates that, in certain cases, the Commission reserves the right, 
OJ C 156, 27.6.1995, p. 5. 
Commission Communication on aids granted illegally (OJ C 318, 24.11.1983). 
Judgment of 21 March 1990, in Case C 142/87 Royaume de Belgique v Commission . (Tubemeuse) 
[1990] ECR 1-959. Judgment of 14 February 1990, in Case C 301/87 République française v 
Commission (Boussac) [1990] ECR 1-307. 
58 
after having given the Member State concerned notice to submit its 
views and to consider rescue aid instead, to require the Member State 
by means of a temporary order to recover all or part of the aid 
granted in breach of the Treaty. Recovery must comply with the 
provisions of domestic law and interest must be charged from the time 
the aid was paid. Another new point is that interest is calculated not 
on the basis of the legal rate but according to the commercial rate, 
i.e. the reference rate used by the Commission in connection with 
regional aid.87 If a Member State failed to comply with such an order, 
the Commission might apply to the Court of Justice for interim measures 
by a procedure similar to that provided for in the second subparagraph 
of Article 93(2) of the EC Treaty. 
2. Cooperation between the Commission and national courts 
155. In October, with the same aim of increasing observance of 
legality in the Community, the Commission adopted a notice on 
cooperation between national courts and the Commission in the state aid 
field.88 It is not binding or limiting but seeks to give fresh impetus 
to relations between the Community executive and national courts and 
to draw courts' attention to the important role that they can play in 
the prompt safeguarding of the rights of third parties and securing 
compliance by Member States with certain procedural obligations. The 
notice thus clearly forms part of the general trend described in the 
preceding point. 
The notice points out that, while the Commission is the Community body 
responsible for implementing and developing competition policy in the 
Community's public interest, national courts do no more than preserve, 
until the final decision of the Commission, the rights of individuals 
faced with a possible breach by State authorities of the prohibition 
laid down by the last sentence of Article 93(3) of the EC Treaty.89 To 
that end, national courts are invited to use all appropriate devices 
and remedies and apply all relevant provisions of national law and, in 
particular, to grant interim relief, by ordering the freezing or 
returning of monies illegally paid, or awarding damages to parties 
whose interests are harmed. 
In order to attain these objectives more efficiently, the Commission 
intends to assist national courts by instituting closer cooperation, 
notably by: 
pursuing and improving its policy of transparency by publishing 
information on state aid; 
supplying information of a procedural nature on pending cases; 
supplying factual, statistical and analytical information. 
B - Concept of aid 
156. Interpreting the concept of aid as set out in the Treaties is 
often the most difficult part of the Commission's assessment of aid 
measures. The criteria for determining the presence of aid in measures 
taken by the Member States with regard to their enterprises are of 
particular importance not only to the administrative authorities of the 
Member States responsible for notifying them but also to the national 
87 See Commission Communication to the Member States, letter SG(95)D/1971 of 22.2.1995. The 
Court of First Instance very recently confirmed that the Commission could seek the payment 
of interest on sums recovered: Judgment of 8 June 1995, in Case T 459/93 Siemens SA, 
[1995]ECR 11-1675. 
88 OJ C 312, 23.11.1995, p. 8. 
89 Judgment of 21 November 1991, Case C 354/90 Fédération nationale du commerce extérieur des 
produits alimentaires et Syndicat national des négociants et transformateurs de saumon contre 
Etat français, [1991] ECR 1-5527, paragraph 14. 
59 
courts which may have to determine whether a contested measure should 
have been notified. Several Commission decisions taken in 1995 help 
to define the concept of aid provided for in the competition rules. 
157. (a) For Article 92(1) to apply, the measure must have provided 
a firm with an economic advantage which it would not have received in 
the normal course of business. The Commission considers that this 
condition would be met if a company were to acquire publicly owned land 
or publicly owned industrial site at a price lower than the market 
price. It therefore decided to initiate the Article 93(2) procedure in 
respect of the acquisition by the company Siemens Nixdorf AG/Mainz of 
a publicly owned site at a price estimated to be between DM 5 .5 million 
and DM 21.5 million lower than the market price.. The same reasoning 
would apply if the State were to acquire land from a company at a price 
higher than the market price. As the Commission had doubts whether the 
price for the land sold by the Spanish steel company Tubacex to the 
public authorities corresponded to the market value, it decided to 
initiate the Article 93(2) procedure. 
158. Public financing of costs inherent in the preparation of a 
building/industrial site and in providing connections to various 
(public) utility services does not fall under Article 92(1) if the 
company pays for the use of the infrastructure through direct or 
indirect charges. Since preparation of the site in Villey, Meurthe-et-
Moselle, for setting-up a new production plant by the paper company 
Kimberly-Clark benefited this company alone, in particular because it 
is the owner and sole user of the installations put in place, the 
partial public financing provided constituted an aid to that company. 
In this context, the Commission also took into consideration that a 
private market investor would not have carried out this preparation 
since the selling price for the site did not even cover partial 
financing of it. 
159. Public funds provided to a (public) undertaking on terms more 
favourable than those on which a private investor operating under 
normal market conditions would provide them to a private firm in a 
comparable financial and competitive position constitute state aid. In 
cases where the State's acquisition of a holding in a company may be 
combined with other types of public intervention which need to be 
notified to the Commission pursuant to Article 93(3), there is a 
presumption that state aid may be involved. In accordance with its 
Communication on the application of Article 92 and 93 of the EC Treaty 
to public authorities' holdings,90 the Commission asked the Spanish 
Government to inform it in advance of any acquisition made by the 
Institute for the Development of Andalusia. 
Because the intended capital injection by the Land of Bavaria to cover 
the accumulated losses of the steel undertakings Neue Maxhutte 
Stahlwerke GmbH and Lech-Stahlwerke GmbH would coincide with the sale 
of its shares in these companies, thereby removing any prospect of 
profitability from the provision of these funds even in the long term, 
the Commission decided that these capital injections constituted state 
aid. For similar reasons, it decided that the capital injections made 
by the Italian State through its industrial holding company ENI into 
the fertilizer company Enichem Agricultura S.p.A. in the period 1991-94 
constituted state aid, as the capital injections were made before a 
restructuring plan had been set up solely to prevent the company from 
going bankrupt and thus without any prospect of a reasonable return. 
Moreover, the Commission considered that, under the circumstances, the 
period during which the company had suffered heavy losses, i.e. five 
years, was too long to have been acceptable to a private market 
90 See Commission Communication of 1983, Bulletin EC 9-1984, points 3.4 and 4.4 
60 
investor who would have liquidated or thoroughly restructured the 
company much earlier. The capital injections to be made in the context 
of a restructuring plan set up at a later stage therefore also 
constituted state aid and the Commission considered the positive 
results expected from implementation of the plan to be too low compared 
with the total injection of new capital. 
However, if a capital injection by the State into a company is 
accompagnied by an injection of capital by a private investor on equal 
terms and if the private investor's holding in the company has real 
economic significance, the Commission considers that no aid is involved 
in the public intervention. It therefore decided that the capital 
injection and loans provided by the authorities of Wallonia (Belgium) 
to the textile company EM-Filature were based on normal commercial 
considerations and did not constitute state aid since this intervention 
went hand-in-hand with an injection of capital by private shareholders 
making them majority shareholders in the company and since private 
shareholders offered loans on similar terms. For similar reasons, the 
Commission considered that the injection of capital by the Portuguese 
State into the ship repair company Lisnave in connection with a 
restructuring of the company did not involve state aid under 
Article 92(1) . 
160. (b) Under Article 92(1) aid must be granted to certain 
undertakings (or the production of certain goods) to constitute state 
aid. General measures of economic, tax or social policy do not fall 
within Article 92 (1) and competitive advantages for firms in one Member 
State arising from differences in such general policy measures must be 
addressed, if necessary, under the appropriate procedure laid down in 
Articles 101 and 102. 
Therefore, Article 92(1) does not apply to general measures applicable 
to all undertakings in a Member State and satisfying objective and non­
discriminatory requirements. In the light of these considerations, the 
Commission considered that aid granted by the German Government to 
employees of the firm Maschinenfabrik Sangerhausen GmbH to cover social 
security obligations in connection with the liquidation of the firm did 
not constitute state aid, since the aid is automatically available to 
any firm in liquidation in Germany. Similarly, it took the view that 
the suspension of debt repayments in favour of the Spanish steel 
company Tubacex did not, in itself, constitute state aid, but a general 
measure taken within the framework of Spanish insolvency legislation 
generally applicable to all companies. However, it also follows from 
the above criteria that, if the effect of the objective requirements 
under a scheme open to all firms is that only certain undertakings may 
benefit from the measure, the Commission considers state aid to be 
involved. 
If a measure is applicable to all undertakings but confers 
discretionary power on the authorities administering the measure, state 
aid may also be involved. Therefore, the Commission considered that a 
Finnish employment aid scheme available to all firms in every sector 
of the industry and every region of the country nevertheless involved 
state aid since the labour market authorities had discretion as to the 
level of aid and the length of the subsidized period for each 
unemployed person taken on by a firm. 
161. (c) The financial benefit to certain undertakings must be 
granted by a Member State or through state resources in order to 
constitute state aid under Article 92(1) , which applies to aid granted 
by any central, regional or local authority and any public or private 
61 
body established or appointed by the State to administer the aid.91 
Even if an aid is not granted through a body established or appointed 
by the State, state aid may be involved if the financial contribution 
to the recipient firm(s') is made by the State. 
162. (d) The aid must be capable of affecting trade perceptibly 
between Member States. The Commission considered this condition to be 
met in respect of aid to the German company Leuna-Werke GmbH even 
though the company does not export goods to other Member States, since 
the aid may enable it to increase its production for the domestic 
market and thus reduce the potential market there for goods imported 
from other Member States. 
