REPORT FROM THE COMMISSION - XXXIst Report on Competition Policy 2001

CONTENTS

Introduction

Box 1: Competition and the consumer - the main Commission decisions in 2001

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

A - Modernisation of the legislative and interpretative rules

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

2. Revision of the leniency notice

3. Review of the block exemption regulation for technology transfer agreements

Box 2: New de minimis notice

4. Review of procedural rules: new mandate of the hearing officers

B - Application of Articles 81, 82 and 86

1. Article 81

1.1. Cartels

1.1.1. A record year for cartel decisions

1.1.2. Cartel decisions in 2001

2. Articles 82 and 86

2.1. Article 82 - undertakings in a dominant position

Box 3: Competition policy in the packaging waste sector

2.2. Article 86(1) in combination with Article 82 - public undertakings/undertakings with special or exclusive rights and dominance

C - Sector-based competition developments

1. Energy: liberalisation in the electricity and gas sector

1.1. Commission proposal on the completion of the European electricity and gas markets

1.2. Interaction of competition policy with single market rules

1.3. Commission's state aid policy in the energy sector

1.4. Other developments in the energy sector: motor fuels

2. Postal services

2.1. Commission proposal for further market opening

2.2. Cases

3. Telecommunications

3.1. Guidelines on market analysis and the calculation of significant market power

3.2. Adoption of the 7th implementation report

3.3. Monitoring the implementation of directives

3.4. Sector inquiry on local loop unbundling

3.5. Leased lines sector inquiry

3.6. Sector inquiry on roaming

3.7. Individual cases dealt with under Articles 81 and

3.7.1. Identrus

3.7.2. Intelsat

3.7.3. Wanadoo

4. Transport

4.1. Air transport

4.1.1. British Midland/Lufthansa/SAS

4.1.2. SAS/Maersk Air

4.1.3. IATA cargo tariff consultations

4.1.4. IATA passenger tariff conferences

4.2. Maritime transport

4.2.1. Revised TACA

4.2.2. Consortia

4.2.3. OECD report on liner shipping

4.2.4. P&O/Stena

4.3. Railways

5. Media

5.1. Sports broadcasting

5.1.1. UEFA broadcasting regulations

5.1.2. UEFA Champions League

5.2. Other issues

5.2.1. Collecting societies

5.2.2. CDs/DVDs

6. Motor vehicle distribution

6.1. Preparing the ground for a new legislative framework specific to motor vehicle distribution

6.2. General assessment of the application of the block exemption regulation as regards new car prices

6.3. Application of the block exemption regulation in 2001

6.3.1. Volkswagen

6.3.2. DaimlerChrysler

6.3.3. Porsche's distribution system

Box 4: Green light for Covisint, the automotive B2B marketplace

6.4. Order of the Court of Justice in the Asia Motor France SA case

7. Financial services

7.1. Competition in the clearing and settlement sector

7.1.1. Eurex

7.2. Payment systems

7.3. Nuclear insurance pools

7.4. Convergence between banking and insurance

8. Information society

8.1. Statement of objections sent to Microsoft

8.2. Information society and the Internet

9. Sport

Box 5: Footballer transfers

9.1. Formula One

9.2. UEFA

9.3. Grants to French professional football clubs

10. Pharmaceuticals

10.1. Parallel trade: Adalat, GlaxoWellcome

10.1.1. Adalat

10.1.2. GlaxoWellcome

10.2. Joint ventures

10.2.1. Pfizer/EISAI

10.2.2. Pfizer/Aventis

D - Statistics

II - Merger control

A - General policy and new developments

1. Introduction - general developments

2. National markets and potential competition

2.1. Definition of the relevant geographic market and potential competition

2.2. Definition of the relevant product market

Box 6: The paper cases and collective dominance

3. Merger control in the 21st century - Green Paper on the Review of the Merger Regulation

3.1. Jurisdictional issues

3.2. Substantive issues

3.3. Procedural issues

3.4. Joint working group with national competition authorities

Box 7: Ancillary restraints - adaptation of the Commission's policy

4. Developments in the application of the failing firm defence

Box 8: Schneider/Legrand

5. Remedies

5.1. Remedies - statistical developments

5.2. Nature of remedies accepted in 2001

5.3. Remedy implementation

5.4. International cooperation on remedies

6. Article 9 referrals to Member States - new developments

7. International cooperation

7.1. Cooperation with the United States authorities

Box 9: GE/Honeywell

B - Statistics

III - State aid

A - General policy

1. Transparency

2. Modernising state aid control

Box 10: Risk capital

3. State aid and tax policy

4. Stranded costs

5. Public broadcasting

5.1. Communication from the Commission on the application of state aid rules to public service broadcasting

6. Cinema and audiovisual production support

6.1. Review of the national cinema and audiovisual production support schemes

6.2. Communication from the Commission on certain legal aspects relating to cinematographic and other audiovisual works

7. Enlargement

Box 11: German public banks (Anstaltslast and Gewährträgerhaftung)

B - Concept of aid

1. Origin of resources

2. Advantage to a firm

3. Selectivity

4. Effect on trade between Member States

C - Assessing the compatibility of aid with the common market

1. Horizontal aid

1.1. Research and development

1.2. Employment, training and working conditions

1.3. Environment

1.4. Rescue and restructuring

2. Regional aid

3. Sectoral aid

3.1. Sectors subject to specific rules

3.1.1. Shipbuilding

3.1.2. Steel

3.1.3. Coal

3.1.4. Motor vehicle industry

3.1.5. Transport

3.1.6. Agriculture

3.1.7. Fisheries

3.2. Specific sectors not subject to special rules

3.2.1. Financial sector

3.2.2. Services

3.2.3. Exceptional occurrences

D - Procedures

1. Initiation of formal investigation proceedings

2. Existing aid

3. Recovery of aid

4. Non-execution of decisions

E - Statistics

IV - Services of general interest

1. General principles

2. Recent developments

2.1. Request by the Nice European Council

2.2. Commission report to the Laeken European Council

3. Antitrust (including liberalisation)

3.1. Court developments

3.2. Liberalisation through legislative measures

V - International activities

A - Enlargement

1. Accession preparations and negotiations

2. Progress in the alignment of competition rules

3. Implementing rules under the Europe Agreements and the customs union decision

4. Extension of Article 87(3)(a) status under the Europe Agreements and the adoption of regional aid maps

5. Technical assistance to the candidate countries

6. Western Balkans

B - Bilateral cooperation

1. United States

2. Canada

3. Other OECD countries

4. Mediterranean countries

5. Latin America

6. Russian Federation and Ukraine

C - Multilateral cooperation

1. WTO: trade and competition policy

1.1. Competition in the Doha Development Agenda

1.2. An initial assessment of the declaration adopted in Doha

Box 12: Trade and competition: from the Van Miert report to Doha

2. OECD

3. UNCTAD

4. International Competition Network

VI - Outlook for 2002

1. Antitrust

1.1. Legislative and regulatory activities

1.2. Enforcement activities

2. Mergers

3. State aid

4. International field

Annex - Cases discussed in the report

Introduction

1. Enforcement of the competition rules is one of the Commission's key tasks; it plays a central role in the economic functioning of the single market. With the final phase of the introduction of the euro starting on 1 January 2002 and enlargement of the European Union on an unprecedented scale, the prospect of a modernisation of the rules on antitrust, mergers and state aid is essential if the Commission is to be able to respond to the fast-changing economic environment. This will make it possible to focus on such behaviour by market participants as most endangers an "open market economy with free competition", as stipulated in the Treaty.

2. In 2001, a series of cartel decisions highlighted the sustained effort by the Commission to tackle flagrantly anticompetitive behaviour by undertakings in a wide range of sectors. These decisions provide evidence of the direct impact of competition policy on consumer welfare, as do this year's decisions concerning the car industry. In addition, opening up markets where a competitive environment is not yet fully established, while at the same time guaranteeing a level playing field and safeguarding the provision of services of general interest, remained high on the Commission's agenda.

3. The Commission's action in the merger field is being carried on against a background of globalisation and an increasing complexity of cases. Multi-jurisdictional aspects raised by global mergers increasingly require intensive international cooperation in different forums, such as the International Competition Network (ICN), and under bilateral agreements. In order to ensure that the European merger control system is properly equipped to deal with the challenges raised by these global mergers as well as the challenges that the enlargement of the European Union will bring, the Commission is undertaking a thorough review of the EC merger regulation. A consultation document (green paper) covering jurisdictional, procedural and substantive issues was published in December.

4. In the state aid field, major improvements in transparency were brought about in 2001 with the adoption of the state aid scoreboard and the opening to the public of an online state aid register. The Commission's policy of updating and modernising its state aid rules continued with the adoption of new rules on state aid for risk capital and the start of three major new policy reviews concerning aid for employment, for research and development and for large regional investment projects. As for monitoring and enforcement, particular attention was given to the definitive entry into force of the two block exemption regulations governing aid for small and medium-sized enterprises and training aid, and the regulation on de minimis aid.

5. With the adoption of common positions on the competition chapter on 12 December, the initial phase of the enlargement activities in the state aid field came to an end. The association council decided to provisionally close the competition chapter for four candidate countries.

6. The Commission has to pay close attention to the competition aspects of the forthcoming enlargement and work with the applicant countries in order to make sure that the same rules will apply with equal effectiveness throughout an enlarged Union.

7. In 2001, the total number of new cases was 1 036, comprising 284 antitrust cases (under Articles 81, 82 and 86), 335 merger cases, and 417 state aid cases (excluding complaints). Comparable figures for 2000 were a total of 1 211 new cases, comprising 297 antitrust cases, 345 merger cases, and 569 state aid cases. [1] The decrease in the overall number of new cases therefore represents an overall trend due to a slight decrease in the field of antitrust, the first decrease in merger cases in several years and a significant drop in the number of state aid cases.

