EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 16.6.2008 
SEC(2008) 2038 
  
COMMISSION STAFF WORKING DOCUMENT 
Annex to the 
 
REPORT FROM THE COMMISSION 
 
Report on Competition Policy 2007 
  
{COM(2008) 368}  
 
EN 2   EN TABLE OF CONTENTS 
I – Instruments................................................................................................................ ............ 9 
A – Antitrust – Articles 81, 82 and 86 EC ................................................................................. 9 
1. Applicable rules ........................................................................................................... 9  
1.1. Continuing the fight against cartels.............................................................................. 9 1.2. Other agreements and concerted practices................................................................... 9 1.3. Abuse of dominant posit ions (Article 82 EC)............................................................ 10 
1.4. State measures............................................................................................................ 10 
2. Application of Articles 81, 82 and 86 EC.................................................................. 10 2.1. Cartels ................................................................................................................... ..... 10 
2.2. Other agreements and concerted practices................................................................. 12 2.2.1. Antitrust enforcement in the financial services sector ............................................... 12 2.3. Abuse of dominant posit ions (Article 82 EC)............................................................ 13 
2.3.1. Margin squeeze in a regulated sector......................................................................... 13 
2.3.2. Commission Decision providing guidance on l ong-term agreements in the Distrigas 
case........................................................................................................................... .. 13 
2.4. State measures............................................................................................................ 14 
2.4.1. Full application of competition law in the regulated electronic communications 
sector ......................................................................................................................... . 14 
2.4.2. Effective use of the periodic penalty  payments tool under Article 228 EC............... 15 
2.4.3. Infringement proceedings concerning  failure to implement the Financial 
Transparency Directive .............................................................................................. 16 
3. Selected Court cases................................................................................................... 16 3.1. The CFI reiterates settled case law on re fusal to supply in the Microsoft case ......... 16 
3.2. The CFI upholds the Commission's decisi on on predatory pricing by Wanadoo...... 17 
3.3. The CFI finds that Commission letters ca nnot be appealed in the context of the 
Article 7 procedure..................................................................................................... 18 
3.4. CFI judgment in Akzo  defines the limits of le gal professional privilege ................... 19 
3.5. CFI judgment in the DSD case concerning a buses within the German system for the 
collection and recycling of packaging waste ............................................................. 20 
B – Merger control ............................................................................................................. ...... 21 
 
EN 3   EN 1. Applicable rules ......................................................................................................... 21 
1.1. Guidance on jurisdiction in  merger control: Commission Consolidated Notice on 
Jurisdiction ................................................................................................................. 21  
1.2. Guidance on the assessment of mergers:  Commission Guidelines on Non-horizontal 
mergers....................................................................................................................... 2 2 
1.3. Guidance on the assessment of merger s: draft Revised Commission Notice on 
Remedies.................................................................................................................... 23 
2. Application of the me rger control rules ..................................................................... 24 
2.1. Overview.................................................................................................................. .. 24 
2.2. Remedies in non-horizontal cases.............................................................................. 25 3. Selected Court cases................................................................................................... 26 3.1. Jurisdiction in merger cases ....................................................................................... 26 3.1.1. Cementbouw v Commission ...................................................................................... 26 3.2. Substantive assessment of mergers ............................................................................ 27 3.2.1. Sun Chemicals and others v Commission.................................................................. 27 3.3. Damages for alleged losses resulting from a Commission merger decision.............. 28 
3.3.1. Schneider Electric v Commission .............................................................................. 28 
C – State aid control.......................................................................................................... ....... 29 
1. Applicable rules ......................................................................................................... 29 2. Application of the State aid rules............................................................................... 30 2.1. Overview.................................................................................................................. .. 30 
2.2. Applying regional aid rules........................................................................................ 31 2.3. Applying the State aid framework fo r Research, Development and Innovation 
(R&D&I).................................................................................................................... 32 
2.4. Assessing risk capital financing for SMEs................................................................. 33 2.5. Assessing training aid ................................................................................................ 33 2.6. Taxation cases ............................................................................................................ 34 
2.7. Aid for rescuing and restructuring firms in difficulty................................................ 34 2.8. Aid for environmental protection............................................................................... 35 2.9. Enforcing and monitoring State aid decisions ........................................................... 36 2.10. The application of State aid ru les in particular sectors .............................................. 37 
2.10.1. Steel.................................................................................................................. .......... 37 
 
EN 4   EN 2.10.2. Shipbuilding ........................................................................................................... .... 38 
2.10.3. Coal ................................................................................................................... ......... 38 
2.10.4. Agriculture ............................................................................................................ ..... 39 
2.10.5. Fisheries .............................................................................................................. ....... 39 
3. Selected Court cases................................................................................................... 40 3.1. Definition of aid ......................................................................................................... 40 
3.2. Procedural issues........................................................................................................ 4 0 
3.3. Recovery of aid .......................................................................................................... 4 3 
D - The role of competition policy in the wider policy framework ......................................... 44 
II – Sector Developments....................................................................................................... .. 45 
A – Energy ..................................................................................................................... .......... 45 
1. Overview of the sector ............................................................................................... 45 2. Policy developments .................................................................................................. 46 2.1. Antitrust enforcement................................................................................................. 47 2.2. Mergers: concurrent applica tion of internal market and competition rules (Article 21 
of the Merger Regulation).......................................................................................... 49 
2.3. State aid: investigations ope ned in respect of regulated electricity tariffs that may 
favour certain undertakings........................................................................................ 50 
B – Financial services ......................................................................................................... ..... 52 
1. Overview of the sector ............................................................................................... 52 2. Policy developments .................................................................................................. 53 2.1. Sector inquiry into retail banking............................................................................... 53 2.2. The Commission prohibits MasterCard's Mu ltilateral Interchange  Fees for certain 
cross-border card payments in the EEA..................................................................... 54 
2.3. Morgan Stanley/Visa International and Visa Europe................................................. 55 2.4. Groupement des Cartes Bancaires ............................................................................. 57 2.5. Business insurance sector inquiry .............................................................................. 58 2.6. State aid in the financ ial services sector .................................................................... 59 
2.7. Mergers in the financ ial services sector..................................................................... 61 
C – Electronic communications ............................................................................................... 61 
1. Overview of the sector ............................................................................................... 61 
 
EN 5   EN 2. Policy developments .................................................................................................. 62 
2.1. Review of the Regulatory Framework:  reduction of ma rkets subject to ex ante 
regulation.................................................................................................................... 6 2 
2.2. Application of the Regulatory Framew ork and other policy developments .............. 64 
2.3. Developments in the area of State aid........................................................................ 65 2.3.1. Support for broadband services.................................................................................. 65 2.3.2. Aid to Greek incumbent operator............................................................................... 67 2.4. Merger Control........................................................................................................... 6 7 
D – Information technology ..................................................................................................... 68 
1. Overview of the sector ............................................................................................... 68 2. Policy developments .................................................................................................. 69 
E – Media and Sport............................................................................................................ ..... 71 
1. Overview of the sector ............................................................................................... 71 2. Policy developments .................................................................................................. 73 2.1. Digital Broadcasting................................................................................................... 73 2.2. Public service broadcasting........................................................................................ 74 2.3. Rights management and online distribution............................................................... 75 
2.4. Premium sport content ............................................................................................... 76 
2.5. White Paper on Sport ................................................................................................. 77 2.6. Film and other audiovisual works.............................................................................. 77 2.7. Application of merger control.................................................................................... 78 
F – Automotive industry ........................................................................................................ .. 78 
1. Overview of the sector ............................................................................................... 78 2. Policy developments .................................................................................................. 79 2.1. Antitrust enforcement................................................................................................. 80 2.2. Merger Control........................................................................................................... 8 1 
2.3. State aid control......................................................................................................... . 82 
G – Transport .................................................................................................................. ......... 83 
1. Overview of the sector ............................................................................................... 83 2. Policy developments .................................................................................................. 85 
 
EN 6   EN 2.1. Road Transport........................................................................................................... 8 5 
2.2. Rail Transport and Combined Transport.................................................................... 86 2.2.1. Railways liberalisation: further integrati on of European rail transport markets........ 86 
2.2.2. Applying Merger Rules to rail transport – DeutscheBahn /EWS .............................. 87 2.2.3. Applying State aid rules to rail transport ................................................................... 88 2.3. Inland Navigation....................................................................................................... 88  
2.4. Maritime Transport .................................................................................................... 88 2.4.1. Policy developments .................................................................................................. 88 2.4.2. Applying State Aid Rules to Maritime Transport...................................................... 89 2.5. Aviation.................................................................................................................. .... 90 
2.5.1. Enforcement of Article 81 – SkyTeam airline alliance.............................................. 90 
2.5.2. Applying merger rules to aviation.............................................................................. 91 2.5.3. International Aviation Policy – Appli cation of Regulation (EC) No 847/2004......... 92 
2.5.4. International aviation policy – applic ation of the Horizontal Mandate ..................... 92 
2.5.5. Applying State Aid Rules to Air Transport................................................................ 93 2.5.6. International aviation policy – EU-US open aviation agreement .............................. 94 
H – Postal services ............................................................................................................ ....... 94 
1. Overview of the sector ............................................................................................... 94 
2. Policy developments .................................................................................................. 95 2.1. Objectives of the Commission ................................................................................... 95 2.2. Initiatives of the Commission .................................................................................... 96 
III – The European Competition Network and cooperation with National Courts .................. 98 
A – General overview ........................................................................................................... ... 98 
1. COOPERATION ON POLICY ISSUES................................................................... 99 1.1. Further convergence of national laws and instruments in the context of enforcement 
of Regulation 1/2003 by NCAs................................................................................ 100 
1.2. Cooperation in individual cases ............................................................................... 100 1.2.1. Case allocation ......................................................................................................... 101 
1.2.2. Coherent application of the rules ............................................................................. 101 2. Application of EU Compet ition rules by National Courts  In The EU: Report on the 
implementation of Article 15 of Regulation 1/2003 ................................................ 102 
 
EN 7   EN 2.1. Assistance in the form of information or in the form of an opinion ........................ 102 
2.1.1. The opinions requested by Swedish courts .............................................................. 102 2.1.2. The opinion requested by a Spanish court ............................................................... 103 2.2. Judgments of national courts.................................................................................... 104 2.3. Amicus curiae intervention under Ar ticle 15(3) of Regulation 1/2003 ................... 104 
2.4. Financing the training of national judges in EU competition law ........................... 105 
IV – International activities.................................................................................................. .. 105 
A – Enlargement, Western Balkans and Neighbourhood policy ........................................... 105 B – Bilateral co-operation ..................................................................................................... . 106 
1. Agreements with the USA, Canada and Japan......................................................... 106 2. Cooperation with other countries and regions ......................................................... 107 
C – Multilateral co-operation ................................................................................................. 1 08 
1. International Competition Network ......................................................................... 108 1.1. Working Groups....................................................................................................... 108 1.2. OECD...................................................................................................................... . 109 
V – Outlook for 2008 ........................................................................................................... .. 110 
A – Antitrust.................................................................................................................. ......... 110 
B – Mergers.................................................................................................................... ........ 110 
C – State aid .................................................................................................................. ......... 110 
D – International activities ................................................................................................... .. 110 
E – Sector Developments ....................................................................................................... 1 11 
1. Electronic communications...................................................................................... 111 2. Information Technology........................................................................................... 112 3. MEDIA..................................................................................................................... 11 2 
4. Health-related markets ............................................................................................. 113 5. Financial services sector .......................................................................................... 114 6. Postal services .......................................................................................................... 115  
VI – Interinstitutional cooperation ......................................................................................... 116  
1. European Parliament ................................................................................................ 116 
 
EN 8   EN 2. Council ..................................................................................................................... 117 
3. European Economic and Social Committee and Committee of the Regions........... 117 
 