C - Assessment of compatibility of aid with the common market 
1. Sectoral aid 
1.1. Sectors subject to specific rules 
1.1.1. Aid to Shipbuilding 
163. On 21 December the Council adopted Regulation (CE) No 3094/9592 
implementing an OECD agreement with respect to normal competitive 
conditions in commercial shipbuilding and shiprepair, including the 
elimination of production subsidies. The new regulation will apply as 
from the entry into force of the OECD agreement. This was scheduled 
for 1 January 1996 but, although the European Union ratified the 
agreement in December, entry into force was unfortunately delayed 
because of delays in ratification by other parties to the agreement. 
The Council therefore decided that the rules of the Seventh Directive 
on aid to shipbuilding93 should continue to apply ad interim but not 
beyond 1 October 1996. If the OECD agreement has still not entered 
into force by 1 June 1996, the Commission will put forward appropriate 
proposals to the Council so that it can decide future policy before 
1 October 1996. Against this background, the Commission decided to 
maintain from 1 January 19 96 the common production aid ceiling at 9% 
for large vessels and 4.5% for vessels costing less than ECU 10 million 
and for conversions. 
1.1.2 Steel 
164. During 1995 the Commission continued to be vigilant in applying 
the steel aid code.94 This strict enforcement of the aid rules resulted 
in a number of negative decisions being taken, including ordering of 
the recovery of aid illegally granted. 
In November and December respectively the Council gave its unanimous 
assent to special derogations • under Article 95 ECSC relating to 
production and closure aid for iron-ore mining in Austria and the 
privatization of the public steel company in Ireland. 
Close monitoring of six previous Article 95 ECSC cases (Ilva in Italy, 
CSI and Sidenor in Spain, EKO Stahl and SEW FreitaT in Germany, and 
Siderurgia Nacional in Portugal) was maintained with half-yearly 
reports being submitted to the Council. 
Judgment of the Court of Justice in Case 78/76 Steinike und Weinlig v Bundesamt fur Ernâhrung 
und Forstwirtschaft [1977] ECR 575. 
OJ L 332, 30.12.1995. 
Council Directive 90/684/EEC, as last amended by Directive 94/73/EC. 
Commission Decision 3855/91/ECSC. : 
62 
In March the Commission proposed that the provisions of the steel aid 
code relating to aid for environmental protection should be brought 
into line with the revised Community guidelines on state aid for 
environmental protection under the EC Treaty to ensure that the steel 
industry enjoyed equal treatment with other industrial sectors. The 
Council's assent is still awaited. 
1.1.3 Coal 
165. Decision No 3632/93/ECSC95 of 28 December 1993 establishes the 
Community rules for state aid to the coal industry covering the period 
from 1994 until 2002. 
On 4 April the Commission authorized96 financial assistance totalling 
ECU 3 3 84.2 million that had been planned by Germany for 1995 in the 
form of compensation to the electricity generators under the Third Law 
on electricity produced from Community coal, aid for maintaining the 
underground workforce in mines ( "Bergmannspramie"), and aid to cover 
the exceptional costs of a number of coal undertakings resulting from 
inherited liabilities. 
On 19 July the Commission delivered a positive opinion on a 
restructuring plan submitted by the French authorities and authorized 
aid97 totalling ECU 912.8 million to cover operating losses for 1994, 
aid to cover inherited liabilities resulting from the modernization, 
rationalization and restructuring of the coal industry, and aid for 
research and development. On the same occasion, the Commission approved 
additional German aid totalling ECU 196.9 million for the supply of 
coking coal and coke for the Community steel industry.98 
On 26 July the Commission authorized99 France to grant aid totalling 
ECU 668.1 million to cover operating losses for 1995, aid to cover 
inherited liabilities resulting from the modernization, rationalization 
and restructuring of the coal industry, and aid for research and 
development. 
The Commission authorization for the United Kingdom to grant aid 
totalling ECU 2 594.4 million for inherited liabilities in 1995 was 
contained in the Commission Decision of 3 November 1994.10° 
Notifications of aid for 1995 have been received from the Portuguese 
and Spanish authorities,, and an additional notification has been 
received from the German authorities. These are all being examined by 
the Commission departments to determine their compatibility or 
otherwise with Decision 3632/93/ECSC. 
1.1.4. Motor vehicle industry 
166. By its judgment of 29 June 1995,101 the Court of Justice ruled in 
respect of the last Commission's decision extending the EC framework 
on state aid to the motor vehicle industry for an unlimited period that 
it had ceased to apply on 1 January 1995. To avoid any legal vacuum 
that the judgment might create, the Commission had to take 
extraordinary action and, on 5 July decided to extend the framework 
OJ L 329, 30.12.1993, p. 12. 
Decision 95/464/ECSC (OJ I, 267, 9.11.1995. p. 42). 
Decision 95/465/ECSC (OJ L 267, 9.11.1995, p. 46). 
Decision 95/499/ECSC (OJ L 287, 30.11.1995, p. 53), 
Decision 95/519/ECSC (OJ L 299, 12.12.1995, p. 18), 
Decision 95/995/ECSC (OJ L 379, 31.12.1995, p. 6). 
Case C-135/93 Spain v Commission [1995] ECR 1-1651, 
63 
retroactively from 1 January 1995 and, at the same time, proposing to 
the Member States that the framework be reintroduced for a two-year 
period starting no later than 1 January 1996. 
Subsequently, the Spanish Government appealed to the Court against the 
Commission's decision to extend the framework retroactively and, unlike 
all other Member States, also refused to accept the proposal to 
reintroduce it for a two-year period. Following the refusal, the 
Commission was obliged to initiate the Article 93 (2) procedure in order 
to examine the compatibility of all aid schemes which might benefit the 
motor vehicle industries in Spain. On 20 December it adopted a final 
decision compelling Spain to comply - in the same way as the other 
Member States - with the requirements of the newly reintroduced 
framework. 
On the basis of its decision of 5 July, the Commission continued to 
apply the framework during 1995. It received 9 notifications on the 
basis of approved schemes and 2 notifications on the basis of ad hoc 
schemes. It adopted a decision approving notified aid in 6 cases. It 
also took an interim decision enjoining the German Government to 
provide within a fixed deadline all the information necessary to allow 
an assessment of aid to the new projects of VW Sachsen, which were not 
covered by a previous 1994 decision.102 
167. In assessing individual awards based on regional aid schemes 
(e.g. FORD Genk), the Commission continued to apply its criterion 
whereby regional aid in this sector should be in proportion to the 
actual regional handicaps arising for an investor. However, it should 
be noted that, on average, it has allowed higher aid intensities for 
motor vehicle manufacturers carrying out investment projects in the 
least-developed regions of the EU. 
168. As regards rescue and restructuring aid, the Commission adopted 
final decisions on the cases concerning DAF Belgium, DAF Netherlands 
and SEAT-Volkswagen. These decisions implied, pursuant to the existing 
regulations, a recovery of part of the aid in the case of bankrupt DAF 
and a significant reduction of production capacity in the case of SEAT. 
Furthermore, the Commission decided to initiate proceedings under 
Article 93 (2) against aid granted by the Spanish authorities to Santana 
Motor S.A. 
169. In assessing aid for research and development the Commission, 
while recognizing the potential beneficial effects of R&D activity on 
economic development, takes into consideration the risk of distortions 
of competition and ensures that such aid is granted only to projects 
that are genuinely innovative at a European level. It also verifies 
that the maximum intensities laid down in the Community framework on 
aid for R&D are adhered to. As these conditions were fulfilled in the 
Opel Austria and Ford Valencia cases, the Commission approved the aid 
proposed for these projects. 
170. Both cases also involved aid for investment projects to reduce 
environmental pollution. In line with the motor vehicle framework and 
the guidelines on state aid for environmental protection, such aid can 
be approved only if it is to cover extra investment costs necessary to 
reduce or eliminate pollution or to adapt production methods in order 
to protect the environment and only if the limits of aid intensity 
specified, i.e. 15% for projects complying with new standards and 30% 
for projects significantly exceeding standards or for voluntary 
measures, are not exceeded. In both the Opel Austria •and the Ford 
Valencia cases, as well as in the Ford Genk case mentioned earlier, 
102 XXIVth Competition Report, point 367 and Annex II.E., point 2.6. 
64 
these conditions were fulfilled with the result that the Commission 
approved the proposed aid. 
171. In several past cases, the Commission has required the national 
authorities to monitor the realization of eligible investment and asked 
the Member States to send annual reports on the investments carried out 
and the aid payments made. Practice has shown the importance of such 
a follow-up procedure, bearing in mind that the execution of large 
multi annual investment projects leads to many changes which might 
require modification of the aid payments. In the course of 1995 this 
ex post control was exercised in the Ford/VW Se tubal and Fiat 
Mezzogiorno cases as well as in the Chrysler and SNF cases in Austria, 
where the European Union had reached agreement on aid reductions with 
the Austrian authorities. In its NedCar decision, the Commission 
required the Dutch authorities to notify the rules on the allocation 
of costs between the old and new models, so that it could ensure that 
no aid was granted to Volvo and Mitsubishi on the basis of inadequate 
rules.103 The analysis of the cost allocation rules for 1994 and 1995 
showed that they did not contain elements of state aid. Finally, in the 
case of restructuring aid for Rover, which dates from a period prior 
to the establishment of the framework, and in the case of regional aid 
for Opel Eisenach the ex post monitoring was terminated after all the 
conditions of the decisions had been fulfilled. 
1.1.5. Synthetic fibres industry 
172. Since 1977 aid to this industry has been subject to 
supplementary control through the code on aid to the synthetic fibres 
industry. In April the Commission asked an independent consultant to 
assess the code's effects and, if supplementary control were still 
considered necessary, advise what form it should take. The consultant 
reported in October and the Commission will decide what action to take 
early in 1996. Also in April the Commission extended the period of 
validity of the current code104 for a further nine months to 
31 March 1996105. 
1.1.6. Transport 
173. The year has seen a substantial increase in the number of aid 
cases in the transport sector (from 29 to 52) . At the same time, cases 
have become increasingly complex and the scope for enforcement of 
Articles 92 and 93 has expanded. As the liberalization of transport 
markets progresses, commercial pressure increases on operators across 
the board. The forthcoming completion of civil aviation liberalization 
will include cabotage rights for European carriers from March 1997. The 
recently approved Directives on infrastructure charges and track access 
in the railway sector follow on from Directive 91/440, which is also 
being extended to intra-state lines in the shipping industry. These are 
but a few examples of the progress being made towards a single market 
for transport services. 