[1] The figure for state aid in 2000 was revised after the 2000 Competition Report was published.

8. The slight reduction in the number of new antitrust cases is confirmation that the effects on notifications in the past two years (sharp downward trend since 1999) of the issuing of guidelines on horizontal and vertical agreements are being maintained. The number of complaints, which has fluctuated widely over previous years, remained fairly stable this year (116 in 2001 against 112 in 2000).

9. The total number of cases closed was 1 204, comprising 378 antitrust cases, 346 merger cases, and 480 state aid cases (excluding complaints). Comparable figures for 2000 were 1 230 cases closed, comprising 400 antitrust cases, 355 merger cases and 475 state aid cases. [2] While the slight decline in closed antitrust cases relates to the increased focus on (resource-intensive) cartel cases, the number of cases closed (378) largely exceeds the number of new cases (284) and further reduces the backlog.

[2] The figure for antitrust in 2000 was revised after the 2000 Competition Report was published.

10. The slight slowdown in mergers and alliances coming under Commission scrutiny in 2001 appears to reflect the general worsening of economic conditions in the industrialised world and the business community's changed perception of the success of recent M&A activity. For the first time since 1993, the number of mergers notified to the Commission fell, from 345 in 2000 to 335 in 2001, but the level is still much higher than in 1999. In all, 340 formal decisions were taken during the year (against 345 in 2000). Whilst there was a pause in 2001 in the upward trend in the overall number of merger notifications, merger cases are becoming increasingly complex and markets more concentrated. In particular, the number of opened cases requiring in-depth investigation has increased more rapidly than the overall number of cases (phase II decisions: 2001 up 17% on 2000 and 100% on 1999).

11. In the field of state aid, the number of notifications was down by approximately 30% and new cases of non-notified aid decreased by about 45% compared with 2000, while requests for the review of aid schemes increased nearly fivefold. The number of proceedings initiated, however, remained stable (66 in 2001 against 67 in 2000). Negative final decisions increased slightly (31 in 2001 against 26 in 2000). Overall, the number of cases pending has also increased (from 584 in 2000 to 621 in 2001) due to the number of complaints. [3]

[3] The figure for 2000 was revised after the 2000 Competition Report was published.

Box 1: Competition and the consumer - the main Commission decisions in 2001

Commissioner Monti has repeatedly underlined the great importance the Commission attaches to consumer aspects of competition law and policy. State aid policy, merger control and antitrust enforcement all have their part to play in securing for consumers the benefits deriving from the application of EU competition rules.

Looking back on 2001, in particular several of the antitrust decisions taken illustrate clearly how the preservation of full competition works to the benefit of consumer interests. Any extra profits generated by market operators by their limiting the forces of competition, e.g. through cartels, will ultimately have to be paid for by the consumer, who would enjoy lower prices, better service and a wider choice if competition worked properly.

British Midland/Lufthansa/SAS

On 1 March 2000, British Midland International, Lufthansa and SAS notified a joint venture agreement under which they agreed to coordinate their services to and from London Heathrow and Manchester International airports.

The Commission acknowledged that, in terms of efficiency gains and competition, the agreement's overall effect was positive in that it led to a reorganisation and expansion of the parties' existing networks. However, the agreement provided that Lufthansa was to be granted the exclusive right to operate flights on almost all routes between London and Frankfurt. The London-Frankfurt market is one of the busiest in Europe. The Commission concluded that British Midland's withdrawal from the London-Frankfurt route represented an appreciable restriction of competition on this market. It was concerned that the agreement might even have the effect of eliminating competition altogether. Only Lufthansa and British Airways would have remained, and Lufthansa/British Midland would have been in a much better position with regard to access to slots at both ends of the market. In contrast, British Airways was hampered in its efforts to increase its frequencies by a shortage of slots at Frankfurt.

With a view to addressing the Commission's competition concerns, the parties gave a commitment to make slots available at Frankfurt airport so as to allow a new entrant or an existing competitor, in particular British Airways, to increase its frequencies on this route and compete on an equal footing with Lufthansa. British Airways has since requested and obtained some of these slots.

As a result, customers will benefit from a wider choice of air transport services to more destinations, better connections, convenient scheduling and seamless travel.

SAS/Maersk

On 18 July, the Commission decided to fine Scandinavian airlines SAS and Maersk Air EUR 39.375 million and EUR 13.125 million respectively for operating a secret market-sharing agreement.

The Commission had observed that Maersk Air had withdrawn from the Copenhagen-Stockholm route. This led to the monopolisation by SAS of the Copenhagen-Stockholm route to the detriment of over one million passengers who use that route every year. It also appeared that SAS had stopped flying on the Copenhagen-Venice route and Maersk Air had started operations on this route and, finally, that SAS had withdrawn from the Billund-Frankfurt route, leaving Maersk Air as the only carrier. In addition, the parties also negotiated an overall non-compete clause covering their future operations on international routes to and from Denmark and on Danish domestic routes.

As a result of the decision, competition between SAS and Maersk Air, the two largest airlines operating to and from Denmark, was restored. Actual new entry on routes previously covered by the market sharing was announced, for example, by SAS concerning five round trips per day between Billund and Copenhagen. Pressure on airline tariffs was restored given that the parties' pricing behaviour was again constrained by the actual possibility of new entry by the other party.

Car sector

In the car sector the Commission denounced practices by manufacturers which prevent consumers from purchasing cars in the country of their choice.

On 29 June, the Commission adopted a decision fining Volkswagen EUR 30.96 million for resale price maintenance in Germany in respect of the new VW Passat. Volkswagen had sent circular letters in 1996 and 1997 to its German dealers asking them not to sell this model for less than the recommended list price. This is the first ever decision on resale price maintenance in the car sector. Resale price maintenance is a very severe restriction of price competition and has a direct impact on consumer prices.

On 10 October, the Commission adopted a decision fining DaimlerChrysler EUR 71.825 million for several infringements of Article 81 of the EC Treaty. One of these infringements consisted of obstacles to parallel trade in Germany, preventing buyers from other Member States from buying cars from German dealers. Another involved a price-fixing agreement in Belgium aimed at reducing discounts to customers.

Important developments concerning the review of the car distribution block exemption - which will be finalised in 2002 - took place during 2001. For details please refer to Section 6.1 of this report.

Bank charges for euro zone currency exchange

Shortly after the creation of the euro, the Commission received complaints from consumers alleging that certain banks had collectively fixed their charges for exchanging euro zone banknotes. The Commission carried out several surprise inspections at various banks and sent requests for information to most euro zone banks. Subsequently it started proceedings against a large number of banks in seven Member States.

Several banks reacted by presenting unilateral proposals to the Commission to the effect that they would significantly reduce the charges applicable and eliminate them entirely by October 2001 at the latest, at least for buying transactions carried out by account holders - something which would be of clear benefit to consumers before the changeover to the euro.

Taking into account the exceptional circumstance of the disappearance of the market concerned and the immediate benefit to consumers stemming from these proposals, the Commission decided to end the cartel proceedings against most of the banks. On 12 December, it fined five German banks a total of EUR 100.8 million for concluding an agreement on a commission of about 3% for the buying and selling of euro zone banknotes.

Mergers

Merger control decisions also have an impact on the daily life of consumers.

In the Nordea/Postgirot case, the Commission approved the acquisition by the Scandinavian banking group Nordea of sole control of Sweden's Postgirot Bank AB, subject to conditions. Postgirot is a wholly-owned subsidiary of state-owned Posten AB, the Swedish Post Office. It owns and operates an in-house giro payment system, which it uses to supply distance payment services to retail and corporate customers. Postgirot also provides banking services to household and corporate customers, including deposits, lending, international payments, trade finance and card services. The deal initially raised competition concerns as Nordea would have controlled both Postgirot and Bankgirot, the two main bank payments systems used by Swedish households to pay electricity, telephone and other bills. Such a significant level of influence could have led to price increases directly affecting consumers' daily banking needs. Nordea undertook, however, to reduce its stake in Bankgirot to 10%, a level which will no longer give it decisive influence over the company, and to withdraw from Privatgirot, a company which competes with Postgirot in giro-related technical services. By accepting these undertakings and making approval of the merger conditional on them, the Commission made sure that the newly-created entity will continue to face competition to the advantage of the final consumer.

The Unilever case, which concerns the divestment of well-known household food brands (see Section II.5.3, point 309), and two cases concerning the petrol/oil distribution sector (BP/E.ON and Shell/DEA, see Section II.6, points 317-318) may also be of particular interest to consumers.

State aid

Finally, state aid control plays an important role in ensuring that the taxpayer's money is allocated efficiently and contributes to a sound economic environment in which viable economic entities can create sustainable employment opportunities for European citizens. In its state aid decisions the Commission takes into account aspects related to the proper functioning of services of general interest.

1.

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

A - Modernisation of the legislative and interpretative rules

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

12. On 27 September 2000, the Commission adopted its proposal for a regulation introducing a new system for implementing Articles 81 and 82 of the EC Treaty. [4] Once in force, the new regulation will, among other things, replace Regulation No 17 of 1962. The key element of the reform is the proposed transition from a system whereby the Commission enjoys a monopoly to apply Article 81(3) (the exemption monopoly) to a directly applicable system of legal exception, whereby agreements which do not contravene Article 81(1), or which fulfil the conditions of Article 81(3), are automatically deemed lawful and agreements in breach of Article 81(1), but not fulfilling the conditions of Article 81(3), are automatically deemed unlawful. This reform implies the abolition of the notification and authorisation system as it is provided for in Regulation No 17, an enhanced responsibility for national competition authorities and national courts to apply Articles 81 and 82 and clear arrangements to safeguard the coherent application of Articles 81 and 82 throughout the European Union, including a network between all European competition authorities. The proposed regulation also aims at strengthening the Commission's powers of investigation (e.g. the right of inspection at non-business premises). Via its proposal, the Commission's goal is to increase efficiency in tackling breaches of Articles 81 and 82, thereby ensuring effective competition in Europe. [5]

[4] COM(2000) 582 (OJ C 365 E, 19.12.2000).