EN 9   EN I – Instruments 
A – ANTITRUST – ARTICLES 81, 82 AND 86 EC 
1. A PPLICABLE RULES  
1.1. Continuing the fight against cartels 
1. A key aspect in the detection of cartels  is the Commission leniency policy, which 
offers incentives to cartelists to report th eir illegal activities. December 2006 saw the 
introduction of a revised leni ency notice (the 2006 Notice)1. The 2006 Notice is the 
Commission's third leniency notice follo wing earlier versions in 1996 and 2002, and 
applications under the revised notice have been forthcoming in 2007. The Commission received 20 applications for immunity
2 and 11 applications for a 
reduction of fines under the 2006 Notice from the date of its introduction to the end of 2007. 
2. In particular, the 2006 Notice subjects not  only immunity applicants but also 
applicants for a reduction of fines to a number of conditions in order to qualify for lenient treatment. Accordingl y, all applicants must coope rate fully and continuously 
with the Commission, must immediately ceas e participation in the infringement and 
must not have tampered with evidence or disclosed the fact or content of their 
application. One remaining distincti on between conditions for immunity and 
reduction of fines is that applicants th at have coerced other undertakings to 
participate in the cartel will not be e ligible for immunity, although they may qualify 
for reduction. The Commission carefully assesses compliance with these cumulative conditions. 
1.2. Other agreements and concerted practices 
3. The Commission's 2005 Green Paper on damages actions for breach of the EC anti-
trust rules  received strong support in a European Parliament resolution calling on the 
Commission to prepare a White Paper with  detailed proposals to ensure more 
effective antitrust damages claims
3. In preparing this White  Paper, the Commission 
consulted widely with representatives of  Member State governments, judges from 
national courts, representatives of indus try, consumer associations, the legal 
community and many other stakeholders. In parallel, the Commission services 
drafted an extensive impact assessment report analysing th e problems in this area and 
possible solutions. In order to assist the Commission services in this task, a 
                                                 
1 Commission notice on immunity from fines and reduction of fines in cartel cases, OJ C 298, 8.12.2006, 
p. 17. 
2 Where several applications for imm unity have been received for the sa me alleged infringement, the first 
application is counted as an immunity application and the subsequent ones as applications for a 
reduction of fines unless the first application is rejected. 
3 European Parliament resolution of 25 April 2007 on the Green Paper on Damages actions for breach of 
the EC antitrust rules (2006/2207 (INI)), available at: 
http://www.europarl.europa.eu/oeil/file.jsp?id=5378362  
 
EN 10   EN consortium of independent  experts drafted a very comprehensive study on the 
welfare impact and potential scenarios i nvolved in more effective claims for 
damages. Both the impact assessment report  and the study are due to be published at 
the same time as the White Paper. 
4. Following a consultation, on 13 September th e Commission adopted draft Guidelines 
on the application of Article 81 of the EC Treaty to maritime transport services, with a view to final adoption in 2008
4. The Guidelines set out the principles that the 
Commission will follow when defining markets and assessing cooperation 
agreements involving maritime cabotage, liner and/or tramp vessel services, following the repeal of Regulation 4056/86 containing the liner conference block 
exemption, and the extension of the scope  of Regulation 1/2003 to include cabotage 
and tramp vessel services. 
1.3. Abuse of dominant positions (Article 82 EC)  
5. During 2007, the Commission services continue d their reflections on the feedback it 
received in response to the DG COMP Disc ussion Paper on the application of Article 
82 of the Treaty to exclusionary abuses, and are in the process of analysing the 
comments received and of the Commission's ongoing enforcement experience in this 
area. In this context, the judgment of the Court of First In stance in September 
upholding the Commission's substantive finding that Microsoft abused its dominant position, thereby suppo rting the Commission's analytical  approach in the areas of 
tying and refusal to supply, is a welcome development. 
1.4. State measures 
6. As part of the Single Market Revi ew concluded by the Commission on 20 
November, particular attention was given to the issue of services of general 
economic interest (SGIs), including social se rvices of general in terest (SSGI) in the 
form of a Communication
5 which notes that, in the fiel d of State aid, the decision and 
the framework on State aid in the form of  public service compensation adopted in 
2005 (often referred to as the 'Altmark pack age'), has already made a significant 
contribution to simplifying the applicable  rules. An accompanying Staff Working 
Paper provides technical guidance in the form of answers to frequently asked 
questions, including on the basis of legi slation, case law and Commission decisions 
related to SGEIs and in particular SSGI6. 
2. A PPLICATION OF ARTICLES 81, 82 AND 86 EC 
2.1. Cartels 
7. The Commission continued to attach high prio rity to the detecti on, investigation and 
sanctioning of cartels in 2007. The focus of the Commission's activities was on 
significant hard core cartels, in particular those with a European or worldwide scope. 
                                                 
4 OJ C 215, 14.9.2007, p. 3; see also Press release IP/07/1325, 13.9.2007. 
5 See COM(2007) 725 final. 
6 SEC(2007) 1516. 
 
EN 11   EN The Commission issued eight final decisions7 in which it fined 418 undertakings a 
total of EUR 3 334 million (compared with 2006 when there were seven final decisions, 41
9 undertakings fined and a total of EUR 1 846 million). The 
Commission imposed the highest fine per car tel case to date of EUR 992 million in 
the Elevators and Escalators  case and also, in the same cas e, the highest fine per 
undertaking for a cartel violation with the imposition of a penalty of EUR 477 million on the ThyssenKrupp group. 
8. The Commission has been able to detect a number of cartels on its own initiative. 
The recent cases of Elevators and Escalators , Fasteners , Professional Videotape  and 
Flat Glass  demonstrate that, although the Co mmission's leniency policy is an 
effective tool in detecting cartels, the Commission is not dependant on evidence 
provided by leniency applicants to uncover cartel behaviour. The Commission 
continues to place considerable weight on such ex officio  investigations, which may 
result from market monitoring, sector e nquiries, complaints and via the national 
competition authorities in the European Competition Network. 
9. On-site inspections covering a wide vari ety of sectors included calcium carbide
10, 
power transformers11, marine hoses12, hardware for windows and doors13, 
international freight forwarding14, cathode ray tubes15 and exotic fruit16. A number of 
these inspections were c oordinated with other comp etition authorities around the 
world. In addition, in the Marine Hoses  case, which itself involved cooperation 
between the EU, US, UK and Japanese aut horities, the Commission exercised for the 
first time its power to conduct a search of a private home. 
10. The Commission has also sought to impose appropriate sanctions to punish those 
participating in cartels and to ensure effec tive deterrence from entering into cartel 
behaviour. The new Guidelines on Fines17, introduced in 2006, were applied for the 
first time in Professional Videotape  and employed subsequently in Flat Glass  and 
Chloroprene Rubber . Under the new guidelines, fine s better reflect the overall 
economic significance of the infringement as  well as the respective shares of the 
companies involved. 
                                                 
7 Case COMP/38.899 Gas Insulated Switchgear  Commission decision, 24.1.2007; Case COMP/38.823 
Elevators and Escalators  Commission decision, 21.2.2007; Case COMP/37.766 Netherlands Beer  
Commission decision, 18.4.2007; Case COMP/39.168 Hard Haberdashery:Fasteners Commission 
decision,  19.9.2007; Case COMP/38.710 Bitumen Spain  Commission decision 3.10.2007; Case 
COMP/38.432 Professional Videotapes  Commission decision, 20.11.2007; Case COMP/39.165 Flat 
Glass  Commission decision, 28.11.2007; Case COMP/38.629 Chloroprene Rubber  Commission 
decision, 5.12.2007. 
8 This figure does not include th e companies that received immunity from fines for cooperation under the 
Leniency Notice. 
9 This figure includes two undertakings where decisions have been readopted. 
10 MEMO/07/22, 18.1.2007. 
11 MEMO/07/53, 13.2.2007. 
12 MEMO/07/163, 3.5.2007. 
13 MEMO/07/276, 4.7.2007. 
14 MEMO/07/406, 11.10.2007. 
15 MEMO/07/453, 8.11.2007. 
16 MEMO/07/534, 30.11.2007. 
17 Guidelines on the method of setting fines impos ed pursuant to Article 23(2)(a) of Regulation 
No 1/2003. OJ C 210, 1.9.2006, pp. 2-5. 
 
EN 12   EN 11. Three points in particular emerge from the Commission's fining decisions. First, 
there continued to be a si gnificant increase in the am ount of the fine imposed on 
repeat offenders. In Elevators and Escalators  the fines for ThyssenKrupp companies 
were increased by 50%, in Gas Insulated Switchgear  ABB's fine was increased by 
50% and in Chloroprene Rubber  the fines of Bayer and ENI were increased by 50% 
and 60% respectively. The se riousness with which the Commission views repeat 
offences is reflected in the new Guidelines  on Fines, which provi de for increases of 
up to 100% for such instances of recidivism. 
12. Second, obstructing a Commissi on investigation during on-s ite inspections incurs 
severe penalties. Sony's fine in the Professional Videotape  case was increased by 
30% for a refusal by one of  its employees to answer  questions when under an 
obligation to respond, while another Sony employee was found to have shredded documents during the inspection. 
13. Third, leaders of the cartel are likely to ha ve the level of their fines increased. In 
Bitumen Spain,  the fine for Repsol and Proas was increased by 30% for their 
leadership role. In Gas Insulated Switchgear,  fines were increased by 50% for 
Siemens, Alstom and Areva for their leader ship role as secretary of the cartel. 
2.2. Other agreements and concerted practices 
2.2.1. Antitrust enforcement in the financial services sector 14. The decisions adopted by the Commissi on during the second half of 2007 in 
Groupement des Cartes Bancaires (see II.B.2.4.) , Morgan Stanley/Visa (see 
II.B.2.3.)  and MasterCard  (see II.B.2.2.) provide useful guidance with respect to the 
competition principles to be applied to the payments sector. Such guidance is important for the integration of the payments , especially so in the context of Single 
Euro Payments Area (SEPA). SEPA is an initiative set up by the European banking industry, represented by the European Paymen ts Council, to crea te an integrated 
market for payment services which is subject to effective competition and where there is no distinction betw een cross-border and national payments within Europe. 
15. The decision in  Groupement des Cartes Bancaires  illustrates that behaviour by a 
payment card scheme that forecloses national markets by keeping competitors at bay will not be tolerated. The decision in Morgan Stanley/Visa  makes clear that 
unjustified exclusion from the market of certain members without valid reasons 
which leads to foreclosure is prohibited. It signals that membership rules and competition clauses are likely to be closely scrutinised by competition authorities to ensure the non-discriminatory and propor tional application of such schemes. 
16. Finally, in MasterCard,  the Commission analysed MasterCard's cross border intra-
EEA multilateral interchange fees (MIFs) for MasterCard branded consumer credit and charge cards and for MasterCard or  Maestro branded debit cards. While the 
decision does not declare MIFs  illegal as such, it does make clear that, in order to 
comply with Article 81 EC, such fees mu st contribute to t echnical and economic 
progress and benefit consumers. 
 