174. As commercial operations move into new areas, control of 
financial support from the state must be stepped up to preserve a level 
playing-field for all enterprises, both public and private. In 
transport cases, no advantage that reduces the costs normally included 
in the cost structure of an undertaking and stems from a State measure 
should be authorized unless it responds to the need for coordination 
of transport or represents reimbursement for the discharge of public 
service obligations. In addition, the development of transport as an 
103 XXIVth Competition Report, points 367 and Annex II.E, point 2.6 
104 OJ C 346, 30.12.1992. 
105 OJ C 142, 8.6.1995. 
65 
economic activity or a concrete project of common European interest 
might qualify for exemption. 
175. In the course of the year the Commission departments were 
consulted on several cases (Ferrovie dello Stato, fixed Ôresund link) 
by Member States in order to clarify whether public investment in 
infrastructure could be considered state aid. Governments have always 
used financial intervention as an essential tool in their policy of 
infrastructure development. In principle, as long as access and usage 
remain public and general, such intervention will not constitute aid 
within the meaning of Article 92(1) but will be normally regarded as 
being in the public interest. For there to be a distortion that might 
qualify as aid, the infrastructure-related advantages, should be 
conferred selectively, with the aim of helping specific firms: for 
example, a purpose-built facility for the sole use of one undertaking 
or discriminatory access restrictions. 
In economic terms, public authorities normally provide these goods and 
services because of the inability of the price system to do so 
effectively. Goods such as infrastructures tend to be indivisible and 
collectively consumable by all citizens whether they pay for them or 
not. Such a public good provided by government benefits society in a 
collective manner and is not conferred upon any specific enterprise or 
industry (principle of non excludability). Consequently, public support 
for infrastructure will not normally constitute aid, but rather a 
general measure derived from the State's sovereignty in respect of 
economic policy, land planning and development. 
176. Various complaints submitted during the year claimed the 
existence of state support for ports. The question arises whether 
financial backing for port activities can be examined in the context 
of Article 92. 
177. In relation to civil aviation, the Commission based its 
decisions concerning state aid on the principles developed in the new 
guidelines adopted in November 1994.10G These take account of the 
increasingly competitive nature of the market for air transport 
services after the entry into force of the third liberalization package 
in 1993. In 1994 the Commission authorized the granting of 
restructuring aid to be paid in instalments in favour of TAP and Air 
France. In both cases, the Commission's approval was made subject to 
the correct fulfilment of a list of commitments and restructuring 
plans. Then in 1995, with the assistance of independent experts, the 
Commission monitored compliance . In view of the satisfactory fulfilment 
of both elements by TAP107 and Air France108 no objections were raised 
to payment of the second tranches of the aid. 
178. Also in 1994, the Commission decided that the subscription by 
the French public .entity CDC-P to bonds issued by Air France 
constituted illegal aid, incompatible with the common market, and 
requested its reimbursement. In October 1994, France and Air France 
challenged the Commission decision before the Court of First Instance. 
The Commission then decided on 4 April 1995109 to amend its original 
decision, and to request France to ensure that the aid and interest on 
arrears are deposited in a blocked bank account until the Court 
delivers a final ruling. The economic rationale of this mechanism is 
to deprive Air France of the use of the money corresponding to the aid, 
pending Court proceedings. 
106 XXIVth Report on Competition Policy, point 375. 
101 OJ C 154, 21.6.1995. 
109 OJ C 295, 10.11.1995. 
109 OJ L 219, 15.9.1994. 
66 
179. On 4 May 1995110, the Commission analysed the financial 
transactions involved in an agreement between Swissair and Sabena, 
aimed at the acquisition by the former, of a strategic stake (49.5%) of 
Sabena. The operation implied the issue by Sabena of new shares for 
BEF 9.5 billion, BEF 6 billion being subscribed by Swissair and the 
remaining part by Belgium and a group of Belgian investors. The 
Commission recalled that when the public holding in a company is to be 
increased, the capital injection will not involve state aid provided 
that the public investment goes together with the injection of a 
significant amount of capital by a private shareholder. Swissair's 
subscription of new shares at the same price and under the same 
conditions as Belgium and the Belgian investors was accepted as 
evidence that the operation was a normal financial transaction and not 
state aid. 
180. On 10 May 1995, the European Commission decided not to raise 
objections to plans by the German government to contribute to pension 
funds in favour of Lufthansa employees as part of the company's 
privatisation programme initiated in 1992. The measures were linked to 
the charges imposed on Lufthansa following its compulsory withdrawal 
from a supplementary pension fund managed by the public entity VBL to 
which, as a public company, it had been obliged to belong. The 
Commission considered that a private investor in the same position as 
the German State, obliged to relinquish the control of Lufthansa, would 
have acted in the same way in order to maximise the final value of its 
stake. 
181. On 19 July 1995, the Commission analysed a capital injection of 
FF 300 million into the company AOM by its parent State owned company 
Credit Lyonnais. The Commission, having analysed the restructuring plan 
of the airline, reached the conclusion that AOM was likely to return 
to profitability in the near future and that the net present value of 
future cash-flows was higher than that of the investment. The operation 
was considered to amount to a normal financial transaction and not 
state aid, since a market economy private investor in the same 
circumstances would have made the investment in AOM. 
182. On 2 9 November 1995, the Commission adopted a final negative 
decision concerning the exceptional mechanism of depreciation of 
aircraft registered in Germany and used for international commercial 
activities. In certain circumstances, the scheme allowed for an 
exceptional depreciation of up to 30% of the total acquisition cost. 
The Commission considered that the scheme amounted to an aid and that 
it could not fall within the second and third paragraph of Article 92. 
183. Likewise, the Commission took a number of decisions in cases 
involving aid to the maritime sector. The Commission's 1989 guidelines 
on the examination of state aid to Community shipping companies is 
currently under review in the context of an overall reappraisal of 
Community maritime transport policy. The results of this exercise will 
be presented by the Commission in a strategy discussion document on 
which the European institutions, the Member States and other interested 
parties will be invited to comment. 
184. In particular the Commission decided that an agreement between 
Spanish regional and local authorities in the Basque Country and 
"Ferries Golfo de Viscaya", concerning a ferry service between Bilbao 
and Portsmouth did not contain state aid elements. The final decision, 
following the opening of the procedure under article 93.2 of the 
Treaty, was taken on 6 June 1995. 
°OJ L 239, 7.10.1995 page 19. 
67 
185. Serious doubts were raised about the compatibility of aid 
granted to the French State-owned shipping company Compagnie Générale 
Maritime ('CGM') with the Treaty. The Commission decided on 
31 October 1995, and later on 20 December 1995, to initiate and extend 
respectively, the Article 93.2 procedure. The aid amounts to 
approximately ECU 33 0 million. 
186. The Commission also examined several cases of state aid in the 
road transport sector, taking particular account of the gradual 
liberalization of cabotage since 1 January 1995111 which entails the 
opening-up of local markets to Community competition. 
187. On 18 August the Commission brought an action before the 
Court of Justice against Italy for not having taken the necessary 
measures to comply with the Commission Decision of 9 June 1993, which 
declared a tax credit for professional road hauliers in Italy 
incompatible with the common market and ordered the Italian authorities 
to recover the sums paid. 
In addition, the scheme, which had been deemed to be operating aid and 
had initially been scheduled for the 1992 tax year, was extended by the 
Italian authorities to 1993 and 1994, with a budget of ECU 558 million. 
On 4 October the Commission decided to initiate Article 93(2) 
proceedings in respect of the extensions and called for the immediate 
suspension of the aid. 
188. In the area of inland waterways, the structural reorganization 
aimed at reducing existing overcapacity by scrapping vessels that was 
begun in 1990 on the basis of Council Regulation (EEC) No 1101/89 of 
27 April 1989 is still underway. In view of the amount of excess 
capacity, the Commission presented a proposed amendment of the above-
mentioned Regulation to the Council on 23 May, recommending extensive 
scrapping in the period 1996-98, part-financed by the Community, the 
Member States concerned and the trade. This action is an important 
measure accompanying the gradual liberalization of the 
waterway-transport market which was also advocated by the Commission 
in a proposal of 23 May 1995. 
189. In the course of 1995 some operations undertaken by railway 
companies were examined by the Commission in the light of Articles 92 
and 93. In relation to the UK sale of the railway rolling stock 
companies (ROSCOs) the Commission decided on November 2 9 that the 
guarantees provided to the purchasers maximised the sale profit and 
therefore do not constitute State aid. 
Similarly, on October 18 1995, the Commission decided that, a state 
guarantee in favour of Ferrovie dello Stato S.p.A., issued by the 
Italian government for a loan of 372 MECU to railway infrastructure 
investments in the high speed train link Brenner -Verona, did not 
constitute state aid. 
1.1.7. Agriculture 
190. The accession of three new Member States (Austria, Sweden, 
Finland) brought about some change in the situation regarding state aid 
in agriculture. The Act of Accession established a specific procedure 
for each new Member State for aid existing at the time of accession and 
for a given transitional period. In accordance with the Act of 
Accession, the new Member States informed the Commission by 3 0 April 
of all existing agricultural aid schemes within the meaning of 
Article 93 (1) of the Treaty. On 13 February the Commission adopted two 
111 Council Regulation No 3118/93 (OJ L 279, 12.11.1993). 
68 
decisions approving the Austrian and Finnish programmes for the 
implementation of Articles 138 to 140 of the Act of Accession, which 
provide for the granting of transitional, degressive national aid for 
agricultural products. The decisions were subsequently modified to 
take account of new factors. 