[5] For a detailed description of the Commission's proposal, see Section I.A.3. of the 2000 Competition Report, SEC(2001) 694. For more details of the 1999 White Paper on Modernisation, see Section I.A.2. of the 1999 Competition Report, SEC(2000) 720.

13. On 29 March 2001, the Economic and Social Committee adopted its opinion on the proposed regulation. [6] In its opinion, the Committee "wholeheartedly supports the reform of the system for applying competition rules" and it "appreciates the clear and bold wording used" in the Commission's proposal, which it qualifies as essential to the reform. However, given the complexity of the topic and in order to preserve the unity and coherence of the system and the precedence of Community law and to guarantee effective decentralisation while maintaining maximum legal certainty, the Committee also urged the Commission to issue, before or after the entry into force of the new regulation, "accompanying measures" which would further clarify some of the central concepts of EC competition law, such as the effect on trade between Member States.

[6] OJ C 155, 29.5.2001.

14. On 20 June, the European Parliament's Committee on Economic and Monetary Affairs adopted its final report on the Commission's proposals. [7] In its report, the Committee "accepted that the current system of regulating European competition policy is too bureaucratic, cumbersome and ineffective" and that the enlargement of the European Union could only aggravate that situation. The Committee therefore welcomed the well-timed proposal from the Commission "to radically overhaul the competition rules now, in advance of an enlarged Community". However, in order to pragmatically achieve the intended objectives of the reform, the Committee encouraged the Commission to modify its proposal on some points and it suggested some clarifications on essential elements of the proposed reform. Most of these suggestions were taken over by Parliament when it adopted, by 409 votes to 54, its opinion on the proposed regulation on 6 September. [8] The amendments proposed by Parliament aim among other things at deleting the clause concerning a registration system for certain types of agreement (Article 4(2)), harmonising the regime of fines (Article 5), ensuring the proportionality of the remedies of a behavioural or structural nature (Article 7(1)) and clearly defining public interest in the context of Commission decisions based on Article 10.

[7] The report of the Committee on Economic and Monetary Affairs and the opinions of the Committee on Industry, External Trade, Research and Energy and the Committee on Legal Affairs and the Internal Market (A5-0229/2001) have not yet been published in the Official Journal, but can be found on http://www2.europarl.eu.int/omk/OM-Europarl-PROG=REPORT&L=EN&PUBREF=-//EP//TEXT+REPORT+A5-2001-0229+0+NOT+SGML+V0//EN.

[8] The European Parliament legislative resolution (R5-0444/2001) has not yet been published in the Official Journal, but can be found on http://www3.europarl.eu.int/omk/omnsapir.so/pv2-APP=PV2&PRG=CALEND&FILE=010906&TPV=DEF&LANGUE=EN.

15. On 14-15 May and 5 December, under the Swedish and Belgian Presidencies respectively, the Council (Industry) held a substantive debate on the Commission's proposal. Although provisional agreement was reached on some of the aspects of the proposed regulation, it was concluded that discussions on the principles and modalities of the envisaged reform needed to be continued in the Council working group. As guidance for further progress in the working group, the Council debated in particular the general principles underlying the functioning of the network of competition authorities, inviting the Commission to lay these principles down in a common declaration. The Council also subscribed to the objective of Article 3 of the Commission's proposal so as to ensure a level playing field for agreements affecting trade between Member States, but it urged the working group to discuss further the effect of such a provision on specific national rules.

2. Revision of the leniency notice

16. In line with the general thinking behind the modernisation exercise, namely the need to refocus its activities on the most serious infringements of Community law, the Commission adopted in 2001 new draft rules aimed at better detection and eradication of price-fixing and other cartels. The leniency notice was revised, after five years of implementation, with a view to further increasing its effectiveness and maximising the Commission's ability to detect and successfully prosecute cartels. The draft new notice published on 21 July [9] addressed these issues in more precise terms and prepared the ground for the adoption of a new notice on immunity from fines and reduction of fines in 2002.

[9] Draft Commission notice on immunity from fines and reduction of fines in cartel cases (OJ C 205, 21.7.2001).

3. Review of the block exemption regulation for technology transfer agreements

17. On 20 December, the Commission adopted a report [10] evaluating the functioning of Regulation (EC) No 240/96, [11] the technology transfer block exemption (hereinafter called the "TTBE"). The report provides a critical analysis of the application of and policy approach underpinning the TTBE. It stresses in particular the need to adapt the TTBE to ensure consistency with the new Commission block exemptions for distribution agreements, [12] specialisation agreements and R&D agreements, [13] which follow a more economics-based approach.

[10] Commission evaluation report on the transfer of technology block exemption Regulation No 240/96, COM(2001) 786 final, 20.12.2001. The report is also available on the Internet at the following address: http://europa.eu.int/comm/competition/antitrust/technology_transfer/

[11] Commission Regulation (EC) No 240/96 on the application of Article 81(3) of the Treaty to certain categories of technology transfer agreements (OJ L 31, 9.12.1996).

[12] Commission Regulation (EC) No 2790/1999 (OJ L 336, 29.12.1999).

[13] Commission Regulations (EC) Nos 2658/2000 and 2659/2000 (OJ L 304, 5.12.2000).

18. The report finds that the TTBE uses criteria relating more to the form of the agreement than to the actual effects on the market. The TTBE has in fact four main shortcomings:

- firstly, it is too prescriptive and seems to work as a straitjacket, which may discourage efficient transactions and hamper the dissemination of new technologies;

- secondly, it covers only certain patent and know-how licensing agreements. This narrow scope of the TTBE seems increasingly inadequate to deal with the complexity of modern licensing arrangements (e.g. pooling arrangements, software licences involving copyright);

- thirdly, a number of restraints are currently presumed illegal or excluded from the block exemption without proper economic justification where the parties lack market power and are in a vertical relationship. This concerns in particular restrictions extending beyond the scope of the licensed intellectual property right (IPR) (e.g. non-compete obligations, tying);

- fourthly, by concentrating on the form of the agreement, the TTBE extends the benefit of the block exemption to situations which cannot always be presumed to fulfil the conditions of Article 81(3), either because the contracting parties are competitors or because they hold a strong position on the market.

19. The report invites comments on a number of issues:

- should the scope of the TTBE, which applies only to patents and know-how, be widened to cover also copyright, design rights and trademarks- This issue is of particular importance to a number of sectors including the software industry, which depends on a chain of copyright licences for manufacture and distribution;

- should the TTBE also cover licensing agreements between more than two companies, such as licensing pools- Such arrangements have become increasingly important to industry, given the growing complexity of new technologies. In this respect, it may be observed that multiparty licences can be efficiency-enhancing and procompetitive, in particular where the pool covers only essential IPRs. However, multiparty licences may also have serious anticompetitive effects, especially where the agreement covers substitute technologies or where it requires members to grant licences to each other for current and future technology at minimal cost or on an exclusive basis;

- a more lenient approach to licensing agreements between non-competitors. It is generally acknowledged that, if the parties to an agreement are in a vertical relationship, i.e. are not competitors, exclusive licences are mostly efficiency-enhancing and procompetitive. For instance, if the IPR holder does not have the assets for the production or distribution of the licensed products, it is more efficient to license to someone who does;

- a more prudent approach to licensing agreements between competitors. If the parties are in a horizontal relationship, i.e. if the licence prevents competition that could have taken place between the licensor and the licensee were it not for the licence, licence agreements may give rise to a number of competition concerns. On the one hand, exclusive licences will often lead to market sharing through the allocation of territories or customers, especially where the licence is reciprocal or the exclusivity extends also into non-licensed competing products. Production quotas agreed in licensing agreements between competitors may easily lead to a straightforward output restriction. On the other hand, under certain conditions, in particular in the case of licensing to a joint venture and in the case of non-reciprocal licensing, the exclusivity may lead not only to a loss of inter-brand competition but also to efficiencies. To assess whether the negative effects on competition may be outweighed by the efficiencies, the market power of the parties and the structure of the markets affected by the agreement need to be taken into account.

Box 2: New de minimis notice

On 20 December, the Commission adopted a new notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the EC Treaty ("de minimis notice"). [14] The new notice replaces the previous notice of 1997. [15] By defining more clearly and comprehensively when agreements between companies are not prohibited by the Treaty, the notice will reduce the compliance burden for companies, especially smaller companies. At the same time, the Commission will be better able to avoid examining cases which have no interest from a competition policy point of view and will thus be able to concentrate on more important cases.

[14] OJ C 368, 22.12.2001. The new notice is also available on the Internet at the following address: http://europa.eu.int/comm/competition/antitrust/deminimis/:

[15] OJ C 372, 9.12.1997.

The new notice reflects an economics-based approach and has the following key features:

(1) The de minimis thresholds are raised to 10% market share for agreements between competitors and to 15% for agreements between non-competitors.

The previous notice had fixed the de minimis thresholds at 5% and 10% market share respectively. Competition concerns are in general not to be expected where companies do not have a minimum degree of market power. The new thresholds take account of this while at the same time staying low enough to be applicable whatever the overall market structure looks like. [16] The difference between the two thresholds takes into account, as before, the fact that agreements between competitors in general lead more easily to anticompetitive effects than agreements between non-competitors.

[16] This does not imply that agreements between companies that exceed the thresholds set out in the notice do appreciably restrict competition. Such agreements may still have only a negligible effect on competition in the common market, but this can be assessed only on a case-by-case basis. Such assessment is relevant in particular for agreements that are not covered by any of the Commission block exemption regulations.