EN 13   EN 2.3. Abuse of dominant positions (Article 82 EC) 
2.3.1. Margin squeeze in a regulated sector 17. On 4 July, the Commission adopted a decision against the Spanish incumbent 
telecoms operator Telefónica  for a very serious abuse of its dominant position in the 
Spanish broadband market. The fine imposed on Telefónica amounted to EUR 151 875 000. The Commission found that Tele fónica had imposed a margin squeeze 
between the wholesale prices it charged to competitors and the retail prices it charged to its own customers from 2001 to 2006. Tele fónica's competitors were forced to 
make losses if they wanted to matc h Telefónica's retail prices. The conduct 
contributed to consumers paying among the high est retail prices in the fifteen old EU 
Member States (EU-15), and broadband penetration remain ed well below the average 
EU-15 rate. The abuse ended with the Sp anish regulator's decision of 21 December 
2006 to lower Telefónica's wholesale pric es (a reduction of between 22% and 61% 
depending on the download speed of the offer). 
18. This decision shows that the Commission is  ready to act forcefully against price 
abuses, even in a scenario where the industry under examin ation is subject to sector-
specific regulation. In the pr esent case, regulation did no t preclude Telefónica from 
taking the initiative to avoid the margin squeeze by decreasing its wholesale prices or 
increasing its retail prices. 
19. Both Telefónica and the Spanish Government  have appealed agai nst the Commission 
decision before the Court of First Instance (CFI)
18. The decision also gave rise to 
private enforcement for harm caused by violations against competition law, which the Commission in principle encourages
19. For example, on 6 November the 
consumers association, Ausbanc Consum o, filed a claim against Telefónica for 
damages for harm caused to all consumers and the Spanish market. According to Ausbanc, the harm caused amounted to EUR 458 million. 
2.3.2. Commission Decision providing guidance on long-term agreements in the Distrigas 
case
20 
20. On 11 October the Commission adopted an  Article 9 Decision concerning the long-
term gas supply contracts concluded by Dist rigas in Belgium. Under this decision, 
the Commission makes legally binding until 2011 a set of commit ments offered by 
Distrigas to address concerns raised by the Commission in the course of an 
investigation under Article 82. 
21. The Commission’s concerns were  that Distrigas could be dominant on the market for 
the supply of gas to large customers in Belgium and that its long-term gas supply 
contracts in this market could make it di fficult for other gas suppliers to build up a 
portfolio of customers. The concerns focu sed on two related factors: the duration of 
the contracts and the volumes of gas tied to Distrigas. 
                                                 
18 Case T-336/07, OJ C 269, 10.11.2007, p. 55. 
19 White Paper on Damages Actions for Breach of the EC antitrust rules, COM(2008) 165 final, 2.4.2008. 
20 Case COMP/37.966 Distrigas . 
 
EN 14   EN 22. To address these concerns, Distrigas proposed to conclude no new gas supply 
contracts with gas resellers for a term of more than two years. The maximum duration of new contracts w ith other large gas customer s (industrial consumers and 
electricity generators) would be five years,  except for new gas-fi red power plants, for 
which a longer duration may be justified on efficien cy grounds. Furthermore, 
Distrigas would ensure that an average of 70% of the gas demand that it has 
contracted to supply to these customers w ould return to the ma rket every year (in 
principle because the contract expires). 
23. While Distrigas enjoys some flexibility in meeting this average over the lifetime of 
the commitments, at least 65% of its total contracted volumes must return to the 
market each year (and on average, over the whole period of commitments, at least 70%). The commitments also ensure that , even if its sale s volumes decrease, 
Distrigas would be able to tie a certain fixed volume of gas for more than a year 
ahead. This maximum fixed volume represents  about 20% of the to tal sales to these 
customers. 
24. The commitments also ensure that the ri ghts of Distrigas' existing customers under 
long-term contracts would not be affected. For such custom ers, Distrigas will grant 
unilateral rights of terminat ion with prior notice without  indemnity. These contracts 
will be treated as short-term contracts for the purpose of the commitments. 
25. The effect of these commitments is to ensu re that Distrigas does not tie an excessive 
proportion of customers for more than one year ahead, while allowing Distrigas as 
much flexibility as possible in managing its portfolio of contracts. 
2.4. State measures 
2.4.1. Full application of competition law in the regulated electronic communications 
sector 
26. In June the Commission closed an infr ingement procedure against the Czech 
Republic which had limited the power of the Czech Competition Authority (Czech NCA) to apply Articles 81 and 82 EC to anticompetitive behaviour in the electronic communications sector
21. Following a reasoned opinion in March22 the contested 
provision of the Czech Competition Act was repealed and EU competition rules can 
now be fully applied by the Czech NCA. 
27. The contested provision ruled out the app licability of the Czech Competition Act 
(which inter alia contai ns the conditions under which the Czech NCA applies 
Articles 81 and 82) to anticompetitive beha viour which was at the same time in 
breach of obligations under the EU regulatory framework for electronic communications (Regulatory Framework)
23. This was contrary to EU law, which 
does not allow any such limitation of the applicability of EU competition rules. On 
                                                 
21 See Press Release IP/07/956, 28.6.2007. 
22 See Press Release IP/07/400, 23.3.2007. The reasoned opinion was the second step of the infringement 
procedure under Article 226 EC and followed the sending of a letter of formal notice in July 2006. 
23 See Directives 2002/21/EC (Framework Directive) , 2002/20/EC (Authorisation Directive), 2002/19/EC 
(Access Directive), 2002/22/EC (U niversal Service Directive). 
 
EN 15   EN the contrary, it  provides that both competition law and sector-specific regulation can 
apply to the same set of facts. 
28. More specifically, neither the EC Treat y nor secondary Community legislation, 
notably Regulation 1/2003, allows any exemp tions from the applic ability of Articles 
81 and 82 to the electronic communicati ons sector. The Regulatory Framework 
cannot – and does not – exclud e the application of Articles 81 and 82 either. The 
decision against the Spanish incumbent telecoms operator Telefónica  for a very 
serious abuse of its domi nant position in the Spanis h broadband market referred 
above (paragraph 17) is a clear example of  this. In fact, the Regulatory Framework 
explicitly acknowledges the primary role  of competition law remedies in the 
electronic communications sector. 
29. Therefore, the Commission considered that the Czech Republic had not met its 
obligations to take all appropriate measures to fulfil its obligations arising from the EC Treaty (Article 10), in combinati on with its obligations to designate a 
competition authority or authorities with the power to apply Articles 81 and 82 in 
individual cases and so ensure effective co mpliance with these articles (Articles 35 
and 5 of Regulation 1/2003). 
2.4.2. Effective use of the periodic penal ty payments tool under Article 228 EC 
30. In enforcing Directive 2002/77/EC on comp etition in the mark ets for electronic 
communications networks and services
24 (based on Article 86 EC), the 
Commission’s right under Article 228 to as k the Court of Justice (ECJ) to impose 
periodic penalty payments proved to be an  effective tool. In response to a reasoned 
opinion based on Article 228 issued to Luxem bourg for failure to comply with a ECJ 
ruling25, Luxembourg announced the adoption of two new regulations establishing 
transparent procedures for operators wish ing to roll out thei r networks alongside 
State and municipal roads, th ereby ending the infringement. 
31. In most infringement procedures the Me mber States complied before Article 228 
procedure was started. For example,  in July the Commission withdrew26 its pending 
appeal at the ECJ under Arti cle 226 against Hungary afte r the latter abolished a 
provision of its Media Act that prevented cable operators from providing cable TV 
services to more than one third of the Hungarian population. This restriction, which 
infringed Directive 2002/77/EC on comp etition in the markets for electronic 
communications networks and services, prevented investme nts for the provision of 
broadband services, including ‘triple play ’ services (voice telephony, broadband 
internet access and cable TV distribution)  by the cable TV operators in competition 
with the incumbent operator which offered its services throughout the whole of the 
country. 
                                                 
24 Directive 2002/77/EC of 16.9.2002 (Liberalisation Consolidation), OJ L 249, 17.9.2002, p. 21. 
25 See Press Release IP/07/10, 28/6/2007. 
26 See Press Release IP/07/1137, 19.6.2007. 
 
EN 16   EN 2.4.3. Infringement proceedings concerni ng failure to impl ement the Financial 
Transparency Directive  
32. In 2007 the infringement proceedings agai nst Austria, Spain, Slovenia and Poland 
were closed following the adoption of the required measures to transpose Commission Directive 80/723/EEC (the Transparency Directive)
27, as amended, into 
national law. New infringement proceedings  were initiated against seven Member 
States for non-communication or non-conf ormity of the national transposition 
measures (Belgium, Denmark, Italy, L uxembourg, the United Kingdom, Slovakia 
and Latvia). The Transparency Direc tive imposes a general obligation of 
transparency in financial relations between public aut horities and public 
undertakings. This is crucial in terms of enabling the Commission to check that 
public money is used to pay for the provision of public services. 
3. S ELECTED COURT CASES  
3.1. The CFI reiterates settled case law on refusal to supply in the Microsoft case 
33. On 17 September the CFI delivered its judgment28 on Microsoft's application for 
annulment of the Commission's 2004 Deci sion, which found that Microsoft had 
abusively leveraged its PC operating system dominance onto the market in work 
group server operating systems by wit hholding essential interface information 
necessary to enable competing work gr oup server operating systems to communicate 
with the Windows PC operating system. The 2004 Decision also established that 
Microsoft abusively leveraged its dominant position in the PC operating system market onto the streaming media player  market by distributing its Windows PC 
operating system only together with Windows Media Player. 
34. The CFI upheld all substantive findings of the Commission, i.e. the findings of abuse 
with regard to the refusal to disclose in teroperability information and the tying of 
Windows Media Player to Windows, as well as  the findings with regard to the fine. 
The Court annulled only the provisions relating to the powers granted to the 
Monitoring Trustee and the orde r that Microsoft bear the associated costs. Microsoft 
did not appeal against the CFI judgment. 
35. As regards refusal to supply,  the CFI reiterated well-established case law
29 stating 
that the exercise of an exclusive right by the owner of the intellectual property right 
may give rise to an abuse only in "exceptional circumstances". The Court noted that "the following circumstances, in particular, must be considered to be exceptional:  
– in the first place, the refusal relates to a product or service indispensable to the 
exercise of a particular activity on a neighbouring market; 
                                                
 
27 Commission Directive 2006/111/EC of 16.11.2006 codified and repl aced the original Transparency 
Directive and its amendments. 
28 Case T-201/04 Microsoft v Commission . 
29 Case 238/87 Volvo  [1988] ECR 6211, Joined Cases C 241/91 P and C 242/91 P RTE and ITP v 
Commission  [1995] ECR I 743 ("Magill"), Case C 418/01 IMS Health  [2004] ECR I 5039. 
 
EN 17   EN – in the second place, the refusal is of such a kind as to exclude any effective 
competition on that neighbouring  market; 
– in the third place, the refusal prevents  the appearance of a new product for which 
there is potential consumer demand." 30 
36. As regards tying,  the CFI fully confirmed the 2004 decision's findings that (i) 
Microsoft is dominant in th e tying product market (PC ope rating systems); (ii) the 
tying and tied products (Windows PC ope rating system and the Windows Media 
Player) are two separate pr oducts; (iii) Microsoft afford ed consumers no choice to 
obtain the tying product without the tie d product; (iv) the tying foreclosed 
competition and (v) there was no objec tive justification for the tying. 
3.2. The CFI upholds the Commission's deci sion on predatory pricing by Wanadoo 
37. On 30 January, in the France Télécom (formerly Wanadoo) v Commission31 case, the 
CFI upheld the Commission’s decision a nd confirmed that France Télécom had 
abused its dominant position on the Fren ch high-speed internet access market32. 
38. On 16 July 2003 the Commission imposed a fine of EUR 10.35 million on Wanadoo 
for charging predatory prices for its  Pack eXtense and Wanadoo ADSL services33. 
39. The CFI confirmed the Commission's market de finition of high-speed  internet access 
for residential customers, separate from the low-speed internet access market. The 
CFI held that the rapid growth of the sect or does not preclude the application of 
competition rules. 
40. On predatory pricing the CFI restated previous case law34, ruling that prices below 
average variable costs give grounds fo r assuming that a pricing practice is 
eliminatory and that, if the prices are be low average total costs but above average 
variable costs, those prices mu st be regarded as abusive if they are determined as part 
of a plan for eliminating a competitor. 
41. The CFI also ruled that the Commission enjoys broad discre tion as regards the 
method of calculation as to the rate of recovery of costs and that it is for the applicant 
to prove the unlawfulness of any such methodology. Concluding that the 
Commission applied the correct methodology in  establishing that there was predatory 
pricing, the CFI found that the Commission provided solid and consistent evidence 
as to the existence of a plan of pred ation for the entire infringement period. 
                                                 
30 Paragraph 332 of the judgment. 
31 Case T-340/03 France Télécom SA (formerly Wanadoo SA) v Commission  [2007] (not yet reported). 
32 France Télécom decided to appeal against the CFI judgment. The case is pending before the ECJ – see 
case C-202/07 P France Télécom SA v Commission . 
33 Case COMP/38.233 Commission decision, 16.7.2003. 
34 Case C-62/86 AKZO v Commission  [1991] ECR I-3359. 
 