191. Generally speaking, the Commission opposes any state aid 
relating to support measures that would be liable to upset the 
Community market machinery and which, as operating aid, would not have 
any lasting effect on the development of the sector in question. 
192. As regards investment aid in the primary production sector and, 
in particular, pursuant to Article 12(1) of Council Regulation (EEC) 
No 2328/91 on improving the efficiency of agricultural structures,112 
the assessment of Community and state aid should, as far as possible, 
be carried out in conjunction with a parallel assessment of the cases 
within the periods stipulated for state aid; this procedure would make 
it possible to send only one letter to the Member State concerned, 
under both Articles 92 and 93 of the Treaty and Regulation No 2328/91. 
193. As regards aid to investments in improving the processing and 
marketing of agricultural products, Community policy is laid down by 
Council Regulation (EEC) No 866/90.113 This Regulation also authorizes 
Member States to establish aid measures, under various conditions, in 
accordance with Articles 92 and 93 of the Treaty. However, this 
facility is limited by the selection criteria provided for in the 
Regulation, applied by the Commission by analogy to the assessment of 
state aid. 
Until 1994, the selection criteria applicable to such investments, 
known as "sectoral limits", were specified in Commission Decision 
90/342/EEC of 7 June 1990.114 This was amended by Commission Decision 
94/183/EEC of 22 March 1994.115 In 1994, the Commission informed Member 
States that it would continue to apply the sectoral state aid limits 
provided for in point 2 of the Annex to the 1990 Decision.116 In 1995, 
the Commission altered its position in order to apply the more 
favourable limits provided for in the 1994 Decision.117 Following 
preparatory work with the Member States, the Commission adopted118 the 
principle of the application to state aid, from 1 January 1996, of the 
criteria contained in its Decision of 22 March 1994 and no longer those 
in its Decision of 7 June 1990. 
194. The Commission also adopted the principle of a review of its 
policy concerning subsidized operating loans in the agricultural 
sector.119 
1.1.8. Fisheries 
195. In 1995 the Commission registered 37 new aid schemes and 20 aid 
schemes that were either not notified or were only notified after their 
adoption, as well as three new cases of existing aid. It decided not 
to object to the aid in 22 cases, one of which was started in 1994. 
OJ L 218, 6.8.1991, p. 1. 
OJ L 91, 26.4.1990, p. 1. 
OJ L 163, 29.6.1990, p. 71, 
OJ L 79, 23.3.1994, p. 29. 
OJ C 189, 12.7.1994, p".5. 
OJ C 71, 23.3.1995, p. 6. 
OJ C 29, 2.2.1996, p. 4. 
OJ C 44, 16.2.1996, p. 2. 
69 
It also decided to initiate the Article 93(2) procedure in respect of 
two aid measures, one Italian and the other German. In the same 
period, the Commission decided to terminate the Article 93 (2) procedure 
initiated in respect of an aid measure implemented in Italy and 
notified in 1993. 
1.2. Specific sectors not subject to special rules 
196. For some years Europe has been experiencing a major shift 
towards liberalization, privatization and the adjustment of national 
monopolies. This trend, together with continued harmonization of rules 
at Community level, prompted the Commission to study methods of 
applying state aid rules to certain sectors such as banking or postal 
services. Although they are in principle subject to the same treatment 
as any other sector (especially the principle of a "private investor 
in a market economy"), they are nevertheless sufficiently different to 
warrant being taken into account by the Commission when assessing state 
aid. 
1.2.1. Banking 
197. This sector has particular characteristics that are chiefly 
social and statutory (protection of savers), macroeconomic and 
financial (necessary stability of the sector, smooth operation of the 
payments system), political and international (possible repercussions 
in the form of "panic" in other establishments in the same country or 
other countries due to the considerable interdependence existing in 
this sector, especially in the event of a major institution failing). 
That is why specific authorities are in charge of monitoring the sector 
in the various Member States. 
After the Banesto case in 1994, the Credit Lyonnais case is an 
important example of the way in which state aid rules should be applied 
with a view to the particular sensitivity of a sector. In terms of the 
amounts involved, this case is the largest yet dealt with by the 
Commission: the total volume of aid was FF 45 billion (ECU 7.5 
billion). In addition, at the end of 1993, Crédit Lyonnais was the 
largest European bank in terms of total balance, thus providing an 
example of what happens when a major bank fails, with all the 
downstream consequences for the entire financial and banking system in 
France and, indeed, Europe. 
The principle adopted by the Commission, after consulting a high-level 
group of experts, was to apply to the banking sector substantive and 
procedural rules on state aid, taking account of the specificities of 
banking." Compliance with the rules also ensures that credit 
establishments enjoying the implicit or explicit support of the state, 
being either public establishments or too important to be allowed to 
go bankrupt, do not act in an imprudent manner. Such an attitude would 
require state assistance and hence lead to distortions of competition 
which could have been avoided. Even if state intervention were 
considered necessary to prevent undesirable effects on other financial 
establishments and markets, the Commission would wish to ensure that 
the solution chosen would produce the least possible distortion of 
competition. Lastly, major counter-concessions will have to be offered 
by a defaulting establishment in order to offset the negative effects 
of state assistance on other market operators. That is why the 
Commission eventually decided to approve the aid to Crédit Lyonnais 
conditional on the sale of a large part of its international network, 
on a contribution to the costs of the hiving-off mechanism in the form 
of a better-fortunes clause, on a clear separation between 
Crédit Lyonnais and the hived-off structures and on the probable 
privatization of the bank within five years. 
70 
1.2.2. Postal sector 
198. The Commission regards this as an essential sector owing to its 
vital function as a vehicle for the social and economic activities of 
a country. However, it must also take account of the fact that the 
Court of Justice specified that the competition rules applied to postal 
services,120 without prejudice to the principle of Article 90(2) of the 
EC Treaty. 
Postal services, especially public or semi-public services or those 
granted special and exclusive rights, continue to enjoy a special 
relationship with the state. This is reflected in the benefit of 
direct financial support (grants) or indirect support (tax relief) 
usually lacking in transparency. On the one hand, the Commission 
Directive on the transparency of financial relations between Member 
States and public undertakings is applicable in this area,121 which 
entails special accounting and financial obligations. On the other 
hand, such direct or indirect financial assistance constitutes state 
aid which the Commission has a duty to monitor, both because of the 
obligation on Member States to notify aid plans in advance and because 
of its obligation to keep under constant review all existing systems 
of aid in order to take account of the progressive development or 
functioning of the common market. 
The case "Activités concurrentielles de la Poste française" is doubly 
interesting in this respect inasmuch as it deals both with the 
application of the state aid rules (Articles 92 and 93) and with the 
provisions on enterprises entrusted with the operation of services of 
general economic interest '(Article 90 (-2)) . This case constitutes the 
first combined application of these two provisions by the Commission. 
The latter considered that the tax advantages enjoyed by the postal 
services did not outweigh the extra costs resulting from the 
constraints imposed on the French post office in carrying out its 
public service task and did not benefit the competitive aspects of its 
activities (i.e. the activities not reserved to the post office under 
French law) . The Commission therefore decided that the tax advantages 
did not constitute aid under Article 92(1) of the EC Treaty. 
1.2.3 The audiovisual sector 
199. The Commission recognizes that the European film and television 
industry makes an important contribution to the diversified European 
culture. Thus, the promotion of cultural diversity is accepted by the 
Commission as a justification for state aid to the film industry and 
the production of television programmes. However, in its assessment of 
state aid to the audiovisual sector, the Commission will ensure that 
the aid does not cause any undue distortions of competition and that 
there is no discrimination on grounds of nationality or any other 
impediment to the free flow of goods, services, people and ideas across 
the European Union. The Commission aims to strike a balance between the 
requirements of cultural and heritage promotion and the openness of 
trade and competition in the single market. 
To clarify state aid policy in this field, the Commission is currently 
preparing guidelines on state aid for culture, the arts and the 
audiovisual sector. The guidelines were discussed with Member States 
at a multilateral meeting in June and met with general support. 
Judgment of 12 February 1992, Joined Cases C-48 and C-66/9Ô Nederland en PTT Nederland and 
PTT Post v Commission [ 1992] ECR 1-565; Judgment in Case C-320 Paul Corbeau [ 1993] 
ECR 1-2563. 
Commission Directive 80/723/EEC of 25 June' 1980, as amended by Directive. 84/413/EEC 
(OJ L 229, 28.8.1985, p. 20). 
71 
200. In light of complaints from private TV stations alleging that 
public broadcasters receive state aid which distorts competition on the 
TV market within the EC, the Commission in 1993 appointed a firm of 
consultants to undertake a study on the situation, paying particular 
attention to the public service obligations imposed on public 
broadcasters, how much they cost and how much subsidy the public 
broadcasters receive. In October, the Commission received the final 
report and sent it to Member States for comments. In respect of the new 
Member States and the EFTA States, signatories to the EEA Agreement, 
it has issued an invitation to tender for a similar study. When it 
receives the comments' of Member States on the first study and when the 
second study is completed, the Commission will consider the cases 
pending and encourage a debate on the way forward. 
2. Horizontal aid 
2.1. Research and development 
201. On 20 December the Commission adopted a new Community framework 
for state aid for research and development. 
The framework in force since 1986 was amended in the light of the new 
competition environment both in the Community and internationally. The 
revised version takes account of the recommendations of the White Paper 
on growth, competitiveness and employment and of the consequences of 
the agreements resulting from the multilateral negotiations of the 
Uruguay Round.,. In addition, the text clarifies certain unwritten 
practices developed by the Commission since the 1986 framework entered 
into force. 
Although as a general rule the admissible aid level is still 25% for 
pre-competitive development projects that are closer to the market, and 
50% for basic industrial research, "bonuses" are possible for projects 
involving SMEs (+10 points), assisted regions (+5 or 10 points) and. 
projects tagged as priority in the Community R&D framework (+15 
points). 