(2) It specifies for the first time a market share threshold for networks of agreements producing a cumulative anticompetitive effect.

The previous de minimis notice excluded from its benefit agreements operated on a market where "competition is restricted by the cumulative effects of parallel networks of similar agreements established by several manufacturers or dealers". This meant in practice that firms operating in sectors such as the beer and petrol sectors could usually not benefit from the de minimis notice. The new notice introduces a special de minimis market share threshold of 5% for markets where such parallel networks of similar agreements exist.

(3) It contains the same list of hardcore restrictions as the horizontal and vertical block exemption regulations.

The new notice defines more clearly and consistently the hardcore restrictions (such as price fixing and market sharing) which are normally always prohibited and cannot benefit from the de minimis notice. For agreements between non-competitors, the new notice has taken over the hardcore restrictions set out in block exemption Regulation (EC) No 2790/1999 for vertical agreements. [17] For agreements between competitors, the new notice has taken over the hardcore restrictions set out in block exemption Regulation (EC) No 2658/2000 for specialisation agreements. [18]

[17] OJ L 336, 29.12.1999.

[18] OJ L 304, 5.12.2000.

(4) Agreements between small and medium-sized enterprises are in general de minimis.

The new notice states that agreements between small and medium-sized enterprises (SMEs) are rarely capable of appreciably affecting trade between Member States. Agreements between SMEs therefore generally fall outside the scope of Article 81(1).

4. Review of procedural rules: new mandate of the hearing officers

20. On 23 May, the Commission adopted a decision on the terms of reference of hearing officers in certain competition proceedings. [19] This new "mandate of the hearing officers", which replaces the previous terms of reference dating from 1994, [20] follows the Commission's decision last year to enhance this function. It aims to reinforce the independence and authority of the hearing officer, to strengthen his role in EC merger and antitrust proceedings and to enhance the objectivity and quality of the Commission's competition proceedings and the resulting decisions.

[19] Decision of 23.5. 2001 on the terms of reference of hearing officers in certain competition proceedings (OJ L 162, 19.6.2001).

[20] Decision of 12.12.1994 on the terms of reference of hearing officers in competition procedures before the Commission (OJ L 330, 21.12.1994).

21. The right of the parties concerned and of third parties to be heard is an established principle of Community law. The principle has been restated in the EU Charter of Fundamental Rights, as part of the right of every person "to have his or her affairs handled impartially, fairly and within a reasonable time". Safeguarding that right during the Commission's competition proceedings is the special responsibility of the hearing officer.

22. The position of hearing officer was created in 1982. His initial responsibility was limited primarily to the organisation, chairing and conduct of the oral hearing in antitrust proceedings - i.e. cartels and abuses of dominant positions - and later on also in merger proceedings. The hearing officer also ensured that in the preparation of draft Commission decisions in competition cases due account was taken of all the relevant facts whether favourable or unfavourable to the parties concerned. In carrying out this task the hearing officer contributed to the objectivity of the hearing itself and of any subsequent decision. This remit was updated and widened in 1994 to ensure adequate protection for the rights of parties, in particular with regard to confidentiality of documents and business secrets and adequate access to the case files of the Commission.

23. The new mandate, adopted by the Commission on 23 May, maintains these core aspects of the hearing officer's functions. In addition, however, the role has been strengthened and the terms of reference adapted and consolidated in the light of developments in competition law.

24. In particular, the transparency of the appointment of hearing officers has been increased by publishing these appointments in the Official Journal, while any interruption or termination of appointment or transfer requires a reasoned decision by the Commission, also published in the Official Journal. Significantly, the independence of the hearing officer from the Directorate-General for Competition has been reinforced in that the hearing officer is now attached for administrative purposes to the Member of the Commission with special responsibility for competition (the Competition Commissioner) and reports directly to him rather than to the Director-General for Competition, as was previously the case.

25. In addition, the hearing officer's function is also reinforced in the decision-making process itself. Senior management within the Directorate-General for Competition are required to keep the hearing officer informed about how a proceeding is developing up to the stage of the draft decision to be submitted to the Competition Commissioner. The hearing officer may present observations to the Commissioner on any matter arising out of any Commission competition proceeding. More specifically, the hearing officer's final report, produced on the basis of the draft decision submitted to the Advisory Committee, must now systematically be attached to the draft decision submitted to the Commission so that the latter is fully aware of all relevant information on the course of the competition proceeding and on enforcement of the right to be heard. The report may be modified in the light of any amendments made to the draft decision prior to its adoption. In order to enhance the transparency of proceedings, the final report must also be communicated to the addressees of the decision together with the decision itself as well as to Member States and be published in the Official Journal with the decision.

26. The new mandate also extends the role of the hearing officer as regards commitments for remedies proposed by the parties in relation to any proceeding initiated by the Commission under merger or antitrust control. The hearing officer can report on the objectivity of any enquiry which may have been conducted in order to assess the competition impact of the proposed commitments.

27. The new mandate also addresses the hearing officer's powers with regard to granting or denying confidentiality when information is disclosed by publication in the Official Journal. This applies in particular to the published versions of Commission decisions on merger and antitrust cases.

28. The importance parties attach to procedural matters was underlined most recently by actions brought before the Court of First Instance which resulted in the President issuing orders on 20 December. [21]

[21] Cases T-219/01 R Commerzbank AG, T-216/01 R Reisebank AG and T-213/01 R Österreichische Postsparkasse AG.

29. On 30 and 16 October respectively, the Commission appointed Mr S. Durande and Mrs K. Williams to the post of hearing officer.

1.

B - Application of Articles 81, 82 and 86

1. Article 81

1.1. Cartels

1.1.1. A record year for cartel decisions

30. The priority given to tackling cartel cases resulted in 2001 in a large increase in the number of cases handled. The Commission adopted 10 negative formal decisions in the Graphite electrodes, Sodium gluconate, SAS/Maersk, Vitamins, German banks, Citric acid, Belgian breweries, Luxembourg breweries, Zinc phosphate and Carbonless paper cases and closed by way of settlement five cases of cartels in the banking sector connected with the introduction of the euro. [22] It adopted statements of objections in several other cases, including Plasterboard and GFU. [23]

[22] See 1.1.2 below.

[23] Press releases MEMO/01/149, 24.4.2001 and IP/01/830, 13.6.2001.

31. Secret cartels are among the most serious restrictions of competition. They lead to higher prices and less choice for consumers. And they have a negative impact on the whole of European industry by increasing the cost of services, goods and raw materials for European enterprises obtaining their supplies from cartel members. In the longer term, they reduce European industry's overall competitiveness.

32. For all these reasons, the detection, prosecution and punishment of secret cartels has been one of the central features of the competition policy pursued by the European Commission ever since it was set up. The formation in 1998 of a specialised unit (the cartels unit) gave tangible expression to the priority which the Commission intended to give to the fight against cartels, although other units may also take part. Moreover, the entry into force of the future Council regulation replacing Regulation No 17 on antitrust procedures places the surveillance of markets and the campaign against the hidden anticompetitive practices which develop therein at the heart of the tasks performed by Community competition policy. It is with this in view that, for a number of years now, the emphasis has been on substantially strengthening the resources available to, and thoroughly reorganising the working methods of, the Directorate-General for Competition in relation to cartels.

33. Detecting, prosecuting and punishing secret cartels poses a constant challenge to competition authorities. The increasing globalisation of trade means having to deal with secret agreements extending beyond the frontiers of Europe and sometimes concluded outside the territory of the EEA. Generalisation of the new information and communication technologies is making it more difficult to gain access to evidence of such agreements. And the intensification of the struggle against cartels, both inside and outside Europe, is being matched by greater sophistication in the practices employed.

34. Reform of Regulation No 17, which is currently being discussed in the Council, is vital as it will enable the Commission to meet this challenge by becoming increasingly efficient at fighting hidden practices. In particular, the investigatory powers reform, involving as it does the possibility of carrying out inspections at private dwellings, is a key factor in adapting the struggle against cartels to practices that are becoming ever more sophisticated.

35. In the same way and for the same reasons, the Commission is undertaking a review of its guidelines on immunity from and reduction of fines.

36. The Commission first adopted a leniency programme in 1996 [24] in order to increase effectiveness both in the detection and in the handling of cartel cases. The leniency programme was conceived as a potent investigative weapon rewarding undertakings cooperating with the Commission. It recognises the difficulty of obtaining hard evidence of secret cartels in an increasingly sophisticated environment.

[24] OJ C 207, 18.7.1996.

37. Five years after it was adopted, the leniency programme plays an important role in the enforcement of competition rules against cartels and it has been invoked by companies in many of the cases opened since July 1996. Up to now, the leniency notice has been applied in 16 final Commission decisions: Extra-alloy surcharge, [25] British Sugar, [26] Pre-insulated pipes, [27] Greek ferries, [28] Seamless steel tubes, [29] Lysine, [30] SAS Maersk Air, [31] Graphite electrodes, [32] Sodium gluconate, [33] Vitamins, [34] Belgian breweries, [35] Luxembourg breweries, [36] Citric acid, [37] German banks, [38] Zinc phosphate [39] and Carbonless paper. [40]

[25] OJ L 100, 1.4.1998.

[26] OJ L 76, 22.3.1999.

[27] OJ L 24, 30.1.1999.

[28] OJ L 109, 27.4.1999.

[29] Not published.

[30] OJ L 152, 7.6.2001.

[31] Cases COMP/D2/37.444 and COMP/D2/37.386 (OJ L 265, 5.10.2001).

[32] Case COMP/36.490; press release IP/01/1010, 18.7.2001.

[33] Case COMP/36.756; press release IP/01/1355, 20.10.2001.

[34] Case COMP/37.512; press release IP/01/1625, 21.11.2001.