EN 18   EN 3.3. The CFI finds that Commission letters ca nnot be appealed in the context of the 
Article 7 procedure 
42. On 12 December the CFI a dopted an order in the Vodafone Spain v Commission  
case35 declaring Vodafone's action for annulme nt inadmissible and clarifying that a 
Commission letter of comments issued  within the Community consultation 
mechanism under Article 7 of the Framework Directive does not constitute an act 
producing binding legal effects and is ther efore not amenable to judicial review36. 
43. National regulatory authori ties (NRAs) are required under the EU Regulatory 
framework for electronic communications (R egulatory Framework) to define and 
analyse relevant markets susceptible to sector-specific ex ante  regulation37 and to 
make the respective draft measures accessi ble to the Commission and the NRAs in 
other Member States for comments. The NRA concerned shall then take the utmost account of such comments before adopting the final decision
38. 
44. In the case at issue, the Spanish NRA notified a draft measure39 proposing, first, to 
find that Vodafone and two other compan ies jointly enjoyed significant market 
power (SMP)40 in the wholesale market for the supply of access an d call origination 
on public mobile telecommunica tions networks in Spain and, second, to impose an 
obligation on Vodafone and the other two companies to respond to reasonable 
requests for access to their networks and to offer reasonable terms for the supply of access services. 
45. The Commission sent the Spanish NRA a le tter with comments regarding joint SMP 
(equivalent to collective dominance) and th e relevant market. While the comments 
expressed the Commission's satisfaction that there was sufficient evidence to 
conclude that joint SMP existed, it was also noted that any concrete evidence of developments in the retail market not li nked to the regulatory measures in the 
relevant market that would cast doubt on th e sustainability of the joint SMP would 
require a review of the relevant market. 
46. The Spanish NRA then adopted the final m easure, against which Vodafone appealed 
before the Spanish Supreme Court. Vodaf one brought an action for annulment of the 
Commission's letter of comments before the CFI. In dismissing Vodafone's action as 
inadmissible, the CFI significantly clarified th e nature of both a letter of comments 
under Article 7 of the Framework Directive (FD) and of the Co mmunity consultation 
mechanism. 
47. The CFI concluded in casu that neither the content of th e contested act nor the legal 
context in which it was adopted shows that  it constitutes an act producing binding 
legal effects. According to the CFI, the wording of Article 7(5) FD (" shall take the 
                                                
 
35 Order of the CFI adopted on 12.12.2007 in Case T-109/06 Vodafone España SA and Vodafone Group 
plc v Commission . 
36 Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common 
regulatory framework for electroni c communications networks and serv ices (Framework Directive) (OJ 
L 108, 24.4.2002, p. 33). The Framework Directive is the cornerstone of the Regulatory Framework. 
37 Articles 15 and 16 FD. 
38 Article 7(3) and 7(5) FD respectively. 
39 Draft measure ES/2005/0330. 
40 Significant market power is equivalent to dominance under EU competition law. 
 
EN 19   EN utmost account of comments ") underlines the non-binding nature of a Commission 
letter under Article 7(3) FD. The context of the consultation mechanism also shows 
that the letter of comments constitutes a preparatory Community act that cannot be 
the subject of an independent action for annulment. 
48. Finally, the CFI found that the contested act was in any even t not of direct concern to 
Vodafone, arguing that although the NRA con cerned must "take the utmost account" 
of Commission comments, it has some leeway  to determine the content of the final 
measure, so that a Community act based on Article 7(3) FD cannot be regarded as 
directly affecting the legal situat ion of the undertakings concerned. 
3.4. CFI judgment in Akzo  defines the limits of le gal professional privilege 
49. On 17 September, the Court of First Inst ance delivered its judgement in an action 
lodged by Akzo dealing mainly with the issue of legal professional privilege41. 
Although the Court found that the Commi ssion had committed some procedural 
errors, it rejected the main pleas, dismissing the broad interpretati on of the concept of 
legal professional privilege advanced by Akzo. 
50. On the first main substantive point the Court ruled that the material scope of legal 
professional privilege extends  only to documents which were drawn up exclusively 
for the purpose of seeking advice from an exte rnal lawyer in exercise of the rights of 
defence. Second, the Court clarified that the personal scope of legal professional 
privilege excludes in-house lawyers, even where they are members of the bar in their Member States. The rationale for this narrow interpretation is that in-house lawyers are functionally, structurally and hierarchic ally integrated in the companies that 
employ them and are, therefore, not independent. 
51. In terms of procedure, the Court rules th at undertakings do not  have to disclose 
documents that are protected by legal prof essional privilege until (i) the Commission 
has decided that the document must be disc losed and (ii) the time-limit for appealing 
this decision before the Court has laps ed. Undertakings mu st immediately upon 
request of the Commission inspectors substa ntiate any claim that a document falls 
under legal professional privilege. In orde r to determine if such a claim is well-
founded, the Commission officials are entitled to take a cursory look at the document 
unless the undertaking provide s appropriate reas ons why even such a cursory look 
would give the Commission access to inform ation that is covered by privilege. 
52. Where an undertaking abuses claims of le gal professional pr ivilege, the “Court 
would point out that the Commission ha s the means, where appropriate, to 
discourage and penalise such conduct. In fact, such c onduct may be penalised under 
Article 23(1) of Regulation No 1/2003 (…) or be taken into acc ount as aggravating 
circumstances when calculating any fine imposed in the context of a decision imposing a penalty under the competition rules”
42. 
                                                 
41 Joined Cases T-125/03 and T-253/03 Akzo Nobel Chemicals and Akzo Chemicals v Commission . 
42 Paragraph 89 of the judgment. 
 
EN 20   EN 3.5. CFI judgment in the DSD case concernin g abuses within the German system for 
the collection and recycling of packaging waste 
53. On 24 May the CFI43 upheld the Commission decision of April 200144 concerning 
the payment provision in an agreement betw een the German system for the collection 
and recycling of packaging waste called Du ales System Deutschland (DSD) and its 
clients. This originally indus try-led system serves to meet  recycling requirements in 
the form of quotas laid down in the Germ an packaging ordinance implementing EC 
Directive 94/62 on packaging and packaging waste. Manufacturers and retailers, who 
have the legal obligation to take back sale s packaging, conclude a contract with DSD 
which guarantees to install a collection and recycling service in such a way that the companies are exempted from their legal obligations. The contract also regulates the use of the Green Dot trademark on the packaging and determines the fee to be paid by DSD's clients. 
54. The Commission found that DSD had abus ed its dominant position by obliging its 
clients to pay for all packaging brought on to  the German market that bears the Green 
Dot trademark, whether DSD actually prov ides its exemption service or not. 
Whenever the client intends to use the se rvices of competitors for parts of its 
packaging, the provision lead s to a double payment situatio n for the clients or forces 
them to introduce costly double-packagi ng lines, given that DSD requires the 
packaging exempted by its system to be marked with the Green Dot. 
55. The CFI found that the Commission rightly  concluded that there was a mismatch 
between the service provided by DSD and th e fee due by its clients, and recognised 
that selective marking as required by DSD to avoid the double-payment situation 
leads to significant additional costs for manufacturers and distributors of sales packaging and therefore has the effect of  dissuading them from using competing 
systems. 
56. Given the practical functioning of the co llection and recovery system operated by 
DSD, CFI disagreed with DSD's descripti on of the function of the Green Dot. The 
CFI confirmed that the decision does not adve rsely affect the essential function of the 
Green Dot as a trademark. Th e CFI found that the remedy
45 ordered by the 
Commission was proportionate and did not c onstitute an imposition of a compulsory 
licence. 
                                                 
43 Judgment of 24.5.2007 in case T-151/01 DSD v Commission  not yet reported. DS D filed an appeal 
against the judgment to the ECJ. 
44 Case COMP/34.493 DSD  OJ L 166, 21.6.2001, p. 1. 
45 The remedy prevented DSD from charging a fee for th e part of the sales packaging bearing the “Green 
Dot” for which it can be shown that the take-back an d recovery obligation, as set out in the German 
packaging ordinance, has been properly fulfilled by another party (see MEMO/07/205, 24.5.2007). 
 
EN 21   EN B – MERGER CONTROL  
1. A PPLICABLE RULES  
1.1. Guidance on jurisdiction in merger co ntrol: Commission Consolidated Notice 
on Jurisdiction 
57. On 10 July the Commission adopted the Co mmission Consolidated Jurisdictional 
Notice under the Merger Regulation (the "J urisdictional Notice" or the "Notice")46. 
The Jurisdictional Notice replaces the f our previous Noti ces dealing with 
jurisdictional issues under the Merger Regulation, a meas ure was strongly welcomed 
in the course of the consultation47. 
58. All previous Notices were  adopted by the Commission in 1998 under the previous 
Merger Regulation 4064/89. These are (i) the Notice on the concept of 
concentration48, (ii) the Notice on the concept of full-function joint ventures49, (iii) 
the Notice on the concept of  undertakings concerned50 and (iv) the Notice on 
calculation of turnover51. 
59. The Notice covers all issues relevant fo r the Commission's jurisdiction under the 
Merger Regulation, with the exception of referrals52. The rationale of the 
consolidation of the four previous Notices in one document was to make the 
Jurisdictional Notice more user-friendly a nd to allow notifying parties to establish 
more easily whether the Comm ission is competent for an envisaged transaction. This 
consolidation also removes the overlaps betw een four notices and thus eliminates the 
possibility of conflicting interpretations. 
60. The adoption of the Jurisdictional Notice wa s not only an exercise of consolidation 
as is clear from the sources used in amending the Notice: 
61. First, the Jurisdictional Notice takes into  account the changes introduced by the new 
Merger Regulation in relation to jurisdictional issues. 
62. Second, it also incorporates re cent case-law. For example, a number of issues arising 
from the judgments of the Court of Firs t Instance ("CFI") in  the cases Cementbouw53 
and Endesa54 are included in the Jurisdictional Notice. 
                                                 
46 Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the 
control of concentrations between undertakings. Cu rrently, the Jurisdictional Notice can be found in 
English, French and German on DG COMP's web-site under 
http://ec.europa.eu/comm/competition/mergers/legislation/draft_jn.html 
47 The comments can be found on DG COMP's web-site under 
http://ec.europa.eu/comm/competition/mergers/legislation/draft_jn.html  
48 OJ C 66, 2.3.1998, p. 5. 
49 OJ C 66, 2.3.1998, p. 1. 
50 OJ C 66, 2.3.1998, p. 14. 
51 OJ C 66, 2.3.1998, p. 25. 
52 See Commission Notice on Case Referral in resp ect of concentrations, OJ C 56, 5.3.2005, p. 2. 
53 Judgment in Case T-282/02 Cementbouw v Commission  [2006] ECR II-319; see also opinion of AG 
Kokott in Case C-202/06 Cementbouw v Commission  26.4.2007, paragraph 56 (not yet reported). 
 