Furthermore, the admissible aid intensity will also be increased by 10 
points for projects meeting at least one of the following criteria: 
cross-frontier cooperation between independent firms, broad 
dissemination of research results, cooperation between universities and 
industry. An increase of 25 points will be allowed for priority 
projects under the R&D framework which also provide for cross-frontier 
cooperation between enterprises or between enterprises and public 
research bodies, and broad dissemination of results. 
This system of bonuses will make it possible to adjust the amount of 
aid that is acceptable on the basis of the general interest and which 
must in any event comply with the maximum rates of the WTO Subsidies 
Code. 
To take account of competition outside the Community and the new 
possibilities offered by the WTO Agreement on Subsidies and 
Countervailing Measures, the new framework provides that European firms 
are eligible for the maximum aid levels approved by the WTO (50% for 
precompetitive research and 75% for basic industrial research) in the 
following cases: overlapping state aid and Community support, 
important project of common European interest (exemption under 
Article 92(3)(b)), projects and programmes for which similar activities 
are carried out by enterprises outside the European Union having 
benefited (in the last three years) or about to benefit from aid having 
an equivalent intensity at a level accepted by the WTO for the same two 
types of research. 
72 
In the new framework, to lessen the bureaucratic burden on Member 
States and itself, the Commission believes, on the basis of experience, 
that it is no longer necessary to notify annual budget increases of 
less than 100% of the original amount and/or extensions of authorized 
schemes, provided that certain conditions are met. 
Aid to an individual project under a research and development scheme 
authorized by the Commission need not in principle be notified. 
However, the new framework requires notification of large aid grants 
under existing schemes, setting the aid threshold.at ECU 5 million and 
project costs at ECU 25 million. 
The revised framework also provides for different situations in which 
public financing of R&D conducted by establishments of higher education 
or non-profit-making public research bodies, either individually or on 
behalf of enterprises or in collaboration with them, does or does not 
cope within the scope of Article 92(1) of the EC Treaty. 
The framework also specifies the factors taken into account by the 
Commission to determine whether R&D aid proposed by a Member State 
encourages enterprises to carry out' supplementary research and 
development in addition to that which they carry out in the course of 
their normal work (incentive effect of R&D aid) . 
For SMEs, it will be assumed that the aid is necessary and acts as an 
incentive, whilst in the case of large undertakings the Commission will 
pay particular attention in aid cases where the research is close to 
the marketplace. 
2.2 Employment aid and general social measures 
202. In 1995, the persistently high unemployment rate within the 
Community was the fundamental economic and social problem facing the 
Community. In an attempt to remedy this grave situation Member States 
introduced an increasing number of measures to promote employment and, 
in its White Paper on growth, competitiveness and employment, the 
Commission set out various ways of promoting employment in harmony with 
Community competition policy. 
Most measures taken by Member States under their labour market policies 
are general in nature and do not involve aid, either because they do 
not favour certain undertakings or do not affect trade between Member 
States within the meaning of Article 92(1) of the EC Treaty. For 
example, under the new Danish Energy Package, which imposes on Danish 
industry new or increased energy taxes (C02 and S02 emissions) , some of 
the proceeds of these taxes will flow back to the industry in the form 
of a general reduction in labour market contributions paid by the 
industry. As all companies automatically benefit from this reduction 
on the basis of objective criteria, the Commission did not consider 
this reduction to constitute state aid under Article 92(1) . 
Only measures that selectively reduce labour costs of certain firms or 
in certain sectors with a view to encouraging them to increase their 
labour force, to maintain the level of employment or to recruit certain 
categories of unemployed persons distort or threaten to distort 
competition because they favour the beneficiaries vis-à-vis their 
competitors. Accordingly, the Commission considered that a Swedish 
employment aid scheme available only to firms with less than 500 
employees constituted state aid in favour of those firms to the 
detriment of competitors with more than 500 employees. 
203. Given the considerable number of aid measures to promote 
employment, the Commission considered it appropriate to clarify state 
73 
aid policy in this field by way of the employment aid guidelines.122 As 
regards support measures for training, the issue will be indirectly 
addressed in the more general guidelines on the distinction between 
state aid and general measures since measures that support training can 
in many cases be defined as general measures. The prime objective of 
the Employment Aid Guidelines is to inform Member States and interested 
parties of the principles the Commission will apply in determining the 
existence and compatibility of employment aid measures with the common 
market and in ensuring coherence between the competition rules and the 
employment policy measures advocated in the Commission's White Paper 
on growth, competitiveness and employment. The guidelines confirm the 
traditionally positive approach the Commission has taken towards state 
aid for job creation, in particular aid granted to SMEs or firms 
located in regions eligible for regional aid, provided that the aid 
leads to a net increase in the number of jobs in the firm concerned. 
Similarly, the Commission normally takes a favourable view of aid 
granted to firms that take on unemployed persons who have particular 
difficulties in finding a permanent job, such as the long-term 
unemployed or young people. In its assessment the Commission will also 
take account of possible counterparts offered by the firm for aid going 
beyond the employment of the unemployed, such as training. Moreover, 
in line with the general principles underlying state aid policy, the 
Commission will always examine whether or not the aid is necessary to 
take on an unemployed person and whether or not it is temporary. 
However, not all employment aid is viewed favourably by the Commission, 
which considers that certain employment aid measures, given their 
actual or potential harmful effect on competition within the common 
market, are contrary to the common interest and may be approved only 
in a limited number of cases. Thus, the guidelines confirm the 
Commission's unfavourable view on aid to maintain jobs in a firm. In 
fact, such aid constitutes operating aid which generally has the effect 
of frustrating or delaying structural changes necessary to render a 
firm/sector economically viable, thereby keeping unprofitable 
businesses artificially alive. The Commission considers that, in most 
cases, the negative effects of such aid outweigh the possible short-
term benefits in terms of maintaining a certain level of employment. 
Moreover, it will normally look unfavourably on aid for job creation 
available to only one or more sectors that are sensitive, suffer from 
overcapacity or are in a crisis. The negative effects such aid might 
have on competing firms in the same sector in other Member States and 
the risk that aid would merely export unemployment to other Member 
States outweigh the positive effects in terms of reduction of the 
unemployment rate in the Member State granting the aid. The Commission 
thus decided to initiate the procedure provided for in Article 93(2) 
in respect of employment aid offered to the shoe sector in Italy under 
a general employment aid scheme to sectors suffering from an employment 
crisis. 
However, aid to maintain jobs may be approved if it is granted to firms 
located in regions which, owing to the serious socio-economic problems 
they are experiencing, are eligible for regional aid under 
Article 92(3)(a) or if it is granted in the context of a rescue or 
restructuring plan.123 Moreover, sectoral employment aid may be approved 
in regions with serious unemployment or if it is granted in subsectors 
which are experiencing economic growth and generating jobs. 
204. In response to the urgent need to deal with the current 
unemployment crisis in the European Union and to support the promotion 
of structural employment policies, in particular by means of active 
122 OJ C 334, 12.12.1995, p. 4. 
123 Guidelines on rescuing and restructuring firms in economic difficulty (OJ C 368, 23.12.1994) . 
74 
labour market measures, the Commission is considering adopting an 
accelerated procedure for the notification of employment and training 
aid schemes. Under the accelerated procedure, the Commission will 
decide within twenty working days on notified aid measures. 
2.3. Aid for environmental protection 
205. The Community's environmental policy is based on the principle 
that the polluting firm should pay for the environmental damage it 
causes. Aid to firms for environmental protection is, in principle, not 
compatible with the "polluter pays" principle. However, it must be 
recognized that, in certain cases, such aid may be necessary either as 
an incentive for companies to implement measures for the protection of 
the environment going beyond existing mandatory requirements or in 
order to preserve the competitiveness of the industry when imposing new 
environmental requirements. Thus, under certain circumstances, aid for 
environmental protection may be justified. However, it is clear that 
such aid is capable of distorting competition between companies within 
the common market and is justified only if the beneficial effects of 
the aid on the environment outweigh the distortive effects on 
competition. 
206. The Community guidelines on state aid for environmental 
protection124 aim to strike a balance between the above-mentioned 
competition policy and environmental policy considerations. Thus, they 
confirm the "polluter pays" principle but at the same time provide that 
environmental aid may be authorized under certain conditions. 
In line with these principles, the guidelines stipulate that, although 
operating aid is normally considered to be incompatible with the common 
market, in exceptional cases the Commission may authorize operating aid 
in the form of relief from environmental taxes as well as other 
compensatory measures, provided that the aid is necessary to achieve 
the environmental objectives set. Thus, the Commission considered that 
the relief from new energy taxes on C02 and S02 emissions in favour of 
energy-intensive firms in Denmark and the Netherlands and the relief 
from tax on groundwater and waste in favour of certain firms in the 
Netherlands could be approved since they had to be regarded as the 
inevitable price to be paid for being among the first countries to 
introduce a tax beneficial for the environment. Without some relief 
these taxes would so seriously damage the competitiveness of energy-
intensive firms in the countries going ahead with the tax, in this case 
Denmark and the Netherlands, as to be impracticable. However, in order 
to ensure that these tax reliefs do not distort competition unduly and 
to encourage aid recipients to implement measures to reduce pollution, 
the Commission will always stipulate that the tax relief must be 
temporary and, in principle, degressive. 
2.4. Aid to small and medium-sized enterprises (SMEs) 
207. The Commission continued in 1995 to apply the criteria of the 
Community guidelines on state aid for SMEs adopted by the Commission 
on 20 May 1992.125 The framework provides for a review of its 
application by the Commission no later than three years after 
publication. The Commission therefore presented experts from the 
Member States, at a multilateral meeting held in July, with the 
conclusions of the review and noted the changes it believed to be 
necessary. The Commission's objective continues to be to authorize aid 
which provides impetus and overcomes specific handicaps affecting SMEs 
whilst limiting distortions of competition to a minimum. The 
124 OJ C 72, 10.3.1994. 
125 OJ C 213, 19.8.1992, p. 2. 
75 
discussion chiefly centered on clarification and simplification of the 
rules, updating the de minimis rule and the possibility of taking 
account of investment expenditure relating to technology transfers. 