[35] Case COMP/37.614; press release IP/01/1739, 5.12.2001.

[36] Case COMP/37.800; press release IP/01/1740, 5.12.2001.

[37] Case COMP/36.604; press release IP/01/1743, 5.12.2001.

[38] Case COMP/37.919; press release IP/01/1796, 11.12.2001.

[39] Case COMP/37.027; press release IP/01/1797, 11.12.2001.

[40] Case COMP/36.212; press release IP/01/1892, 20.12.2001.

38. However, experience gathered to date shows that the effectiveness of the notice would be improved by an increase in the transparency and certainty of the conditions on which any reduction of fines is to be granted. It would also benefit from a closer alignment between the level of reduction of fines and the value of a company's contribution to establishing the infringement.

39. For these reasons, after five years of implementation, the Commission decided to revise its leniency notice with a view to further increasing its effectiveness and maximising the Commission's ability to detect and successfully prosecute cartels. A draft new notice published on 21 July [41] addressed these issues in a number of ways and prepared the ground for the adoption of a new leniency notice in 2002.

[41] OJ C 205, 21.7.2001.

1.1.2. Cartel decisions in 2001

Graphite electrodes [42]

[42] Case COMP/36.490; press release IP/01/1010, 18.7.2001.

40. On 18 July, the Commission fined Germany's SGL Carbon AG, UCAR International of the United States and six other companies a total of EUR 218.8 million for fixing the prices and sharing the market for graphite electrodes. Following an extensive investigation which started in 1997, the Commission found that the companies had participated in a worldwide cartel during most of the 1990s. It characterised the companies' behaviour as a "very serious" infringement of the EC competition rules.

41. Graphite electrodes are ceramic-moulded columns of graphite used primarily in the production of steel in electric arc furnaces, also referred to as "mini-mills".

42. With regard to the leniency notice, it is important to note that this is the first time the Commission has granted a substantial reduction in a fine (70%). Showa Denko benefited from this reduction, having been the first company to cooperate and provide conclusive evidence of the cartel to the Commission.

SAS/Maersk [43]

[43] Cases COMP/D2/37.444 and COMP/D2/37.386 (OJ L 265, 5.10.2001).

43. Again on 18 July, the Commission decided to fine Scandinavian airlines SAS and Maersk Air EUR 39.375 million and EUR 13.125 million respectively for operating a secret market-sharing agreement. [44] The agreement had led to the monopolisation by SAS of the Copenhagen-Stockholm route to the detriment of over one million passengers who use that route every year, and to the sharing of other routes to and from Denmark.

[44] SAS lodged an appeal against the decision before the Court of First Instance on 3 October (Case T-241/01), contesting the amount of the fine.

44. SAS and Maersk Air had notified a cooperation agreement, which related mainly to code sharing and frequent-flyer programmes. In the course of the preliminary enquiry it transpired that, coinciding with the entry into force of the cooperation agreement, Maersk Air had withdrawn from the Copenhagen-Stockholm route, where it had until then been competing with SAS. It also transpired that, at the same time, SAS had stopped flying on the Copenhagen-Venice route and Maersk Air had started operations on that route and, finally, that SAS had withdrawn from the Billund-Frankfurt route, leaving Maersk Air - its previous competitor on the route - as the only carrier.

45. These entries and withdrawals, which were not notified, formed part of a wider market-sharing agreement which included an overall non-compete clause covering the parties' future operations on international routes to and from Denmark and on Danish domestic routes.

46. The market sharing was discovered as a result of on-site inspections. The inspections were carried out in June 2000, in close cooperation with the national competition authorities in Denmark and Sweden.

47. As a result of the decision, competition between SAS and Maersk Air, the two largest airlines operating to and from Denmark, was restored to the benefit of consumers.

Sodium gluconate [45]

[45] Case COMP/36.756; press release IP/01/1355, 20.10.2001.

48. On 2 October, the Commission fined Archer Daniels Midland Company Inc., Akzo Nobel NV, Avebe BA, Fujisawa Pharmaceutical Company Ltd, Jungbunzlauer AG and Roquette Frères SA a total of EUR 57.53 million for fixing the price and sharing the market for sodium gluconate. It characterised the companies' behaviour as a "very serious" infringement of the Community and EEA competition rules.

49. Following an investigation which started in 1997, the Commission established that the companies had participated in a worldwide cartel between 1987 and 1995. The cartel agreements were implemented through detailed sales monitoring, the holding of regular multi- and bilateral meetings, and the enforcement of a compensation scheme. Throughout the period, the Commission gathered evidence of over 25 cartel meetings.

50. Sodium gluconate is a chemical used to clean metal and glass, with applications such as bottle washing, utensil cleaning and paint removal, and as a food additive, together with various other chemical applications.

51. The Commission granted for the first time a very substantial reduction in the fine pursuant to Section B of the leniency notice. Fujisawa benefited from a reduction of 80% on the ground that it was the first to adduce conclusive evidence of the cartel's existence, before the Commission had undertaken any investigation ordered by decision. The Commission did not grant Fujisawa a 100% reduction in its fine, as it could have done under Section B, as the company did not approach the Commission until after it had received a request for information. This reluctance to come forward spontaneously and before any investigatory measure was taken into account.

Vitamins [46]

[46] Case COMP/37.512; press release IP/01/1625, 21.11.2001.

52. On 21 November, the Commission adopted a decision under Article 81 of the EC Treaty and Article 53 of the EEA Agreement finding that 13 manufacturers of vitamins A, E, B1, B2, B5, B6, C, D3, H, folic acid, beta carotene and carotinoids had participated in cartels for each of these products resulting in a total of 12 separate infringements.

53. The Commission fined eight companies a total of EUR 855.23 million for fixing the prices of eight different products and allocating sales quotas in respect thereof. The limitation period for fines in competition cases [47] was applicable to the infringements affecting vitamins B1, B6, H and folic acid; the Commission therefore did not fine companies for their involvement in these cartels. Each agreement was a very serious infringement of the Community competition rules and as such justified the overall high level of fines imposed.

[47] Council Regulation (EEC) No 2988/74 of 26 November 1974 concerning limitation periods in proceedings and the enforcement of sanctions under the rules of the European Economic Community relating to transport and competition.

54. A striking feature of this complex of infringements was the central role played by Hoffmann-La Roche and BASF, the two main vitamin producers, in virtually each and every cartel, whilst other players were involved in only a limited number of vitamin products.

55. The participants in each of the cartels fixed prices for the different vitamin products, allocated sales quotas, agreed on and implemented price increases and issued price announcements in accordance with their agreements. They also set up machinery to monitor and enforce their agreements and participated in regular meetings to implement their plans. The modus operandi of the different cartels was essentially the same. Given the continuity and similarity of method, the Commission considered it appropriate to treat in one and the same proceeding and decision the complex of agreements covering the different vitamins.

Citric acid [48]

[48] Case COMP/36.604; press release IP/01/1743, 5.12.2001.

56. On 5 December, the Commission decided to fine five citric acid producers a total of EUR 135.22 million.

57. The Commission's investigation revealed that the five producers had participated, between 1991 and 1995, in a secret cartel of worldwide scope which had enabled them to fix the price and share the market for citric acid. The cartel was a very serious infringement of Article 81 of the EC Treaty and Article 53 of the EEA Agreement, which justified the size of the fines.

Belgian breweries [49]

[49] Case COMP/37.614; press release IP/01/1739, 5.12.2001.

58. On 5 December, the Commission fined five companies a total of EUR 91.655 million for participating in two separate secret cartels on the Belgian beer market.

59. The first cartel involved Interbrew on the one hand and Alken-Maes and Danone (Alken-Maes's parent company at the time) on the other. Interbrew and Alken-Maes/Danone, Nos 1 and 2 on the market, had agreed on a general non-aggression pact, the allocation of customers in the "horeca" (hotels, cafés and restaurants) or "on-trade" sector, price fixing in the retail or "off-trade" sector, the limitation of investments and advertising in the horeca sector, a new tariff structure (horeca and retail) and a detailed monthly information exchange system concerning sales volumes (horeca and retail). The cartel lasted from 1993 until 1998. The CEOs and other senior management of the companies involved met regularly to initiate and monitor these agreements. The Commission considered the infringement to be "very serious". In setting the amount of the fine, it also took into account the fact that Danone had committed similar infringements of Article 81 in the past. [50]

[50] Commission decision of 23.7.1984 (Flat glass) and Commission decision of 15.5.1974 (Flat glass).

60. The second cartel concerned private-label beer in Belgium. This is beer which supermarkets order from brewers but sell under their own label. Between October 1997 and July 1998, Interbrew, Alken-Maes, Haacht and Martens met four times to discuss the private-label beer market in Belgium in general and their prices and customers in particular. During these meetings, the four brewers also exchanged business information. This cartel was considered to be a "serious" infringement.

Luxembourg breweries [51]

[51] Case COMP/37.800; press release IP/01/1740, 5.12.2001.

61. On 5 December, the Commission fined three Luxembourg brewers - Brasserie Bofferding, Brasserie Battin and Brasserie de Wiltz - a total of EUR 448 000 for their participation in a market-sharing agreement in the Luxembourg "horeca" (hotels, restaurants and cafés) or "on-trade" sector. A fourth brewer, Brasserie de Luxembourg, an Interbrew subsidiary, was not fined because it had revealed the cartel to the Commission and fulfilled all the other conditions of Section B of the leniency notice.

62. The brewers had agreed in writing to respect each other's exclusive purchasing arrangements ("beer ties") with horeca customers, as well as measures to restrict the entry of foreign brewers into the Luxembourg horeca sector. The agreement remained in force from 1985 until 2000. It was held to be a "serious" infringement.

Zinc phosphate [52]

[52] Case COMP/37.027; press release IP/01/1797, 11.12.2001.