EN 22   EN 63. Third, the developments in the Commission’s decisional practice in recent years are 
reflected in the Jurisdictional Notice. 
1.2. Guidance on the assessment of merg ers: Commission Gu idelines on Non-
horizontal mergers 
64. On 28 November the Commission adopted Guidelines55 on the assessment of non-
horizontal mergers under the Merger Regul ation. Non-horizontal mergers include 
vertical mergers, such as the acquisition of  a supplier by a customer (for example, a 
car manufacturer acquiring a gearbox supp lier), and conglomerate mergers, which 
concern companies whose activities are co mplementary or otherwise related (for 
instance, a company producing razors buyi ng a company producing shaving foam). 
65. The Guidelines, which provide guidance to  companies as to how the Commission 
will analyse the impact of such mergers on competition, complement the existing Guidelines on horizontal mergers, which deal with mergers of companies who compete on the same markets. 
66. Horizontal mergers can lead to the loss of direct competition between the merging 
firms. By contrast, vertical and conglomer ate mergers do not immediately change the 
number of competitors active in any given market. As a result, the main potential 
source of anti-competitive effects in horizontal mergers is absent from vertical and 
conglomerate mergers. The latter are thus generally less likely to create competition 
concerns than horizontal mergers. In a ddition, vertical and conglomerate mergers 
may also improve a company's efficiency by better co-ordina ting their different 
production stages. 
67. The Guidelines were adopted after extens ive consultation with Member States and 
the general public. Thirty-two papers were submitted in response to the public consultation launched on 13 February. The vast majority of respondents supported 
the issuing of guidelines. In addition, the consultation produced a number of valuable 
comments on individual sections of the draft,  which have been taken into account in 
the final text. Member States' experts endor sed the Guidelines in several rounds of 
consultation. 
68. The Guidelines provide examples, based on established economic principles, of 
where vertical and conglomerate merger s may significantly impede effective 
competition in the markets concerned. For instance, they outline the circumstances 
under which a vertical merger could be likel y to result in competing companies being 
denied access to an important supplier or f acing increased prices for their inputs, and 
thus ultimately lead to higher prices for consumers. 
69. The Guidelines also indicate levels of ma rket share and concentration below which 
the Commission is unlikely to identify competition concerns (so-called "safe harbours"). 
70. By way of example, the energy sector is  one area where verti cal and conglomerate 
issues can be of concern, as illustrated by the Commission's decision to prohibit the 
                                                                                                                                                        
 
54 Judgment in Case T-417/05 Endesa v Commission , [2006] ECR II-2533. 
55 http://ec.europa.eu/comm/competition/mergers/legislation/legislation.html 
 
EN 23   EN proposed takeover of GDP  by EDP  and ENI56. The proposed merger of the 
electricity and gas incumbents in Port ugal could, for example, have created 
considerable obstacles to new entrants to the Portuguese electricity market using gas-
fired power stations. Another recent example is the acquisition of Pfizer's Consumer 
Healthcare division by Johnson & Johnson. Without th e divestiture remedies 
imposed by the Commission, the transaction would have given J&J control over key 
inputs for nicotine patches produced by its main competitor, GSK. The result for consumers attempting to quit smoking coul d have been higher prices and less 
innovative products for their ni cotine replacement therapy. 
1.3. Guidance on the assessment of mergers : draft Revised Commi ssion Notice on 
Remedies 
71. To clarify its policy with regard to reme dies in merger cont rol, the Commission 
launched a public consultation on the draft Revised Remedies Notice. Remedies are 
modifications to a merger proposed by th e merging parties to  eliminate potential 
competition concerns identified by the Commi ssion. In order to give guidance on the 
interpretation of the EC Merger Regulation with regard to reme dies, the Commission 
adopted in 2001 a first Remedies Notice
57 under the EC Merger Regulation. The 
Revised Remedies Notice will update and replace the current notice. 
72. The revision reflects i) the conclusions from the Commission's 2005 Merger 
Remedies Study58 which undertook a comprehensive re view of past merger cases 
involving remedies; ii) recent case law, such as the judgments in the EDP59, General 
Electric60, and Cementbouw61 cases, which gave useful guidance on the legal 
framework for accepting or rejecting remedies  as well as on more specific issues 
concerning their design; iii) the experience gained in the Commission’s practice in 
the past years in the field of remedies, including the GDF/Suez62 and 
Inco/Falconbridge63 cases; and also iv) the changes brought about by the recast 
Merger Regulation of 2004 to the extent that they are relevant to remedies. 
73. The revision makes it clear that the comm itments have to eliminate the competition 
concerns entirely and have to be comprehe nsive and effective from all points of 
view. A general requirement for meeting this  standard is that there has to be a 
possibility of monitoring the binding commitments. In order to allow the 
Commission to properly asse s remedies the draft revise d notice introduces a new 
information form to be submitted by the parties to describe their proposals for 
remedies64. 
                                                 
56 Case COMP/M.3440 ENI/EDP/GDP  Commission decision, 9.12.2004. 
57 Commission Notice on Remedies acceptable under C ouncil Regulation (EEC) No 4064/89 and under 
Commission Regulation (EC) No 447/98, OJ C 68, 2.3.2001, p. 3. 
58 DG COMP, Merger Remedies Study, October 2005. 
59 Judgment of the CFI in Case T-87/05 EDP v Commission  [2005]. 
60 Judgment of the CFI in Case T-210/01 General Electric v Commission  [2005]. 
61 Judgment of the CFI in Case T-282/02 Cementbouw v Commission  [2006]. 
62 Case COMP/M.4180 GdF/Suez  Commission decision 14.11.2006. 
63 Case COMP/M.4000 Inco/Falconbridge  Commission decision 4.7.2006. 
64 This will also require an amendment of Commission Regulation (EC) No 802/2004 on implementing 
the EC Merger Regulation. 
 
EN 24   EN 74. The draft Revised Remedies Notice provide s extended guidance on the suitability of 
the various types of remedies, clearly setti ng out that divestiture commitments are the 
preferred remedies because they are the most effective way to restore competition. Non-divestiture remedies (for instance,  remedies giving competitors access to 
infrastructure, networks, key technology or essential inputs) may only be acceptable 
in certain circumstances when their eff ects will be equivalent to those of a 
divestiture. Apart from this, the revi sion maintains the Commission's existing 
scepticism towards behavioural remedies, i. e. commitments merely to refrain from 
certain commercial behaviour. Due to the absence of effectiv e monitoring of the 
implementation of such remedies, the Commission may accept them only exceptionally and in specific circumstances. 
75. As the proper implementation of the remedies in the interim period is of decisive 
importance for their overall effectivene ss, the draft Revised Remedies Notice 
reinforces the requirements for the implementation of commitments. In particular, it strengthens the tasks of the Monitoring Trustee overseeing the implementation of 
divestiture remedies and clarifies the role of the Hold Separate Manager, responsible 
for the management of the divested business. 
2. A
PPLICATION OF THE MERGER CONTROL RULES  
2.1. Overview 
76. In 2007 the number of merger cases notifie d to the Commission reached an all-time 
record of 402. This figure represents an in crease of more than 12% compared to the 
356 transactions notified in 2006. In the last quarter of  the year the number of 
notifications fell in relation both to the prev ious quarters and to the last quarter of 
2006. This appears to be due to the effects of the global credit squeeze. 
77. In total, the Commission a dopted 396 final decisions in  2007. A total of 368 were 
cleared in first phase without conditions. N early two-thirds (the  equivalent of 238 
decisions) of the unconditional first phase  clearances were adopted under the 
simplified procedure. A further 18 transactions were cleared in first phase subject to 
conditions. 
78. Ten decisions were adopted after in-depth Ph ase II investigations. Five of these were 
cleared without conditions, in four cases the clearances were subject to conditions and one transaction was prohibited. Du ring the year the Commission opened 15 
Phase II proceedings, up from 13 in the prev ious year. In addition, two notifications 
were withdrawn in the second phase. The table below, which lists the number and percentage of prohibitions and second pha se withdrawals over the last ten years 
shows that the figures for 2007 fall within the usual range. 
Chart 1 – Prohibitions and Phase II withdrawals, 1998-2007 
 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total 
10 years
Notifications 224 276 330 335 277 211 247 310 356 402 2977 
 
EN 25   EN Prohibitions 2 1 2 5 0 0 1 0 0 1 12 
Phase II 
withdrawals 4 5 5 4 1 0 2 3 2 2 28 
Regulatory 
risk 2.7% 2.2% 2.1% 2.6% 0.4% 0.0% 1.2% 1.0% 0.6% 0.7% 1.3%
2.2. Remedies in non-horizontal cases 
79. Cases involving vertically rela ted markets in 2007 included Evraz/Highveld65 and 
Johnson and Johnson/Pfizer Consumer Healthcare66. A more detailed explanation of 
this case is given here to illu strate the Commission's approach. 
80. This case concerned the acqui sition by Johnson & Johnson ("J&J") of Pfizer's entire 
consumer healthcare division, Pfizer Cons umer Healthcare ("PCH"). The merger 
gave rise to a problematic vertical rela tionship in the area of nicotine replacement 
therapy (NRT) products, more particularly  with regard to nicotine patches. 
81. J&J, through its subsidiary ALZA (acqui red in 2001), is active in the development 
and manufacturing of innovative drug-delivery  systems such as transdermal drug-
delivery patches. ALZA supplied all GSK's needs for nicotine patches and 
cooperated with GSK in the development of nicotine patch products. GSK sells 
nicotine patches supplied by ALZA under its brand NiQuitin. 
82. Among PCH's activities acquired by J&J was the Nicorette business, which produces 
a wide range of NRT products, including nico tine patches. Therefore, following the 
merger, GSK would find itself in a situati on where it would be supplied with nicotine 
patches by its main competitor. 
83. Nicotine patches are pharmaceutical products; any change in their manufacturing 
process requires the approval of the relevant health authorities. They are also branded 
consumer products. These factors explain wh y the main players in the market are 
vertically integrated or have l ong-term exclusive supply agreements. 
84. The market investigation concluded that th e new entity would have the ability and an 
incentive to foreclose GSK, its competito r on the downstream markets. Given the 
existing ALZA-GSK supply agreement, there was no risk that ALZA could refuse to 
supply GSK, but rather a risk that th e new entity would seek to reduce the 
competitiveness of GSK's NiQuitin patches by, for example, limiting or reducing supply, lowering quality, increasing costs, or  disrupting R&D. The provisions of the 
existing contract were not sufficient to prev ent such a strategy. The new entity would 
increase its own downstream sales as th e market investigation showed that a 
significant proportion of custom ers would purchase Nicorette  if they no longer had 
access to NiQuitin. Such an input foreclos ure strategy would re duce the competitive 
                                                
 
65 Case COMP/M.4494 Evraz/Highveld  Commission decision, 20.2.2007. 
66 Case COMP/M.4314 Johnson and Johnson/Pfizer Consumer Healthcare  Commission decision, 
11.12.2006. 
 