2.5. Export aid 
208. Export aid, i.e. aid linked to the quantity126 of goods sold in 
other Member States/EEA States or aid closely linked to the marketing 
and sale of goods in those countries (such as aid for the setting-up 
or operation of distribution networks or sales agencies for goods and 
services within the Community and the EEA) , is clearly at odds with the 
objective of an internal market. Such aid does not promote any 
Community objective which can justify its direct distortive effects on 
competition. Thus, the Commission will not authorize export aid. 
However, in line with the favourable view it takes of financial 
assistance to SMEs, in particular in view of their limited know-how and 
difficulties in raising external financing, the Commission may 
authorize soft aid in favour of SMEs related to the development of 
export markets, such as aid for consultancy and marketing research, 
provided that the aid is a one-off operation and limited to the 
penetration of new markets. It may, under the same circumstances, 
approve aid to SMEs for participation in trade fairs. 
209. European companies are not only in competition within the EC/EEA 
but also compete for investment on foreign markets, such as Eastern 
Europe, Russia and South-East Asia. The Commission believes, that aid 
to firms for investments on foreign markets may distort competition and 
affect trade within the Community and therefore falls under the state 
aid rules of the EC Treaty. It is concerned that such aid measures may 
lead to business relocation and be available predominantly in the 
central and most-developed regions of the Community, thereby negating 
the efforts made under the Community's cohesion policy to reduce the 
gap between the more prosperous and the less prosperous regions of the 
Community. On the other hand, these aid measures may assist countries 
in Eastern Europe, the Baltic States and Russia in their efforts to 
convert to a market economy and may, therefore, be justified in certain 
cases. To establish a clear policy in this field the Commission decided 
to open the Article 93(2) procedure in respect of a number of 
internationalization schemes and invited Member States and third 
parties to submit their comments. 
210. The Commission has continued its efforts to reach an agreement, 
with Member States on a Communication on short-term export credit 
insurance, which will require Member States to withdraw public support 
from export credit insurance companies in respect of short-term 
commercial risks. The Commission expects that the outstanding problems 
will be resolved in the course of 1996 so that the Communication can 
then be adopted. 
2.6. Rescue and restructuring aid 
211. The Commission continued to apply the new guidelines on rescuing 
and restructuring firms in economic difficulty.127 Without strict 
control, rescue and restructuring aid may be used by Member States to 
sustain ailing companies artificially, with the risk that necessary 
structural adjustments in the internal market will be frustrated or 
unduly delayed and the burdens of such adjustments shifted onto viable 
companies. However, rescue and restructuring aid may be warranted, for 
instance, on the basis of social or regional policy considerations, and 
The Commission is considering whether to include an explicit exemption to this end in the 
"de minimis" rule under revision. 
OJ C 368, 23.12.1994, p. 12. 
76 
the main objective of the guidelines is to strike a reasonable balance 
between such considerations and the creation of a common market with 
free and undistorted competition. 
212. The purpose of rescue aid is to maintain a firm in operation 
temporarily while an appropriate restructuring plan is drawn up. A 
rescue aid may therefore be granted for only a limited period of time, 
normally no more than six months. The Commission considered that the 
guarantee with a duration of eighteen months granted by the Spanish 
Government to Gutierrez Asunce Corporacion (Guascor) for commercial 
loans did not meet the conditions of rescue aid. 
213. Under the guidelines, the Commission makes the approval of 
restructuring aid subject to strict conditions. In particular, the aid 
should normally be a one-off operation. It must be linked to a 
restructuring plan capable of restoring the long-term viability of the 
firm within a reasonable period of time and on the basis of realistic 
assumptions as to its future operating conditions, so that further aid 
will not be necessary. The Commission considers this to be a sine qua 
non for the approval of restructuring aid.128 In view of the fact that 
certain German guarantee and soft-loan schemes for the rescue and 
restructuring of firms in difficulty did not, in principle, exclude the 
repetitive provision of aid for such operations in favour of the same 
firm, the Commission reserved its right to examine such repetitive aid 
individually. Similarly, as the restructuring plan for SANTANA Motor 
S.A., a subsidiary of SUZUKI Motor Corporation Group, was vague and 
unconvincing and did not aim to restore the long-term viability of the 
firm, the Commission could not approve the aid which the Spanish 
Government intended to grant under that plan and decided to institute 
the investigative procedure of Article 93(2) EC. 
214. In order to offset as far as possible adverse effects on 
competitors, it is a condition for authorizing restructuring aid to 
firms operating in sectors suffering from structural overcapacity that 
the recipient firm reduce capacity in a genuine and irreversible way. 
In its approval of restructuring aid to the Italian fertilizer company 
Enichem Agricultura S.p.A., the Commission emphasised the 
implementation of an irreversible reduction in the company' s production 
capacity and decided, moreover, that this condition for approval had 
to be respected until such time as the effects of the aid on the 
competitive situation in the Community were insignificant. However, it 
was unable to approve a state guarantee in favour of the Spanish 
company Guascor since the restructuring plan for the company did not 
seem to provide for reductions in capacity in at least one of its 
product sectors in which there is overcapacity in the EC. 
The Commission cannot itself impose a condition of privatisation on an 
undertaking that receives aid for restructuring purposes. However, a 
commitment from a Member State to privatize the recipient of aid may 
be a decisive element for the Commission in assessing the future 
viability of the company without the need for further aid. Thus, in its 
decision on the compatibility of the restructuring aid to the Italian 
fertilizer company Enichem Agricultura S.p.A., the Commission took 
account of the commitment made by the Italian Government to privatize 
the company. 
128 See also the Community guidelines on state aid to the aviation sector (OJ C 350, 10.12.1994, 
p. 5) . 
77 
2.7. Treuhandanstalt 
215. In January the Commission decided on the terms applicable for 
1995 for privatization aid in the new Lander. Such terms had previously 
been defined in 1991129 and 1992130. Following the dissolution of the 
Treuhandanstalt, the Commission decided that the procedures and 
assessment criteria applying to privatizations in 1995 should be more 
in line with those applicable for other Member States. After the 
transition year 1995 no special rules would exist. 
The Commission investigated several individual cases of aid for the 
privatization of companies in the new Lander. By far the most important 
was the privatization of the petrochemical plants of BSL (Buna, 
Sâchsische Olefinwerke, Leuna) to Dow Chemical. In November, the 
Commission took a final decision allowing aid of ECU 5 billion (DM 9.5 
billion) for the restructuring of BSL as an integrated complex. 
3. Regional aid 
216. The Commission continued its review of the schemes in force, 
their arrangements and the maps of the regions to be regarded as 
eligible for regional aid (in accordance with the principles of a 
reduction in population coverage and consistency with the Structural 
Fund maps). Decisions were taken for the Netherlands, Belgium 
(excluding Hainaut), Spain and Italy. The whole review exercise is 
thus almost over with only one country's still having to revise its 
map. As regards the three new Member States (Austria, Sweden, 
Finland) , the Commission approved and adopted the maps drawn up by the 
EFTA Surveillance Authority in 1994 in the context of the European 
Economic Area. The Commission also continued to examine, under 
Articles 92 and 93 of the Treaty, the compatibility of Structural Fund 
assistance for various Community objectives and initiatives. 
D - Procedures (rights of complainants) 
217. In its judgment of 28 September 1995 in Case T-95/94 SYTRAVAL 
v. Commission, the Court of First Instance annulled the Commission's 
decision of 31 December 1993 rejecting a complaint in respect of 
alleged state aid in favour of Sécuripost, a subsidiary of the state-
owned French postal administration, which operates in competitive 
markets. The CFI considered that the Commission had not provided 
sufficient reasoning for the rejection of a series of statements by 
complainants alleging preferential treatment of Sécuripost. 
The significance of this judgment lies in the statements made by the 
CFI in respect of the rights of complainants in such procedures. The 
CFI stated that the Commission must examine impartially and 
exhaustively all allegations made* by complainants and cannot impose on 
the complainant the burden of proof concerning the existence and 
(in)compatibility of state aid. Otherwise, complainants would be 
required to obtain information in support of their allegations which 
in most cases they would not be able to collect without the 
Commission's acting as an intermediary. Therefore, the Commission 
cannot justify the lack of sufficient reasoning or the failure to 
examine certain allegations on the grounds that the complainant has not 
provided sufficient information. The conclusions in SYTRAVAL confirm 
the CFI's judgment of 18 September 1995 in Case T-49/93 SIDE v. 
Commission. 
129 XXIst Competition Report, point 249. 
130 XXIInd Competition Report, point 349. 
78 
218. There are two stages in the Commission's procedure for the 
examination of state aid measures: the preliminary examination of the 
measure, and the opening of the procedure provided for in Article 93 (2) 
EC in cases where the Commission, following the preliminary 
examination, still has doubts as to the compatibility of the measure 
with the common market. Whereas the Treaty provides for a procedure 
whereby third parties are invited to submit their comments in the 
procedure opened under Article 93(2), this is not the case in respect 
of the preliminary examination. When the compatibility of an aid with 
the common market can be established without further examination, it 
does not appear necessary to alert third parties before tja.e decision 
of the Commission. Therefore, it has been the consistent practice of 
the Commission not to grant third parties, including complainants, a 
right to be heard during the preliminary examination. The European 
Court of Justice has supported this position in a number of 
judgments.131 However, further to the requirement to examine impartially 
and exhaustively all the allegations made by the complainant and to 
state the reasons for its decision in SYTRAVAL, the CFI imposes an 
obligation on the Commission, under certain circumstances, to initiate 
a contradictory procedure with complainants in cases involving 
difficult questions as to the determination of whether or not measures 
are state aid before the Article 93(2) procedure has been opened. The 
judgment seems to impose additional obligations on the Commission in 
its examination of complaints in cases giving rise to doubts about the 
existence of aid, and to go against the established case-law of the 
European Court of Justice. Therefore, the Commission has appealed 
against this judgment to the ECJ. 