63. On 11 December, the Commission fined six producers or former producers of zinc phosphate a total of EUR 11.95 million. The Commission's investigation had revealed that the six producers had participated, between 1994 and 1998, in a cartel covering the whole of the European Economic Area which had enabled them to fix prices and divide up their 90% share of the market in zinc phosphate, an anticorrosion mineral pigment used in the manufacture of industrial paints. The cartel was by its very nature a very serious infringement of Article 81 of the EC Treaty and Article 53 of the EEA Agreement.

Settlements concerning bank charges for the exchange of euro zone currencies and German banks [53]

[53] Case COMP/37.919; press release IP/01/1796, 11.12.2001.

64. Shortly after the creation of the euro on 1 January 1999, the Commission (Directorate-General for the Internal Market) received complaints that exchange commissions for euro zone currency notes and coins remained high. The Commission carried out several surprise inspections at various banks and sent requests for information to most euro zone banks. It gathered evidence which suggested that certain national groups of banks may have colluded to maintain exchange charges at certain levels in order to minimise losses caused by the introduction of the euro. On this basis, the Commission started proceedings in 2000 against a large number of banks and bureaux de change in seven Member States (Austria, Belgium, Finland, Germany, Ireland, the Netherlands and Portugal).

65. However, several banks took the initiative in presenting unilateral proposals to the Commission to the effect that they would (i) significantly reduce their charges for exchanging in-currency banknotes, and (ii) abolish all such charges by October 2001 at the latest, at least for buying transactions by account holders.

66. Taking into account the exceptional circumstance of the disappearance of the market concerned, and the immediate benefit to consumers as a result of these proposals which implied a deviation from the alleged collusive behaviour, the Commission decided to end the cartel proceedings against more than fifty banks in Belgium, Finland, Ireland, the Netherlands and Portugal and against some banks in Germany. [54]

[54] Press release IP/01/1159, 31.7.2001.

67. On 12 December, the Commission fined five German banks a total of EUR 100.8 million for concluding an agreement on a commission of about 3% for the buying and selling of euro zone banknotes during the three-year transitional period beginning on 1 January 1999.

68. The Austrian case will be further examined in the context of a wider-ranging cartel in the Austrian banking sector currently under investigation.

Carbonless paper [55]

[55] Case COMP/36.212; press release IP/01/1892, 20.12.2001.

69. On 20 December, the Commission decided to fine 10 carbonless paper producers a total of EUR 313.69 million.

70. In the course of its investigations, the Commission discovered that the producers had participated, between 1992 and 1995, in a secret, Europe-wide cartel aimed at improving the participants' profitability through collective price increases. This conduct was by its very nature a very serious infringement of Article 81 of the EC Treaty and Article 53 of the EEA Agreement, which justified the size of the fines, notably that of EUR 184.27 million imposed on Arjo Wiggins Appleton, the market leader and instigator of the cartel. Sappi was granted total immunity in respect of its participation in the cartel because, as the first company to cooperate with the Commission, it supplied conclusive evidence of wrongdoing.

Court judgment in British Sugar

71. By decision of 14 October 1998, the Commission fined the sugar producers British Sugar and Tate&Lyle and the sugar merchants Napier Brown and James Budgett for an infringement of Article 81(1) of the EC Treaty consisting in coordination of the parties' pricing policy on the white granulated sugar market in the United Kingdom. [56]

[56] For a comprehensive description of the decision, see 1998 Competition Report, pp. 138-140.

72. Following an appeal by three of the parties, the Court of First Instance in its judgment of 12 July 2001 [57] upheld the Commission's decision in its entirety, except for a reduction in the fine imposed on Tate&Lyle. The Court did not accept any of the various arguments by which the parties sought to show that there had been no infringement and that their behaviour had not been capable of affecting trade between Member States.

[57] Joined Cases T-202/98, T-204/98 and T-207/98 Tate&Lyle, British Sugar and Napier Brown v Commission.

73. With regard to the fines imposed, the Court supported the Commission's findings about the classification of the infringement as serious, its duration, its intentional nature and the assessment of aggravating and attenuating circumstances. On the issue of leniency, it did not question the principles of the Commission's current leniency notice. [58] It did, however, consider that the Commission had erroneously characterised Tate&Lyle's cooperation as not being continuous and complete within the meaning of point B(d) of the notice. It therefore exercised its power of unlimited jurisdiction [59] and reassessed the merits of Tate&Lyle's cooperation and increased the reduction in the fine from 50% to 60%.

[58] OJ C 207, 18.7.1996.

[59] See Article 229 of the EC Treaty and Article 17 of Regulation No 17/62.

74. Meanwhile, British Sugar has appealed to the Court of Justice against the Court of First Instance's judgment. [60]

[60] Case C-359/01 P.

2. Articles 82 and 86

2.1. Article 82 - undertakings in a dominant position

75. Article 82 prohibits undertakings in a dominant position on a given market from abusing this situation to the prejudice of third parties. Such abuse may consist, for instance, in limiting production, charging excessive prices, discriminatory or predatory pricing, tying sales, or other commercial practices not based on the principle of economic efficiency. Such practices have a negative impact on competition; they are engaged in by undertakings whose market power enables them to isolate themselves from competitive pressure and eliminate their competitors without significant damage to themselves or to block market access by new entrants to a significant degree.

76. In 2001, the Commission imposed fines in four Article 82 cases. In the remaining cases which it examined, it was able to accept commitments from the undertakings concerned, or changes to the agreements, which put an end to the abusive practices. The cases examined were not confined to specific sectors and relate inter alia to the postal sector and the car industry.

Deutsche Post AG I [61]

[61] Case COMP/C1/35.141.

77. On 20 March, the Commission issued its first Article 82 decision in the postal sector, finding that the German postal operator, Deutsche Post AG, had abused its dominant position in the market for business parcel services by granting fidelity rebates and engaging in predatory pricing. Deutsche Post was fined EUR 24 million. See Section I.C.2.2.

Deutsche Post AG II [62]

[62] Case COMP/C1/36.915.

78. Another decision in the postal sector, again relating to Deutsche Post AG, was issued on 25 July. See Section I.C.2.2.

Duales System Deutschland (DSD) [63]

[63] Case COMP/34.493; press release IP/01/584, 20.4.2001.

79. On 20 April, the Commission decided that DSD, the company which created the "Green Dot" trademark, had abused its dominant position in the market for organising the collection and recycling of sales packaging in Germany. DSD is the only undertaking to operate a comprehensive packaging take-back and recycling service in Germany. The Commission objected to a provision in the trademark agreement between DSD and its customers obliging the latter to pay fees corresponding to the volume of packaging bearing the Green Dot trademark, rather than to the volume of packaging for which DSD was actually providing its take-back and recycling services. The provision infringed Article 82 as it forced consumers to pay for services not actually rendered and prevented market entry by competitors.

Box 3: Competition policy in the packaging waste sector

In implementing the European Community environmental legislation, Member States set targets for the recovery and recycling of packaging waste in accordance with the polluter pays principle. The national laws and regulations of each country set out the framework for the industry, which then establishes various systems for the collection and recycling of sales packaging. In so-called comprehensive systems, such as those which the Commission has recently analysed, there are contractual relations between the system operator and producers/distributors of packaged goods, the collectors and the guarantee/recycling companies.

Overall, the Commission seeks to act in the consumer's interest. Its aim is to ensure that the new markets created in this sector are open to competition, while maintaining high levels of environmental protection. At the same time, services must be delivered which offer the best possible value. In 2001, the Commission adopted several formal decisions and issued comfort letters (two decisions in the Duales System Deutschland case, [64] one decision in the Eco Emballages case, [65] and comfort letters in the Pro Europe, [66] Returpack-PET, [67] Returpack Aluminium [68] and Returglas [69] cases) laying down the basic competition principles such systems must comply with. These may be summarised as follows:

[64] Case COMP/D3/34.493, decision of 20.4.2001 (OJ L 166, 26.6.2001); decision of 17.9.2001 (OJ L 319, 4.12.2001).

[65] Case COMP/D3/34.950, decision of 15.6.2001 (OJ L 233, 31.8.2001).

[66] Case COMP/D3/38.051.

[67] Cases COMP/D3/35.656 and COMP/D3/37.224.

[68] Case COMP/D3/35.658.

[69] Case COMP/D3/35.669.

(a) A choice for companies: The Commission believes that companies required to recover and recycle waste should have a choice between several systems or other compliance solutions. The idea here is that companies must be free not to contract with the dominant system or to do so only with a partial amount of their packaging. In view of the very strong market position of the systems already in existence, it is of the utmost importance for the emergence of competition that there be unrestricted market access for alternative service providers. A further aim is to ensure that the development of new types of activity in packaging recovery is possible, and thus to remove obstacles to self-management and other individual compliance solutions. The Commission therefore does not accept abusive market behaviour which would consolidate the dominant position of the incumbent operator.

(b) No unjustified exclusivity arrangements: When the Commission assesses restrictions of competition in the packaging waste recovery sector, it considers among other things the scope and duration of contracts. It is critical in general towards all kinds of exclusive arrangement lacking solid and convincing economic justification.

(c) Unrestricted access to the collections infrastructure: One of the characteristics of the market for the collection and sorting of packaging waste at households is that duplication of the existing collection infrastructure is in practice often very difficult. It would be inconvenient for households to use different bins for different collection systems for the same material and this would not be an economically viable solution. The Commission therefore considers the sharing of collection facilities by collectors to be a precondition for the occurrence of competition in practice.

(d) Free marketing of secondary material: Collected and sorted packaging material can be reused as a secondary raw material for various new products. The marketing of secondary material by collectors should also be as free as possible while making sure that materials will find an appropriate reprocessing channel.