EN 26   EN constraints that NiQuitin exerts on Nicorette , leading to reduced choice and increased 
prices for consumers. 
85. The Commission took the view that be havioural commitments would not be 
sufficient to exclude the risk of input for eclosure. Therefore J&J committed to divest 
ALZA's nicotine patch manufacturing busin ess. In March, the Commission approved 
the sale of ALZA's international nicotine patch business to GSK, enabling GSK to become an independent vertically-integ rated producer of nicotine patches. 
3. S
ELECTED COURT CASES  
3.1. Jurisdiction in merger cases 
3.1.1. Cementbouw v Commission 86. On 18 December the Court of Justice reject ed an appeal lodged by the Dutch firm 
Cementbouw against the CFI's judgment of 2006 in case T-282/02 Cementbouw/Commission , by which the CFI had upheld a Commission decision 
clearing an implemented concentration on the condition that the operation be 
unwound within a given deadline
67 (case C-202/06P Cementbouw/Commission ). 
87. Haniel and Cementbouw acquired joint control of the company CVK in 1999 
through a series of transac tions. Prior to 1999, CVK was a joint selling cooperative 
comprising all (eleven) sand lime brick produ cers in the Netherlands. These eleven 
producers (the “CVK members”) were i ndividually controlled by either Haniel, 
Cementbouw or a third company, the German company RAG. . In 2002, the Commission cleared the operation on the condition that the parties fulfilled a commitment to dissolve CVK within a cert ain deadline. Previously the Commission 
had rejected a first commitment offered by the parties, which only amounted to 
Haniel and Cementbouw giving up their join t control over CVK, but leaving the 
Pooling Agreement linking the CVK member s and, hence, CVK's role as a single 
dominant supplier of wall building materials in place. 
88. Following the Commission’s decision in  2002, CVK was dissolved into two 
competing groups, owned by Haniel and Cementbouw respectively. Even though 
Haniel and Cementbouw implemented th e Commission's deci sion, Cementbouw 
appealed against it to the CF I. In February 2006, the CFI rejected the appeal, stating 
the Commission was right both in assumi ng jurisdiction over the case, in its 
assessment of the competition impact of  the operation, and in insisting that 
competition be fully restored. 
89. Cementbouw appealed the Commission's cl earance decision before the Court of 
Justice on the sole ground of CFI's anal ysis as regards the remedy. The CFI had 
stated in this respect that the Commission's jurisdiction over the entire transaction (including both the conclusion of the Pooling Agreement and the acquisition of joint control over CVK by Haniel and Cement bouw) had not ended when the parties 
offered their first set of commitments to gi ve up joint control but leaving the Pooling 
Agreement in place. The Court of Justice in  its judgment confirmed that the CFI – 
                                                
 
67 Case COMP/M.2650 Haniel/Cementbouw/JV (CVK)  Commission decision, 26.6.2002. 
 
EN 27   EN and hence the Commission's decision – was corr ect also in this respect. In the view 
of the Court, the CFI did not violate the pr inciple of proportionality by considering 
that the Commission was not required to accept the first commitment offered by the 
parties, since that commitment was viewed  as insufficient to restore effective 
competition in the relevant market. 
3.2. Substantive assessment of mergers 
3.2.1. Sun Chemicals and others v Commission 90. On 29 May 2006 the European Commissi on approved the acqui sition by Hexion 
Specialty Chemicals ("Hexion", USA), owned by the investment fund Apollo, of Akzo Nobel’s Inks and Adhesive Resins business (“IAR”, th e Netherlands). The 
transaction concerned in partic ular the market for resins used in the printing ink and 
adhesives industries. 
91. The transaction gave rise to various ove rlaps in different t ypes of resins. The 
overlaps were limited to one single applica tion: the production of inks. However, the 
Commission considered that the transacti on would be unlikely to give rise to 
unilateral or co-ordinated anti-competitive effects and therefore cleared the transaction. 
92. On 9 October 2006, three customers - Sun Chemical Group BV, Siegwerk 
Druckfarben AG and Flint Group Germany GmbH  - lodged an appeal before the CFI 
against the decision, alleging that the Commi ssion had failed to follow the Horizontal 
Merger Guidelines and that the decision wa s flawed by errors of law, fact and 
appraisal. 
93. On 9 July, the CFI dismissed the appeal, rejecting all grounds of complaint. In 
relation to the Horizontal Merger Guidelin es, the CFI stated that the Commission is 
not required to analyse all the factors mentioned in the guidelines in every case and does not have to deal explicitly with all the matters of law and fact which may be connected with the merger and/or rais ed during the administrative procedure, 
particularly when these matters appear to be  manifestly irrelevant , insignificant or of 
secondary importance. 
94. As regards the assessment of market share levels and market concentration, the CFI 
stated that a Herfindahl-Hirschman Inde x (HHI) exceeding the guideline thresholds 
does not give rise to a presumption of competition concerns and that, although this is a useful first indication of market structur e, the Commission is not required to assess 
the HHI in every decision. 
95. The CFI upheld the Commission's findings th at the market was characterised by 
excess capacity and that, in order to discourag e any anticompetitive conduct, it is not 
necessary for the merged entity’s customers to  be able to transfer all their orders to 
other suppliers, but only a subs tantial part of their orders. 
96. As regards the assessment of the buyer power  enjoyed by some cu stomers (including 
the applicants), the applican ts argued that the Commission did not take into account 
the fact that their in-house production only covered one ty pe of rosin re sin that could 
be used exclusively for the production of a limited range of inks. The CFI, however, 
 
EN 28   EN supported the Commission's c onclusion that the customers would still have the 
ability to exert pressure on their suppliers , either by threateni ng to stop purchasing 
this specific type of resin or by freeing up the capacity of other suppliers who could 
then produce the rosin resins. 
97. The CFI dismissed all the remaining grounds of  appeal. This case was dealt with by 
the CFI by way of expedited procedure in only nine months. 
3.3. Damages for alleged losses resulting  from a Commission merger decision 
3.3.1. Schneider Electric v Commission 
98. On 11 July the Court of First Instance (" the Court") delivered an interlocutory 
judgment in the Schneider/Commission case . Schneider claimed that the manifest 
errors of assessment and the breach of its right to be heard found in Schneider I68 
constituted  "sufficiently serious breaches" such as to render the Community liable to 
compensate the damage which it incurred by r eason of its resale of Legrand at a price 
below that which it had to pay to acquire it.  Moreover, Schneider maintained that the 
Commission had committed a number of breach es other than thos e contained in the 
decision declaring the merger between Schne ider and Legrand incompatible with the 
common market, and claimed a series of additional heads of damage. 
99. In its judgment, the Court analysed the allegations of fault extraneous to the 
incompatibility decision and found that none constituted a "sufficiently serious 
breach". As regards the faults contained in  the decision, it declined to rule on the 
substantive errors of assessment, since th ey could not result alone in the annulment 
of the decision. In contrast, the Court held that the breach of th e right to be heard 
found in Schneider I constituted a "sufficiently serious breach of a principle of law 
which confers rights on individuals", which could constitute a ground for liability on the part of the Community. Next, while it rejected most of th e heads of damage 
claimed, the Court found that a causal link did exist between the violation of the right 
to be heard and the two following heads of damage: 
– the fees incurred by Schneider in having the merger examined a second time 
following Schneider I , and 
– the reduction in the resale price of Legra nd which Schneider had to grant so as to 
defer the resale pending the delivery of the judgment in Schneider I and thus give 
Schneider the chance to benefit from th e re-examination of the merger, should the 
Court annul the incompatibility decision. 
100. The Community was therefore found to have  to compensate Schneider with respect 
to both heads of damage. However, give n that Schneider was found to have 
contributed to its own damage by assumi ng the real risk of an incompatibility 
decision subsequent to the acquisition of the control of Legrand and, as a 
consequence, of a forced resale, the am ount of damages due in relation to the 
reduction in the resale price of Legrand was reduced by one third.  
                                                
 
68 Affaire T-310/01 Schneider Electric v Commission  Judgment of 22.10.2002. 
 
EN 29   EN 101. The Commission has lodged an appeal agains t the CFI interlocutory judgment to the 
Court of Justice. Should the Court of Justice uphold the interlocutory judgment, the 
CFI will have to decide on th e amount of damage to be compensated in a subsequent 
judgment. 
C – STATE AID CONTROL  
1. A PPLICABLE RULES  
102. In 2007, the Commission pursued the implem entation of the State Aid Action Plan 
launched in 2005. The Commission adopted a new method for setting reference and 
discount rates69 more closely in line with market pr inciples as it contains a system 
taking account of the specific situation of the company or project and will thus contribute to a better economic approach to State aid analysis, as  announced in the 
State Aid Action Plan. 
103. The Commission launched a consultation on a draft General Block Exemption 
(GBER)
70. This GBER will simplify and consolidate into one text five existing block 
exemptions for aid to SMEs, research and development aid in favour of SMEs, aid for employment, training aid and regional aid. In addition, the scope of the existing block exemptions will be extended to c over certain categories of new aid, in 
particular environmental aid, aid in the form  of risk capital as well as research and 
development aid in favour of large companie s. Certain rules will also be simplified 
and harmonised across different categories of aid. For instance, SME bonuses will be 
identical for all categories of aid. The draf t GBER forms part of the State Aid Action 
Plan designed to simplify the rules and concentrate on the cases where the most distortion occurs. A first di scussion with Member States  already took place in 2007. 
A new meeting will take place in 2008 and the GBER should be adopted by the 
Commission in June 2008. 
104. On 13 June 2007 the Commission decided to extend its 2001 Cinema 
Communication until 31 December 2009 at the latest. The Ci nema Communication 
contains rules on State aid to cinemat ographic and other audiovisual works. 
105. In 2007 the Commission also launched the procedure for the revision of the 
Commission notice on the application of Article s 87 and 88 of the EC Treaty to State 
aid in the form of guarantees. A first consul tation of Member States and stakeholders 
took place during the summer. 
106. Following the Commission's work on the new de minimis and regional aid rules, the 
focus of the draft is two-fold. First, it clarifies the conditions relating to the presence 
or absence of aid in the form of guarant ees. Second, it quantifies the relevant amount 
of aid on the basis of market references and risk analysis. 
                                                
 
69 Not yet published in OJ. 
70 OJ C 210, 8.9.2007, pp. 14-40. 
 
EN 30   EN 107. During 2007 the Commission also prepared dr aft guidelines on State aid to railway 
undertakings71. In the context of market opening, where companies are gradually 
confronted with increased competitive pressure, there is a need for improved transparency and legal certainty. 
2. A
PPLICATION OF THE STATE AID RULES  
2.1. Overview 
108. Following the exceptionally large number of State aid notifications in 2006 (922), the 
number of new cases notified by  Member States in 2007 was 77772, significantly 
above the level in 2004 and 2005. The decrease from 2006 is in line with the Commission's commitment to facilitate th e granting of aid through block exemptions 
and to focus policy on the most distor tive types of aid. In 2007, Member States 
introduced more than 1 100 measures without  prior notification to the Commission, 
compared to 410 block exempted measures in 2006. In agriculture alone, the number 
of block exempted measures increased from 119 in 2006 to 496 in 2007. Member 
States also put into effect around 200 m easures under the recently-introduced block 
exemption for regional aid. 
109. The Commission took 629 fi nal State aid decisions
73
 in 2007. In the vast majority of 
cases, the Commission approve d the measures without a formal investigation, 
concluding that the examined aid was compa tible with the State aid rules (87% of all 
decisions in 2007) or did not constitute St ate aid (5% of all d ecisions). Where the 
Commission has doubts whether certain aid measures comply with the rules, it 
carries out a formal investigation during wh ich third parties and all Member States 
are invited to provide observations. At the end of this investigation procedure, the 
Commission either takes a positive, conditional or no aid decision (3% of all decisions) or finds that the measure does not comply with State aid rules and hence is 
not compatible with the common market, a nd therefore takes a negative decision (5% 
of all decisions). 
110. The Commission published two editions  of the State aid Scoreboards
74 in 2007. The 
autumn 2007 update75
 looked at the extent to whic h Member States have responded 
to the Lisbon targets of less and better-targeted aid, and also included a special outlook on aid approved in 2007 under the new framework for research, development 
and innovation (R&D&I). The spring 2007 update
76
 included a focus on unlawful aid 
awarded by Member States.  The Commission continues to publish the electronic 
                                                 
71 http://ec.europa.eu/dgs/energy_transport/state_aid/consultation_ms_en.htm 
72 Of the 777 notifications, 53% mainly concerned the manufacturing and service sectors, 33% agriculture, 
8% transport and 6% fisheries. 
73 Included in this figure are: decisions on the abse nce of State aid, decisions not to raise objections, 
positive decisions, conditional decisions and negative decisions. 
74 http://ec.europa.eu/comm/competition/state_aid/studies_reports/studies_reports.html An online 
Scoreboard contains electronic versions of all Scoreboards, as well as a set of key indicators and a wide array of statistical tables. 
75 COM(2007) 791 final, 13.12.2007, State Aid Scoreboard, autumn 2007 update. 
76 COM(2007) 347 final, 28.6.2007, State Aid Scoreboard, spring 2007 update. 
 