E - Statistics 
219. Over the year, the Commission registered 680 notifications of 
new aid measures or changes to existing aid measures, and 113 cases of 
unnotified aid.132 In the same period, it decided in 504 cases not to 
raise objections in 504 cases. In 57 cases it decided to initiate the 
procedure provided for in Article 93(2) of the EC Treaty or in 
Article 6(4) of Decision 3855/91/ECSC. This detailed analysis 
procedure resulted in 22 positive final decisions, 9 negative final 
decisions and 5 conditional final decisions. Lastly, the Commission 
decided to propose appropriate measures under Article 93 (1) of the EC 
Treaty in respect of 6 existing aid systems. 
131 See in particular Case 84/82 Germany v Commission [ 1984] ECR 1451. 
132 These figures dp not include aid cases in agriculture, fisheries, transport and-coal 
79 
Graph 1: New cases in 1995 
900 
800 
700 
600 
500 
400 
300 
200 
100 
0 --16 
68 
510 
1 I 10 
113 
680 • Reexamined aid 
* Unnotified aid 
D Notified aid 
1994 1995 
Graph 2 
Decisions taken by the Commission 
700 
600 
500 1 
400 
300 
200 4 
100 619 
1991 1992 1993 1994 1995 
80 
Table 1: Decisions by Member State 
Austria 22 
Belgium 15 
Denmark 17 
Finland 2 
France 51 
Germany 209 
Greece 9 
Ireland 3 
Italy 93 
Luxembourg 1 
Netherlands 34 
Portugal 12 
Spain 110 
Sweden 6 
United Kingdom 35 
EUROPEAN UNION 619 
81 
V - International activities 
A - European Economie Area 
220. After Austria, Finland and Sweden joined the European Union on 
1 January 1995, Norway and Iceland were the only remaining EFTA 
signatories of the Agreement on the European Economic Area (EEA 
Agreement). On 1 May 1995 they were joined by Liechtenstein. 
Cooperation in matters of competition resulting from the EEA Agreement, 
supplemented by informal but systematic consultation measures 
established by common accord between the Commission and the EFTA 
Surveillance Authority,133 was maintained with the three countries. 
In addition, in accordance with Article 172 of the Treaty of Accession 
of Austria, Finland and Sweden to the European Union,134 the aid cases 
relating to the new Member States that were being processed by the EFTA 
Surveillance Authority were forwarded to the Commission (some 80 cases 
under Articles 53 and 54 of the EEA Agreement and about 400 aid cases) . 
B - Central and Eastern Europe, Baltic States, New Independent States and 
Mediterranean countries 
1. Central and Eastern Europe 
221. As part of the pre-accession strategy for the six associated 
countries of Central and Eastern Europe (CEECs),135 the Essen European 
Council of December 1994 stressed the importance not only of 
competition policy but also of facilitating its' enforcement. Among 
other things, it charged the Commission, together with the Member 
States, with setting up a competition policy training programme. The 
Commission and the Member States' authorities have met several times 
and managed to improve coordination of their actions and to launch a 
significant joint action. Officials from the CEECs and from the Baltic 
States attended a two-week collective training period at DGIV in 
September (financed by the PHARE programme) and then individually 
visited a national competition authority in the EU. The action was 
widely acclaimed by the participants. 
Technical assistance under the PHARE programme has so far centred 
mainly on anti-trust law aspects. In 1996, it will focus in particular 
on monopolies, exclusive rights and state aid, and will pay particular 
attention to effective enforcement of legislation. 
The Commission's White Paper providing guidelines on the integration 
of the CEECs136 underlines the importance of a viable competition policy 
for economies in transition and lays down four pillars (anti-trust, 
mergers, state aid and state monopolies/exclusive rights) for the 
approximation of legislation which the associated countries should 
undertake. Substantial progress has been made in this area as regards 
anti-trust; all but one associated country have a competition law 
authority. Upon accession, these countries will accept all of the 
133 22nd Competition Report, points 85 to 89 and 24th Competition Report, point 399. 
134 OJ C 241, 29.8.1994. 
135 The Europe Agreements with Romania, the Czech Republic, Bulgaria and the Slovak Republic 
entered into force on 1 February 1995; those with Poland and Hungary entered into force on 
1 February 1994, The Agreements' substantive competition rules are basically those of the 
Treaty of Rome; see XXIVth Report on Competition Policy, point 401. 
136 Commission White Paper on the preparation of the associated countries of Central and Eastern 
Europe for integration into the internal market of the Union (May 1995), endorsed by the 
Cannes European Council in June 1995. 
82 
Community legislation in force ("acquis communautaire") and, in the 
meantime, technical assistance is being provided. 
As regards the rules for implementing the Europe Agreements, those for 
applying the competition rules to undertakings are in the process of 
being adopted by the Association Councils while a proposed set of rules 
is being discussed for state aid. One country has agreed to the set of 
rules and the formal approval process is being launched. Another 
country has announced its agreement. 
The Commission has made several efforts to publicize competition policy 
for all economic agents in these countries. At the Brno conference in 
April, the Director-General for Competition spoke to a wide audience, 
including competition officials and business representatives, about the 
international dimension of competition policy and the importance of 
cooperation between competition authorities. At the Visegrad Conference 
on 19-21 June, heads of the competition authorities in the CEECs and 
DGIV officials discussed specific competition problems of economies in 
transition and also the interaction of anti-trust and state aid 
policies; a joint action programme was agreed upon. It was agreed inter 
alia to establish a network for electronic data exchange. In the autumn 
the Director-General for Competition visited Bulgaria and discussed 
issues relating to state aid and monopolies. 
2. Baltic States, Slovenia, and New Independent States 
222. As part of the pre-accession strategy for the Baltic States 
(Estonia, Latvia and Lithuania), the Free Trade Agreements (FTAs), 
which contain the same competition rules as those in the Europe 
Agreements with the CEECs, came into force on 1 January 1995. They will 
soon be replaced by the Europe Agreements signed in June; these three 
countries now must fulfil the same conditions for inclusion in the pre-
accession strategy which the EU has set for the CEECs. The same 
implementing rules as those for the CEECs are proposed for the Baltic 
States. One country has notified its basic agreement both with the 
rules on undertakings and with those on state aid. Negotiations with 
Slovenia for a Europe Agreement are under way. 
Partnership and cooperation agreements have been sighed with Russia, 
Ukraine, Belarus, Kazakhstan, Kyrgyzstan and Moldova; although the 
competition rules agreed upon are less stringent than those in the CEEC 
agreements, the agreements also include a clause on the approximation 
of legislation. Cooperation has begun, in particular by means of the 
provision of technical assistance under the TACIS programme. In this 
context, financing was provided for an international conference 
organized by the Russian competition authority in the autumn in Moscow 
and attended by the Deputy Director-General for Competition. A working 
group with Russia met in May and again in December. It reviewed ways 
of embarking on the practical implementation of the partnership and 
cooperation agreement (PCA). 
3. Mediterranean countries and Mercosur 
223. Association agreements have been signed with Tunisia, Morocco 
and Israel and similar agreements are currently being negotiated with 
Jordan, Egypt and Lebanon. These contain or are expected to contain 
competition rules as provided in the Europe Agreements. The agreement 
for establishing a customs union with Turkey, which has been signed and 
is in the process of ratification, contains extremely stringent 
obligations relating to the approximation of legislation, particularly 
competition law, which must be fulfilled within specified periods. 
It is to be noted that all these bilateral agreements have triggered 
important moves in the direction of policy harmonization. This is 
83 
compatible with the recommendations of the group of experts on 
competition policy in the new trade order (see below). 
Negotiations with Mercosur are under way and will extend to some 
aspects of competition. 
C - North America 
224. The Agreement between the European Community and the United 
States on the application of their competition laws was approved by the 
European Council on 10 April. At the same time, the Council approved 
the text of a letter addressed to the United States clarifying the 
European Community's interpretation of certain provisions of the 
Agreement .137 
This letter, reflecting the text of Commission statements made to the 
Council, clarified two issues. 
Firstly, information covered by Article 20 of Regulation No 17 or by 
equivalent provisions of other regulations in the field of competition 
may not be communicated by the Commission to the US anti-trust 
authorities save with the express agreement of the source concerned. 
Secondly, each Party ensures the confidentiality of all information 
provided in confidence by the other Party and will use all the legal 
means at its disposal to oppose the disclosure of such information. The 
Commission, after notifying the US competition authorities, will inform 
the Member State(s) whose interests are affected of notifications sent 
to the Commission by the US anti-trust authorities and, after 
consulting them will also inform the Member State(s) concerned of any 
cooperation or coordination of enforcement activities. In the latter 
regard, however, the Commission will respect a request by the US 
authorities not to disclose the information which they provide in cases 
where this is necessary to ensure confidentiality. 
The approval of the Agreement by the Member States has imparted the 
political impetus and created the legal certainty necessary for a 
redoubling of cooperation efforts between the EC and the US. 
Notifications from the US to the EC under the Agreement have continued 
regularly through the year with a total of 35 altogether (21 from the 
Department of Justice and 14 from the Federal Trade Commission) , 21 of 
which were in merger cases. The notifications from the EC to the US 
resumed after 10 April, following the short interruption due to 
uncertainty about the legal position of the Agreement under Community 
law138. The EC notified the US on 43 occasions in 1995, of which 30 
involved merger cases. 
The biannual high-level meetings between the Commission and the US 
anti-trust authorities resumed on 13 November after a break of two 
years. The discussions concentrated on the effectiveness of current 
bilateral cooperation and a number of areas were identified for further 
study. Future bilateral and multilateral cooperation was also discussed 
in the context of the report of the group of experts on competition 
policy in the new trade order and of the adoption by the United States 
of the International Antitrust Enforcement Assistance Act of 1994. A 
significant part of the meeting was also given over to innovation 
markets and their relationship with competition policy. 