The Commission will apply the principles outlined above also to currently pending and future cases. The consumer will benefit directly from the application of these policy principles, since competition in the relevant packaging waste recovery markets is expected to reduce the price that the consumer ultimately pays for the products disposed of in the recovery systems.

Michelin [70]

[70] Case COMP/36.041; press release IP/01/873, 20.6.2001.

80. On 20 June, the Commission decided to fine French tyre maker Michelin EUR 19.76 million for abusing its dominant position in the French market for retread and replacement tyres for heavy vehicles. The Commission's investigation established that, between 1990 and 1998, Michelin operated a complex system of rebates, bonuses and commercial agreements which had the effect of tying dealers to Michelin as their supplier and thus of artificially barring Michelin's competitors from the market. The heavy penalty reflected the seriousness and duration of the infringement and a previous, similar infringement by Michelin.

IMS Health [71]

[71] Case COMP/38.044 IMS Health/NDC, decision of 3.7.2001 (OJ L 59, 28.2.2002).

81. On 3 July, the Commission imposed interim measures on IMS Health (United States), the world leader in the collection of data on pharmaceutical sales and prescriptions, ordering it to license its "1860 brick structure", which segments Germany into 1 860 sales zones or "bricks". The Commission considered that IMS's refusal to grant a licence for the use of the structure, which, in the Commission's view, has become a de facto standard in the German pharmaceutical industry, constituted a prima facie abuse of a dominant position. The refusal prevented potential new entry to the pharmaceutical sales data market and was likely to cause serious and irreparable damage to IMS's current competitors NDC Health (United States) and AzyX Geopharma Services (Belgium). The President of the Court of First Instance, seized by IMS with an application for interim relief, suspended the operation of the Commission decision on 26 October pending a final judgment in proceedings for annulment. [72] NDC Health lodged an appeal against the order of the President of the Court of First Instance on 12 December.

[72] Case T-184/01 R. The President found that the abusive nature of IMS's conduct could not be considered unambiguous under current competition rules, that there was a risk that IMS would suffer serious and irreparable harm if it were forced to grant a licence to its competitors, and that the balance of interests in this case favoured suspension of the decision.

De Post/La Poste (Belgium) [73]

[73] Case COMP/C1/37.859 (OJ L 61, 2.3.2002).

82. On 5 December, the Commission decided that the Belgian postal operator De Post/La Poste had abused its dominant position by making a preferential tariff in the general letter mail service subject to the acceptance of a supplementary contract covering a new business-to-business ("B2B") mail service and imposed a fine of EUR 2.5 million. See Section I.C.2.2.

2.2. Article 86(1) in combination with Article 82 - public undertakings/undertakings with special or exclusive rights and dominance

83. Pursuant to Article 86, the competition rules are also applicable to public undertakings and undertakings which have been granted special or exclusive rights by Member States; Member States are not allowed to enact or maintain in force any measure contrary to the competition rules in respect of any such undertaking.

La Poste (France) [74]

[74] Case COMP/C1/37.133.

84. On 23 October, the Commission adopted a decision on the monitoring of relations between the French company La Poste and firms specialising in the making-up and preparation of mail. The Commission saw a conflict of interests in the relations between La Poste and private mail-preparation firms in that La Poste was both a competitor of those firms and, in view of its postal monopoly, their unavoidable partner. In the Commission's view, this conflict of interests encouraged La Poste to abuse its dominant position. Since French legislation did not provide for sufficiently effective or independent monitoring to neutralise this conflict of interests, the Commission took the view that the French state had contravened Article 86(1), read in conjunction with Article 82, of the Treaty.

C - Sector-based competition developments

1. Energy: liberalisation in the electricity and gas sector

85. The year 2001 brought about important developments for the European energy sector (electricity and gas), which is currently undergoing a liberalisation process. The restructuring of the European energy industry continued. Energy consumers started to benefit from liberalisation on a larger scale and many made use of the new possibilities to switch suppliers. New legislation was proposed to accelerate the liberalisation process. And last but not least, a number of ancillary measures were taken to ensure that liberalisation becomes an economic reality.

86. The liberalisation process requires market participants to adapt to the new economic reality. In the Commission's view, liberalisation obliges energy companies to become more efficient (rationalisation) and to improve services to consumers. At the same time, it creates new market opportunities for energy companies. These can extend the geographic scope of their activities and become multinationals. And they can enter new product markets and become multi-utilities. The year 2001 provided evidence that the restructuring process in the European energy sector is under way and is leading to increased merger activity, with economies of scale and scope being the main drivers. The most prominent examples in 2001 were EdF's acquisition policy in Spain, Italy and the UK, and the acquisition of a majority stake in the German gas company Ruhrgas by the German electricity company EON. To the extent that the Commission is competent to deal with these mergers under its merger regulation, [75] it ensures that they do not lead to the creation or strengthening of a dominant position in the energy markets.

[75] The acquisition of a majority shareholding in Ruhrgas by EON is being dealt with by the German Federal Cartel Office.

87. The ultimate objective of the liberalisation policy - from a competition perspective - is to provide consumers with a wider choice between suppliers, which in turn compete against each other on the basis of price and services. Consumers - particularly in those countries which have opted for a market opening going beyond the minimum requirements of the European electricity and gas directives - are already benefiting from the liberalisation process today. Thus, on a Community-wide level, electricity prices (excluding VAT and energy taxes) to large industrial users have fallen since the initiation of the liberalisation policy, naturally with certain differences between Member States. There also seem to be some signs of convergence of prices between Member States. [76] As regards the gas sector, the situation is somewhat different given that gas is to a large extent imported under long-term contracts and that continental European prices in these contracts are generally linked to oil prices. The rise in oil prices has therefore also led to a price increase for gas in the past year. In the medium and long run it is expected, however, that gas trading hubs will develop also in continental Europe, resulting in more liquidity and short-term trading. This will provide market participants with a new reference price, which could replace the oil price link and thus facilitate price negotiations.

[76] Commission staff working paper: First report on the implementation of the internal electricity and gas market (SEC(2001) 1957, 3.12.2001).

1.1. Commission proposal on the completion of the European electricity and gas markets

88. From a legislative point of view, the most important development in 2001 was the Commission's proposal for a new directive calling for the completion of the European electricity and gas markets. [77] The proposal, which was submitted to the Council and the European Parliament in March 2001 following a public hearing of market participants in autumn 2000, consists of quantitative and qualitative elements.

[77] COM(2001) 125 final, 13.3.2001.

89. As regards the "quantitative elements", the proposal envisages a market opening for all commercial electricity consumers by 2003, for all commercial gas consumers by 2004 and for all other users - including private households - by 2005. When making its proposal the Commission took into account the fact that the implementation of the existing directives by Member States has led to different levels of market opening. In addition, the Commission initiated infringement proceedings in 2001 against France and Germany for failure to transpose or to transpose completely the gas directive, and against Belgium for failure to fully transpose the electricity directive.

90. Unfortunately, consumers in countries that opted for a slow market opening suffer from a competitive disadvantage vis-à-vis consumers in countries that opted for a faster market opening. Similarly, energy companies in the latter countries are subject to competition across their entire customer base, whilst energy companies in the former countries still benefit from a protected customer base leading to unwarranted competitive advantages. These distortions of competition can be reduced or abolished only if all Member States agree on the same level of market opening.

91. As regards the "qualitative elements", the proposal envisages, in the first place, a reinforcement of the unbundling rules. Given that a large number of companies in the electricity and gas sectors are vertically integrated, i.e. active in transmission and supply (in addition to electricity generation or gas storage), there is a risk that the transmission branch of a company might grant favourable treatment to its related supply branch to the detriment of third parties requesting third party access. In order to address this issue, the Commission proposed in its directive that vertically integrated companies be required to carry out a legal unbundling of the respective business units. The proposal also provides for certain accompanying measures in order to ensure that there is no undue flow of information between the unbundled business units. Finally, it was proposed that the reinforced unbundling rules should also be extended to large distribution companies.

92. Secondly, the Commission proposes to make it obligatory for Member States to create independent regulators at national level and to adopt a regulated third party access regime (as opposed to a negotiated third party access regime, which is another option under the existing directives). Regulated access means that access is granted on the basis of tariffs approved by a public authority. The advantage of a regulated access regime is that it generally results in lower transaction costs for third parties and that the tariffs are monitored - on an ex ante basis - by the national regulator.

93. The Commission's proposal for the completion of the energy markets was warmly welcomed by the majority of Member States at the Stockholm European Council in March. However, some Member States, such as France, expressed concern about the final deadline for full market opening. Others, such as Germany, which had opted for a negotiated third party access regime and against a national regulator, expressed concern about the "qualitative elements". None the less, negotiations on the draft directive were initiated in the Council working groups and significant progress was made this year. It is therefore hoped that the negotiations can be concluded in 2002.

94. In June, the Commission reminded Member States of their responsibility to ensure that the uneven level of market opening is remedied as quickly as possible [78] and drew their attention to the fact that companies must not unduly benefit from the different levels of market opening. Finally, it announced that, if Member States are unable or unwilling to adopt its proposal for the completion of the energy markets, it may make use of the instruments provided for in Article 86(3) of the EC Treaty. This article makes it possible to adopt - under certain conditions - Commission decisions and directives addressed to Member States, which do not require Member States' approval.

[78] Press release IP/01/872, 20.6.2001.

95. In parallel with the legislative proposals, work has been carried out by and discussions have taken place with international groups of interested parties (national administrations, regulators, consumers, producers). These groups (Florence Forum for electricity and Madrid Forum for gas) met at the initiative and with the active participation of the Commission. Discussions took place on certain technical and regulatory questions in an attempt to achieve harmonisation which will favour cross-border trade and the creation of a level playing field in Europe with undistorted competitive conditions for both gas and electricity markets.