EN 31   EN newsletter "State Aid Weekly e-News"77 which is distributed to more than 3000 
subscribers. 
111. Progress in terms of a key objective of the State Aid Action Plan - i.e. that the 
Member State should grant both less and be tter-targeted aid - is being made. The 
latest State aid Scoreboard shows that Me mber States have over the past six years 
been moving towards the European Council objective of less and better-targeted aid. 
In particular, the EU-10 Member States have progressively reoriented their state aid towards horizontal objectives of common inte rest such as regional development, 
R&D, SMEs and protecting the environm ent. With the exception of Malta and 
Hungary, they have all directed more than  85% of their aid to horizontal objectives, 
which places them at or above the EU  average. R&D aid has increased only 
moderately in the EU, but with the ne w R&D framework a further increase is 
expected in the future. 
2.2. Applying regional aid rules 
112. During 2007, the Commission appr oved the regional aid maps
78 of Bulgaria and 
Romania, as well as those for Belgiu m, Cyprus, Denmark, France, Italy, the 
Netherlands, and Portugal. As a result, regional aid maps covering the period 2007-
2013 have now been approved for all Member States. 
113. In two successive decisions the Commi ssion approved a methodology for calculating 
the aid intensity of State guarant ees granted on investment loans79 and working 
capital loans80 in Germany. Four other Member States have notified proposed 
methods for determining the aid intensity of State guarantees to be assessed by the 
Commission in accordance with the arrangeme nts provided for in Article 2(2) of 
Regulation (EC) No 1628/200681. 
114. The Commission authorised regional aid for a number of large investment projects, 
such as the establishment of  two chemical production plants82 and three separate 
investment projects in the pulp and paper sector83 in Portugal, the extension of an 
electricity generation plant in Hungary84, a plant for the produc tion of solar energy 
modules in Germany85, the expansion of a car ma nufacturing plant in Slovakia86 and 
an automotive investment project in the Czech Republic87. The Commission also 
authorised German aid to AMD for the conversion and extension of its existing 
micro-processor wafer plants in Dresden88. In one case, concerning Ibiden89 in 
                                                 
77 http://ec.europa.eu/comm/competition/state_aid/newsletter/index.html 
78 http://ec.europa.eu/comm/competition/state_aid/regional_aid/regional_aid.cfm 
79 Case N 197/2007 Method to calculate the aid element in guarantees . 
80 Case N 541/2007 Amendment to the German guarantee method to include guarantees for working 
capital . 
81 OJ L 302, 1.11.2006, p. 29. 
82 Case N 898/2006 Repsol Polimeros , N 899/2006 Artensa . 
83 Case N 900/2006 CELBI , N 838/2006 Soporcel, N 564/2006  About the future . 
84 Case N 907/2006 Mátrai Er őmű. 
85 Case N 863/2006  Avancis . 
86 Case N 857/2006 Kia Motors Slovakia . 
87 Case N 661/2006 Hyundai Motor Manufacturing Czech . 
88 Case N 810/2006 AMD Dresden . 
89 Case C 21/2007  IBIDEN Hungary Ltd.  
 
EN 32   EN Hungary, the Commission opened a formal investigation because  of doubts over the 
definition of the relevant product markets and the market share of the beneficiary. 
115. A proposed ad hoc regional inve stment aid to Glunz & Jensen90 in Slovakia was 
deemed incompatible as it would have cr eated significant distortions of competition 
in the market for graphic arts pre-press processing equipment in which the company has an important share. Doubts about the in centive effect of further ad hoc aid for 
Alas in Slovakia prompted the Commission to open a formal investigation
91. 
116. As regards the outermost regions, th e Commission approved ten aid schemes 
providing exemptions from tax and social security contributions in the French 
overseas départements92, as well as a reduction in excise duty on tr aditional rum93. A 
scheme providing tax reductions to compan ies set up in the free zone of Madeira was 
also approved94. 
117. In Greece, the Commission found that tax breaks of approximately EUR 
200 million95 given to thousands of companies in a wide range of sectors were 
incompatible with the single market and need  to be recovered from the beneficiaries. 
2.3. Applying the State aid framework fo r Research, Development and Innovation 
(R&D&I) 
118. Notifications of aid for R&D&I pending on 1 January, as well as all new 
notifications received in the reporting year , were assessed on the basis of the new 
framework96. In 2007, the Commission approved 48 notified schemes, 28 of which 
were pure R&D schemes, four were pur e innovation aid schemes and 16 covered 
both R&D and innovation. In additi on, the Commission approved four ad hoc  aid 
measures below the threshold triggering a detailed assessment under Chapter 7 of the 
Framework. Two decisions on R&D scheme s concluded that no aid was involved. 
119. The Commission took eight decisions follo wing a detailed assessment of large 
amounts of aid to projects under Chapter 7 of  the Framework. It authorised a number 
of projects financed by the French Industrial Innova tion Agency - two R&D aid 
projects ( "NanoSmart" and "HOMES") totalling EUR 119 million97, EUR 
26.5 million in aid for the NeoVal R&D programme98, EUR 37.6 million in aid 
towards the “ Télévision Mobile Sans Limite ” R&D project99 and EUR 31 million aid 
for the OSIRIS R&D programme100. The Commission also authorised EUR 
                                                 
90 Case C 12/2007 Glunz&Jensen  
91 Case N 843/2006 ALAS Slovakia . 
92 Cases N 522/2006, N 524/2006, N 529/2006, N 540/2006, N 542/2006, N 559/2006, N 560/2006, 
N 627/2006, N 667/2006, N 668/2006. 
93 Case N 530/2006 Taux d’accise réduit sur le rhum «traditionnel» produit dans les départements 
d’outre-mer.  
94 Case N 421/2006 Zona Franca Madeira . 
95 Case C 37/2005 Tax-exempt reserve fund for certain companies . 
96 OJ C 323, 30.12.2006, p. 1. 
97 Cases N185/2007, OJ C 284, 27.11.2007, p. 3 and N89/2007, OJ C 275, 16.11.2007, p. 3. 
98 Case N 674/2006, OJ C 120, 31.5.2007, p. 2. 
99 Case N 854/2006, OJ C 182, 4.8.2007, p. 5. 
100 Case N 349/2007, OJ C 304, 15.12.2007, p. 5. 
 
EN 33   EN 12.25 million of R&D aid for the SOITEC group101. In March, the Commission 
opened an in-depth investigation into a proposed loan of EUR 27 million to Spanish 
company ITP for the development of  the Trent 1000 aircraft engine102. 
2.4. Assessing risk capital financing for SMEs 
120. In 2007 the Commission approved 19 notif ied schemes under the risk capital 
guidelines103. Eleven of the schemes were fo und to respect th e safe harbour 
provisions of Chapter 4 of th e Guidelines and were approve d after a light assessment. 
Five of the schemes were approved after a more detailed assessment under chapter 5 
of the Guidelines. Finally, three scheme s were found not to constitute aid. The 
Commission opened proceedings regard ing one scheme in Saxony-Anhalt, 
Germany104. 
2.5. Assessing training aid 
121. Although training aid is covered by a block exemption regulation105, the Commission 
is required to assess projects exceeding EUR 1 million. In the reporting period the 
Commission took six decisions (final deci sions or decisions to open formal 
investigations) concerning training aid. 
122. In a number of cases, the Commission focussed on the need to ensure  that aid is only 
granted where it is a necessary incentive fo r the training activity (and is not diverted 
into operating aid by subsidising training that  the beneficiary would have carried out 
in any event and thus simply provide s windfall gains for the beneficiary). 
123. Thus, in the GM Antwerp106 case, the Commission found part  of the notified state aid 
incompatible, as it would have served to finance training activities which the 
beneficiary would have carri ed out anyway, even without  aid. Such aid would not 
serve the common interest by increasing trai ning activities and would simply distort 
competition. In Fiat107 and Club Med Guadeloupe108 the Commission found the aid 
necessary and compatible. 
124. Similarly, in the DHL Leipzig/Halle  case109 the Commission initiated the 
investigation because it had doubts whethe r DHL would not have to provide the 
training to its employees anyway. DHL need s to employ workers with sophisticated 
technical skills which are to a large extent  required by law and necessary for its 
operations. Doubts as to the incentive effect  of the training ai d have also led the 
                                                 
101 Case N 887/2006, OJ C 200, 28.8.2007, p. 2. 
102 Case C 9/2007, OJ C 108, 12.5.2007, p. 18. 
103 OJ C 194, 18.8.2006, pp. 2-22. 
104 OJ C 246, 20.10.2007, p. 20. 
105 Commission Regulation (EC) No 68/2001 on the application of Articles 87 and 88 of the EC Treaty to 
training aid (OJ L 10, 13.1.2001, p. 20). 
106 Case C 14/2006, Training aid to General Motors Antwerp (OJ L 243, 18.9.2007, p. 71). 
107 Case N 541/2006 Fiat Auto S.p.A.  (OJ C 220, 20.9.2007, p. 2). 
108 Case N 206/2007 Training aid for Club Med Guadeloupe  (OJ C 284, 27.11.2007, p. 5). 
109 Case C 18/2007 Training aid for DHL Leipzig (OJ C 213, 12.9.2007, p. 28). 
 
EN 34   EN Commission to open formal investigations in the Vauxhall110 and Volvo Cars 
Ghent111 cases. 
2.6. Taxation cases 
125. On 10 October112, the Commission opened the formal investigation procedure with 
respect to a tax incentive for the acquisition by Spanish companies of significant participations in foreign companies. The tax measure allows Spanish companies to amortise over a 20-year period the goodwill deriving from the acquisition of significant shareholdings in foreign companies, whereas there is no similar measure relating to the goodwil l arising from domestic acqui sitions. A shareholding is 
deemed significant if it represents at l east 5% of the share capital of the target 
company. Considering the due di ligence investigation requir ed in such transactions, 
it could be argued that in practice this sc heme can only apply for relatively large 
acquisitions, and that it therefore confers a selective advantage that may be qualified as State aid 
126. On 7 February the Commission opened the fo rmal investigation procedure against 
the so-called "group inte rest box" (Groepsrentebox)  notified by the Dutch 
authorities
113. On 21 March the Commission also  opened proceedings against a 
similar scheme which was already in force in Hungary114. Both schemes reduce the 
tax burdens on companies in respect of the net balance of interest received from and 
paid to affiliated companies. 
127. The Commission considered that the reduced tax burden in respect of a certain type 
of revenue (interest) would, according to the source of the revenue (intragroup), 
confer an economic advantage grante d through State resources on certain 
undertakings only. The Commissi on also considered that th is advantage was likely to 
distort competition and affect trade be tween the Member States. Indeed, the 
advantage would appear to be  substantially higher in th e context of international 
group financing activities. For these r easons, it could constitute State aid. 
2.7. Aid for rescuing and restructuring firms in difficulty 
128. In a number of rescue aid cases the Commissi on again emphasised that such aid is no 
more than a temporary measure facilitating th e preparation of a re structuring plan or 
the liquidation of the company. Accordingly, in the Ottana115, Ixfin116 and New 
Interline117 cases, the Commission opened the formal procedure because rescue aid 
had not been repaid within the statut ory six months deadline and no serious 
restructuring plan had been submitted. In the Ernault118 case, a restructuring plan had 
been submitted subsequent to the granting of rescue aid but was later withdrawn by 
                                                 
110 Case C 23/2007 Vauxhall Motors Ltd Training aid for Ellesmere Port  (OJ C 243, 17.10.2007, p. 4). 
111 Case C 35/2007 Training aid to Volvo Cars Ghent  (OJ C 265, 7.11.2007, p. 21). 
112 OJ C 311/2007, 21.12.2007, p. 21. 
113 IP/07/154, 7.2.2007. 
114 IP/07/375, 21.3.2007. 
115 Case C 11/2007 Aiuto alla ristrutturazione di Ottana Energia Srl (OJ C 122, 2.6.2007, p. 22) 
116 Case C 59/2007 Aiuto al salvataggio alla Ixfin SpA  (decision of 11.12.2007, not yet published). 
117 Case C 13/2007 Aiuto al salvataggio della New Interline SpA  (OJ C 120, 31.5.2007, p. 12). 
118 Case C 32/2005 Aide à la restructuration d'Ernault  (OJ L 277, 20.10.2007, p. 25). 
 