137 OJ L 95, 27.4.1995, as corrected by OJ L 131, 15.6.1995, 
138 XXIVth Competition Report, point 413. 
84 
On 23 January the Council authorized the Commission to open 
negotiations with Canada on a bilateral cooperation agreement in the 
area of competition.139 A first round of negotiations under this 
authorization was held on 27 January, when good progress was made in 
defining the shape of a draft agreement. The draft agreement was 
discussed by the Council Group on Economic Questions on 6 March. It is 
expected that the negotiations will be concluded in the first part of 
1996. 
An informal meeting between the Commission and the Canadian Bureau of 
Competition Policy was held on 14 November to exchange views on recent 
developments in competition policy in the EU and Canada. 
D- Japan 
225. Relations between DG IV and the Japanese Fair Trade Commission 
(JFTC) remained close during the year under review. 
On 22 November the third seminar held jointly by the two competition 
authorities took place in Tokyo. The seminar topics concerned the role 
of competition policy in a globalized economy and the scope of 
competition policy. 
The annual bilateral meeting between DG IV and the JFTC was held on 24 
November. The two competition authorities discussed bilateral 
relations and subjects of common interest such as the liberalization 
and internationalization of the competition rules. They also reported 
on the main legislative developments in their respective areas and on 
the implementation of the competition rules. 
Both formal and informal contacts with the Japanese authorities were 
intensified in 1995. DG IV was thus able, under the deregulation plan 
adopted in May by the Japanese Government, to put forward its requests 
to that Government for a broader and more rigorous application of the 
competition rules, the abolition of virtually all the exceptions to 
those rules and the strengthening of the competition authority (JFTC). 
E - Australia and New Zealand 
226. Bilateral contacts with Australia were pursued on a number of 
occasions during 1995. Topics discussed during these informal meetings 
included recent policy developments in the EU and Australia, in 
particular in the area of deregulation, and the reform of the 
Australian Competition Act. 
F - Multilateral organizations and other international issues 
1. OECD 
227. DG IV played an active part in the work of the OECD on 
competition matters. The main areas of discussion were the convergence 
of laws, international cooperation and the relationship between 
competition policy and international commercial policy, in the context 
of the liberalization of trade. Other topics included the application 
of the competition rules to the liberalized sectors (telecommunications 
and maritime transport); lastly, particular attention was paid to 
certain individual or sectoral aspects of competition policy (failing 
firm and efficiency claims, vertical integration in the cinema 
industry, competition policy and environmental policy). 
XXIVth Competition Report, point 414. 
85 
DG IV represents the- Commission in the OECD Industry Committee's 
Working Party on Public Support Measures. By way of its expertise, it 
continued to contribute to the ongoing OECD survey on public support 
in the manufacturing sector. 
2. World Trade Organization 
228. Negotiations in the sectors where agreement could not be reached 
by the end of the Uruguay Round were actively pursued, especially as 
regards basic telecommunications services. The European Union, within 
the framework of the negotiations, put forward a proposal which places 
emphasis in particular on a timetable for external liberalization that 
is compatible with liberalization within the European Union, as well 
as guarantees in terms of the independence of regulators. 
In the state aids field, all Member States agreed to the Commission's 
proposal for a joint notification and reporting procedure to the 
Commission and the World Trade Organisation, thereby modifying the 
existing standardized system of notification and annual reporting of 
state aid140. As a result of this modification, the notification of 
subsidies as required by the WTO Agreement on Subsidies and 
Countervailing Measures and the above annual reporting is carried out 
in one step. The Commission is confident that this new procedure will 
alleviate the administrative burden on Member States and ensure a high 
level of transparency. 
3. UNCTAD 
229. DG IV continued to play an active part in the work of UNCTAD on 
restrictive trade practices. In particular, it took part in the third 
United Nations Conference which reviewed all the principles and rules 
agreed by UNCTAD in this area. 
4. International cooperation 
230. The group of experts convened by Mr Van Miert in 1994 to discuss 
the prospects for closer cooperation between competition authorities 
presented its report in July 1995.141 It made a number of 
recommendations. Having, briefly examined the possibility of 
establishing an international competition authority and a worldwide 
competition code, it put this to one side as not being realistic in the 
short or medium term. Instead it felt that one should commence with the 
introduction of an adequate set of competition rules by those countries 
not yet having one. In this regard the group recommended that 
assistance should be provided by those countries which have already 
acquired experience in this area. 
The group proposed a dual approach. First, it recommended a 
strengthening of bilateral cooperation between competition authorities 
with, as a priority, a deepening of existing cooperation with the 
United States and an extension of bilateral cooperation to other 
partner countries. 
The second but principal recommendation of the group was the 
elaboration of a plurilateral cooperation framework as the group 
believes that, even if it is strengthened, bilateral cooperation cannot 
resolve all the problems facing competition authorities or create 
effective momentum for enforcing competition rules in third-country 
markets. A plurilateral agreement would include all the elements 
140 Commission letter D/20500 dated 2 August 1995 replacing letter SG(94) D/2484 dated 
22 February 1994. 
m Competition policy in the new trade order: strengthening international cooperation and rules 
(COM(95) 359 final). 
86 
already incorporated in bilateral agreements, to which would be added 
a set of minimum competition rules, a binding positive comity 
instrument and an effective and progressive dispute-settlement 
mechanism. 
On 17 July the Commission authorized the presentation of the report to 
the Council and to Parliament with a view to launching discussions with 
the Union's main partners and within the international organizations 
concerned. 
At a meeting of the Directors-General of the Member States' competition 
authorities on 17 October, it was agreed that a working group should 
be established to consider the technical aspects of some of the group's 
recommendations. 
This report has also been presented to the European Parliament, to the 
Council's Article 113 Committee and to the Community's OECD partners. 
The initial reaction has been positive. 
87 
VI - Information policy 
231. During 1995, the Commission continued its active public 
information campaign on competition policy. As in the past, press 
releases on competition-related issues accounted for almost one third 
of the total number of Commission press releases. With its limited 
resources, DG IV s Information Service replied during the past year to 
more than 1000 questions from the public, forwarding relevant 
documentation or providing useful advice. Owing to a lack of resources, 
most information enquiries have in recent months been answered by way 
of standard letters containing an updated list of Community 
publications on competition available to the public1*2 (including 
studies and speeches by DG IV officials) . DG IV, in collaboration with 
the Office for Official Publications, published during 1995 several 
reference books on competition law, while the EC Competition Policy 
Newsletter, issued three times per year and with a print-run of 17 000 
copies, has established itself as a leading source of information in 
the field. For 1996, several new publications are under preparation and 
DG IV plans to introduce data on EUROPA, the European Institutions' 
host on the World Wide Web.143 
For more information and to obtain the latest list of Community Publications on Competition 
available to the public, contact DG IV s Cellule Information, C150 00/158, Wetstraat, 200 
rue de la Loi, Bruxelles B-1049 Brussel, tel. (+32-2) 295 76 20, fax. (+32-2) 295 54 37, 
Electronic mail: X400: c=BE;a=RTT; p=CEC;o=DG4;s=INF04, Internet: Info4@dg4.cec.be 
http://www.cec.lu. 
Annex : Cases discussed in the report 
1. Articles 85 and 86 and Article 90 
Case ' Paragraph numbers 
Brussels National Airport 120 
Atlas - Phoenix 57 
ATR/BAe 61-62 
BASF/Accinauto 36 
Coapi 89 
Gas Interconnector 82 
ICG/CCI Morlaix 40,43 
Inmarsat-P 59 
Lufthansa/SAS 77-78 
Omnitel Pronto Italia 109 
Organon 37-38 
Pelikan/Kyocera 87 
TACA 73 
Uni lever/Mars 40, 41 
Van Marwijk/FNK-SCK 40,42 
Vebacom 111 
2. Merger control 
Case Paragraph numbers 
ABB/Daimler Benz 139 
Crown Cork and Seal/Carnaud MetalBox 141 
Glaxo/We 11 come [ - 142 
Lyonnaise des Eaux/Northumbrian Water 145 
Mercedes Benz/Kâssbohrer . 135,137 
Nordic Satellite Distribution 133 
Orkla/Volvo 140 
Perrier 147 
Repola Corporation/Kymmene 144 
RTL/Veronica/Endemol 134 
Siemens/Italtel 135-136 
Swissair/Sabena 76,143 
89 
3. State aid 
Case Paragraph numbers 
Air France 177, 178 
Andalusian Development Agency 159 • 
AOM 181 
BSL (Buna, Sâchsiche Olefinwerke,Leuna) 215 
CGM 185 
Chrysler 171 
Crédit Lyonnais 197 
DAF Belgium 168 
DAF Netherlands 168 
Danish energy package 202, 206 
EM-Filature 159 
Employment aid scheme in Sweden 202 
Energy taxes in the Netherlands 206 
Enichem Agricultura S.p.A. 159, 214 
Ferries Golfo De Viscaya 184 
Ferrovie dello Stato S.p.A. • 189 
Fiat Mezzogiorno 171 
Footwear industry in Italy 203 
Ford Genk 167 
Ford Valencia 169 
Ford/VW Setubal 171 
French postal administration 198 
Guascor (Gutierrez Asunce Corporacion) . 212 
Kimberley-Clark 158 
Lech-Stahlwerke GmbH 159 
Leuna-Werke GmbH 162 
Lisnave 159 
Lufthansa 180 
Maschinenfabrik Sangerhausen GmbH 160 
NedCar-Volvo/Mitsubishi ; 171 
Opel Austria 169 
Opel Eisenach 171 
ROSCOs 189 
Rover ; 171 ] ' 
Santana Motor SA . 213 
SEAT-Volkswagen | 168 ; | 
90 
Siemens Nixdorf AG/Mainz 157 
SNF ; 171 
Swissair-Sabena 179 
Sytraval ' 217 -
TAP ; 177 
Textilwerke Deggendorf GmbH 154 
Tubacex 157, 160 
91 



ISSN 0254-1475 
COM(96) 126 final 
DOCUMENTS 
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Catalogue number : CB-CO-96-135-EN-C 
ISBN 92-78-01875-9 
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