1.2. Interaction of competition policy with single market rules

96. Competition policy enforcement ensures in particular that state barriers removed by the electricity and gas directive are not replaced by anticompetitive behaviour by market operators having the same effect. Three basic conditions must be met if effective competition is to be brought about and maintained in both the gas and the electricity market: free supply side, free demand side and free network access. Free does not, of course, mean "free of charge" but "free from artificial restrictions".

97. The following, in particular, create an unfavourable environment for the development of competition in the European gas and electricity markets. First of all, the networks are and will remain natural monopolies. The Commission tries to favour effective network access for third parties under non-discriminatory and non-abusive conditions. In the electricity sector, particular attention is being paid to access to congested interconnectors, essential infrastructures in cross-border trade, between different Member States. Access to these interconnectors is at the same time vital in a number of countries with a monopolistic supply structure, where effective competition can thus be introduced only by means of import competition. The Commission intervened in the design of a transmission capacity allocation system for the UK/France electricity interconnector, and is currently investigating and monitoring the situation on other borders, e.g. as regards the electricity interconnectors between Spain and France and the interconnectors into the Netherlands. It also dealt with the construction and use of a new interconnector linking Norway and Germany. [79] Access to the network is also an important issue for the gas sector. In the year under review the Commission dealt with a case involving the joint refusal of continental European gas companies to grant a Norwegian gas producer access to their pipelines. It settled the case with one of the European companies concerned after the latter had offered commitments rendering the third party access regime more effective. [80]

[79] Cf. notice pursuant to Article 19(3) of Council Regulation No 17 in Case COMP/E3/37.921 Viking Cable (OJ C 247, 5.9.2001); the notifying parties have since decided to discontinue the Viking Cable project.

[80] Press release IP/01/1641 - Commission settles Marathon case with Thyssengas.

98. Secondly, vertical demarcation is and will remain a general feature of the energy industry, particularly in the gas market, due to the existence of a well-established vertical supply chain where all companies have their well-defined position and function.

99. Thirdly, producers have traditionally cooperated in commercialisation in these markets, and still do today, leading to less vigorous competition on the supply side. An example of such a practice was found in the Irish (Corrib) [81] and Norwegian gas sector (GFU), [82] or in the French electricity sector (EdF/CNR), but it would appear that similar arrangements also exist in other countries.

[81] Press release IP/01/578 - Enterprise Oil, Statoil and Marathon to market Irish Corrib gas separately.

[82] Press release IP/01/830 - Commission objects to GFU joint gas sales in Norway.

100. Some other features (horizontal demarcation, use restrictions) limiting competition characterise mainly the gas markets.

1.3. Commission's state aid policy in the energy sector

101. In 2001, particular attention was paid to the following aspects:

- Analysis of stranded cost cases (methodology and decisions). See Sections III.A.4.

- Assessment of an increasing number of renewable energy promotion schemes. See Section III.C.1.3.

- Among other things, the Commission analysed schemes based on operating aid grants, such as the prime d'encouragement écologique in Luxembourg, schemes based on green certificate markets, such as the new regional electricity laws in Belgium's regions, and more complex schemes including a combination of various incentive methods, such as the British renewable obligations system.

- Assessment of state aid aimed at securing a level of security of electricity supply. Directive 96/92/EC [83] authorises Member States to give priority to indigenous fossil fuel energy sources, to an extent not exceeding a fixed threshold based on their annual energy consumption, in order that they might meet a certain level of security of supply.

[83] European Parliament and Council Directive 96/92/EC of 19 December 1996 concerning common rules for the internal market in electricity (OJ L 27, 30.1.1997).

1.4. Other developments in the energy sector: motor fuels

102. When the Commission and the national competition authorities met on 29 September 2000 to discuss competition policy in the motor fuel sector, [84] one of the conclusions was that new entrants and independents are essential to maintain and/or improve the competitive pressure on the European motor fuel markets. During 2001, the Directorate-General for Competition carried out a detailed investigation into the competitive conditions of independent, non-integrated operators in the motor fuel sector.

[84] See 2000 Competition Report, points 119-221. See also press releases MEMO/00/55, 20.9.2000, IP/00/1090, 29.9.2000 and IP/00/1391, 30.11.2000.

103. The independent operators identified a number of factors that render their situation sometimes difficult. These factors are linked to the behaviour of vertically integrated firms as well as certain administrative barriers. The independents claimed that certain of their difficulties are due to the behaviour of some vertically integrated companies, such as discriminatory pricing, predatory pricing, refusals to supply, unwillingness to give access to logistic facilities and the long-term exclusive supply contracts between integrated motor fuel companies and service stations. Although this kind of behaviour would be liable to fall under the scope of Articles 81 and 82 of the EC Treaty if the criteria for applying these provisions were met, the investigation did not provide any conclusive evidence of an infringement of EC competition rules. Finally, the independents mentioned a number of administrative barriers that cause them considerable difficulties. The state barriers most commonly complained of include the national laws implementing Directive 98/93/EC on security stocks, certain tax legislation, environmental requirements, measures increasing price transparency and the methods for allocating retail outlets. The investigation showed that the situation of the independent operators varies considerably between the Member States involved in the investigation. The findings of the investigation were presented and discussed at a second meeting between the Commission and national competition authorities on 16 November.

2. Postal services

104. The postal sector is expanding, owing in particular to further market opening and the changes brought about by the e-economy. The Commission took several important decisions concerning this sector to avoid re-monopolisation of liberalised markets by incumbent operators.

2.1. Commission proposal for further market opening

105. On 15 October, the Council approved a common position of the Member States on a text aimed at amending the existing postal directive.

106. The main changes introduced by the text approved by the Council are:

* A further opening of the market, with a staged reduction in the reserved area as of 1 January 2003 and as of 1 January 2006. [85]

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

* The possibility, by means of a Commission proposal to be approved by the European Parliament and the Council, of the completion of the internal postal market in 2009. [86]

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

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

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

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

107. The text approved by the Council does not contain any definition of "special services". [87] The revised text, although resulting in an opening of the postal market to a lesser extent than originally envisaged by the Commission, can be considered to be an important step towards a single postal market. The text still needs to be approved by Parliament.

[87] A definition of special services was included in the Commission's original proposal. Although most of the national delegations agreed on the need to define special services in the new directive, a compromise could not be reached in the Council on a specific definition.

2.2. Cases

Deutsche Post AG I [88]

[88] Case COMP/35.141 (OJ L 125, 5.5.2001).

108. On 20 March, the Commission concluded its investigation into Deutsche Post AG (DPAG) and adopted a decision finding that DPAG had abused its dominant position by granting fidelity rebates and engaging in predatory pricing in the market for business parcel services. DPAG was fined EUR 24 million in respect of the foreclosure resulting from its long-standing scheme of fidelity rebates. No fine was imposed in relation to predatory pricing given that the economic cost concepts used to identify predation were not sufficiently developed at the time. This is the first formal Commission abuse decision in the postal sector.

109. Following a complaint by United Parcel Service in 1994 claiming that DPAG was using revenues from the letter mail monopoly to finance below-cost selling in the open market for business parcel services, the Commission decided that any service provided by the beneficiary of a monopoly in open competition has to cover at least the additional or incremental cost incurred in branching out into the competitive sector. Any cost coverage below this level is to be considered predatory pricing. The investigation revealed that DPAG, for a period of five years, did not cover the costs incremental to providing the mail-order delivery service.

110. DPAG has undertaken to create a separate company ("Newco") to supply business parcel services which will be free to procure the "inputs" necessary for its services either from DPAG (at market prices) or from third parties or to produce these inputs itself. In addition, DPAG has undertaken that all inputs it supplies to Newco will be supplied to Newco's competitors at the same price and under the same conditions.

Deutsche Post AG II [89]

[89] Case COMP/36.915 (OJ L 331, 15.12.2001).

111. On 25 July, the Commission, following up a complaint filed by the UK Post Office, decided that Deutsche Post AG [90] ("DPAG") had abused its dominant position in the German letter market by intercepting, surcharging and delaying incoming international mail which it erroneously classified as circumvented domestic mail (so-called A-B-A remail). The Commission also decided that DPAG's abusive behaviour justified the imposition of a fine, which, owing to the legal uncertainty that prevailed at the time of the infringement, was set at the "symbolic" amount of EUR 1 000.

[90] Press release IP/01/1068, 25.7.2001.

112. The Commission found that DPAG had abused its dominant position in the German market for the delivery of international mail - thereby infringing Article 82 of the EC Treaty - in four ways: (i) discriminating between different customers, (ii) refusing to provide its delivery service, (iii) charging an excessive price for the service offered and (iv) limiting the development of the German market for the delivery of international mail and of the UK market for international mail bound for Germany. During the course of the proceedings, DPAG had given an undertaking to the effect that it would no longer intercept, surcharge or delay international mail of the type to which the case related.

De Post/La Poste (Belgium) [91]

[91] Case COMP/37.859 (OJ L 61, 2.3.2002); press release IP/01/1738, 5.12.2001.

113. On 5 December, the Commission decided that the Belgian postal operator De Post/La Poste had abused its dominant position by making a preferential tariff in the general letter mail service subject to acceptance of a supplementary contract covering a new business-to-business ("B2B") mail service. This new service competes with the "document exchange" B2B service provided in Belgium by Hays plc, a private operator in postal services based in the United Kingdom. As La Poste exploited the financial resources of the monopoly it enjoys in general letter mail in order to leverage its dominant position there into the separate and distinct market for B2B services, the Commission imposed a fine of EUR 2.5 million.

114. In April 2000, Hays had lodged a complaint with the Commission alleging that La Poste was trying to eliminate the Hays document exchange network, which it had been operating in Belgium since 1982. Hays could not compete with the tariff reduction offered by La Poste in the monopoly area and as a result was losing most of its traditional clients in Belgium, namely the insurance companies.

3. Telecommunications

3.1. Guidelines on