EN 35   EN the Member State. The Commission explained that the aid had to be repaid at the 
latest at the time of withdrawal of the plan. 
129. In the reporting period the Commission approved a number of restructuring aid 
measures including Javor Pivka119 and Novoles Straza120 (both approved under the 
1999 rescue & restructuring guidelines), Techmatrans121 and Bison-Bial122. In other 
cases the Commission found the aid incompatible (e.g. Nuova Mineraria Silius123 
and Biria124) or opened a formal investigation because of doubts regarding 
compatibility (e.g. Legler125, FagorBrandt126 or Fluorite di Silus127). 
130. 2007 also saw a number of restructuring ai d cases linked to the privatisation of 
publicly held companies. In two cases involv ing Romania ( Automobile Craoiva128 
and Tractorul129), the Commission opened the formal investigation because of doubts 
that the conditions attached to the privatisation might confer an advantage on the undertakings that are being privatised and consequently entail State aid to their 
benefit. In particular, conditions aimed at securing a certain future production level, 
especially in the case of a structurally loss-making company, are capable of having 
an effect similar to restructuring aid and are paid for by the State in the form of 
reduced proceeds from the privatisation. 
131. The current 2004 Community guidelines on State aid for rescui ng and restructuring 
firms in difficulty
130 are due to expire on 9 October 2009. In accordance with the 
2006 State Aid Action Plan, DG Competition launched a review of the guidelines in 
2007 in order to identify th e potential need for chan ges to the rescue and 
restructuring rules. 
2.8. Aid for environmental protection 
132. During 2007, approximately 65 State aid cas es were approved by the Commission on 
the basis of the Community guidelines on State aid for Environmental Protection131. 
133. In November, the Commission approved a British case ( WRAP Printing and Writing 
Paper Scheme)132 concerning investment in new capacity for recycling paper. The 
                                                 
119 Case C 19/2006 Restructuring aid for Javor Pivka Commission decision of 10.7.2007 (not yet 
published). 
120 Case C 20/2006 Restructuring aid to Novoles Straza  Commission decision of 10.7.2007 (not yet 
published). 
121 Case C 6/2007 Restructuring aid for Techmatrans , Commission decision of 28.11.2007 (not yet 
published). 
122 Case C 54/2006 Restructuring aid for Bison-Bial , Commission decision of 12.9.2007 (not yet 
published). 
123 Case C 16/2006 Restructuring aid to Nuova Mineraria Silius  (OJ L 185, 17.7.2007, p. 18). 
124 Case C 38/2005 Biria Gruppe  (OJ L 183, 13.7.2007, p. 27). 
125 Case C 39/2007 Aiuto di stato per la ristrutturazione del gruppo Legler  (OJ C 289, 1.12.2007, p. 22). 
126 Case C 44/2007 Restructuring aid to FagorBrandt  (OJ C 275, 16.11.2007, p. 18). 
127 Case C 60/2007 Aid to Fluorite di Silius S.p.A  Commission decision, 11.12.2007 (not yet published). 
128 Case C 46/2007 Privatisation of Automobile Craoiva, Romania  (OJ C 248, 23.10.2007, p. 25). 
129 Case C 41/2007 Privatisation of Tractorul, Romania (OJ C 249, 24.10.2007, p. 21). 
130 OJ C 244, 1.10.2004, p. 2. 
131 OJ C 37, 3.2.2001, p. 3 
132 Case C 45/2005, Waste and Resources Action Programme (WRAP) Printing and Writing Paper Scheme  
(not yet published in the OJ). 
 
EN 36   EN scheme was approved because it respected the requirements that apply to this type of 
investment: (a) the aid does not indirectly relieve the polluters from a burden that 
should be borne by them, (b) the investment goes beyond the "state of the art", (c) the 
treated materials would otherwise be trea ted in a less environmentally friendly 
manner, and (d) the investment increases co llection of those materials. The approval 
was possible due to the fact that the sche me is confined to addressing the proven 
market failures in using recycled paper as raw material. 
134. During 2007 work on revised Community guidelines on State aid for Environmental 
Protection continued as part of the wider energy and climate change package. The 
guidelines were adopted on 23 January 2008133. 
2.9. Enforcing and monitoring State aid decisions 
135. In 2007 the Commission continued its efforts to achieve more effective and 
immediate execution of recovery decisi ons. Information submitted by the Member 
States concerned shows that significant progress towards recovery was made during 
that period. The number of recovery deci sions awaiting implementation was reduced 
from 60 at the end of 2006 to 47 at the end of 2007. In all, 23 recovery cases were 
closed, whilst 9 new recovery decisions were adopted. The progress made is also 
reflected in the amounts of aid recovered. Of the EUR 8.9 billion of illegal and 
incompatible aid to be recovered unde r decisions adopted since 2000, some EUR 
8.2 billion (i.e. 91.2% of the total amount) had been effec tively recovered by the end 
of 2007. In addition, a further EUR 2.4 billion in recovery interests had been recovered. 
136. As announced in the State aid Action Plan
134, the Commission continued to take a 
strict line towards Member States that failed to effectively implement recovery decisions addressed to them. In 2007 th e Commission initiated legal action under 
either Article 88(2) EC or Article 228(2) EC for failure by Member States to comply 
with recovery obligations. It took such action in a total of  five cases involving Italy 
and Spain. 
137. The future General Block Exemption Regula tion (GBER) is expected to lead to a 
significant widening of the scope of the cu rrent Block Exemption Regulations and to 
a large increase in the amounts of block exempted State aid. Ex post  monitoring 
therefore becomes particularly relevant as a way of ensuring th e correct application 
of these measures by Member States. Ag ainst this background, the Commission had 
carried out a pilot project involving th e ex post monitoring of several block 
exemption regulation (BER) measures in 2006. This pilot exercise proved useful and 
the Commission therefore launched a second exercise in 2007. A final report on the 
results of this exercise should be completed in June 2008. 
138. Given that effective and prompt recovery is essential to ensure that an end is put to 
distortions of competition resulting from illegal and incompatible aid, the Commission saw a need to summarise the case  law and its policy in this area in the 
                                                
 
133 Not yet published in the OJ. The guidelines are available in English, French and German on the 
website: http://ec.europa.eu/comm/competition/state_ aid/reform/reform.cfm. Until the publication of 
the new guidelines, the 2001 guide lines on State aid for Environm ental Protection are applicable. 
134 http://ec.europa.eu/comm/compet ition/state_aid/reform/reform.cfm 
 
EN 37   EN form of a Notice135. The main aim of the Notice was to  build on the progress made to 
date and to outline how the Commission and the Member States could cooperate more effectively to ensure effective a nd swift implementation of the Commission's 
recovery decisions. 
139. The Notice highlights the key principles of recovery policy as c ontained in Articles 
14 and 15 of the Procedural Regulation. It recalls the basic prin ciple contained in 
Article 14 (3) of the Procedural Regulation th at recovery is carri ed out under national 
law, as long as the provisions of national law allow immediate and effective recovery. The content of the Notice in this respect is largely shaped by the relatively strict interpretation of the Member Stat es' recovery obligations by the Community 
Courts, in particular in two judgments  handed down in 2005 and 2006 respectively
 
136. 
140. The Notice also contains best practice guidelines for the Commission and for the 
Member States in connection with recovery, as well as a description of the Commission's new approach towards the setting of recovery deadlines
137. 
141. In relation to the role of the Member Stat es, the Notice deals with a number of issues 
such as the internal responsibilities for recovery, issues arising in the event of 
litigation before national or Community C ourts, and the specific issues arising in 
relation to recovery from benefici aries in financial difficulties. 
142. Finally, the Notice recalls the possible cons equences of a failure by a Member State 
to implement a Commission recovery deci sion. It emphasises that the Commission 
will require Member States to suspend the payment of any new – even compatible – 
aid to beneficiaries who have not yet repaid  incompatible aid previously granted to 
them. 
2.10. The application of State aid rules in particular sectors 
2.10.1. Steel 143. The Commission continues to adopt a restric tive approach to State aid in the steel 
sector. Given that restructur ing and investment aid to th e steel sector is generally 
prohibited under EU rules, the Commission did not authorise any new aid in 2007. It 
continued to monitor aids under restructuri ng and business plans authorised prior to 
the 2004 accession. 
                                                
 
135 Towards an effective implementation of Commission decisions ordering Member  States to recovery 
unlawful and incompatible State aid (OJ C 272, 15.11.2007). 
136 The most recent confirmation of th is strict approach was adopted in  the France Telecom case, C-441/06 
Commission v France , which was decided on 18.10.2007. See also Case C-415/03, Commission v 
Greece  [2005], ECR I-03875 and Case C-232/05, Commission v France  [2006]. 
137 To date, the Commission's negative decisions usually contained a single deadline by which the Member 
State had to inform the Commission of the measures taken to comply with a given decision. According 
to the interpretation of the Community Courts, this deadline (which was usually set at two months) also determined the date by which the Member State had to complete the recovery. It is intended that future 
decisions will contain two separate deadlines, two months for informing the Commission of the 
intended recovery measures and a further two months for the completion of the recovery. 
 
EN 38   EN 144. The Commission's monitoring of these plan s was successfully completed in 2007 as 
regards the Czech Republic (three steel companies, all of which are now considered viable under the plans) and Poland (eig ht undertakings, of which five were 
considered viable and three are in liquida tion). The monitoring of Slovakia has given 
rise to litigation. Monitoring cont inues for Bulgaria and Romania. 
145. In this context, the Commission took a d ecision approving a modification of an 
individual business plan of the Czech steel producer VPFM
138. In addition, the 
Commission closed two formal investigation procedures in the Technologie 
Buczek139 and Arcelor Huta Warszawa140 cases with negative decisions, concluding 
that State aid had been mi sused. The Commission also ope ned formal investigations 
into State aid linked to the terms of privatisation of Mittal Steel Roman141, a 
Romanian steel manufacturer, and concerning aid to the re structuring of the Polish 
seamless steel tube sector142. 
2.10.2. Shipbuilding 
146. Work was started in 2007 on the review  of the Framework on State Aid to 
Shipbuilding143. A decision on the future of this Framework is due by 31 December 
2008, when the current provisions expire. 
147. Following the opening of the investigati on procedure The Commission adopted two 
negative decisions prohibiting aid to the Portuguese shipyard Estaleiros Navais de 
Viana do Castelo S.A144. In both cases Portugal had notified the aid to shipbuilding 
on the basis of the Regulation concerning  a temporary defensive mechanism (TDM 
Regulation)145. The TDM Regulation entered into force on 3 July 2002 and expired 
on 31 March 2005. However, Portugal only appr oved the aid internally and notified 
it to the Commission after the TDM Regulation had expired. 
148. The Commission pursued its formal investigat ions into the restructuring of the Polish 
shipyards in Gdynia, Szczecin and Gdansk146. In the latter case it issued an 
information injunction to Poland. 
2.10.3. Coal 
149. After the ECSC Treaty expired, the C ouncil adopted an exemption regulation147 
based on Article 87(3)(e), la ying down favourable rules for State aid for hard coal 
and meta-lignite. In 2007 the Commission t ook relatively few deci sions in the coal 
                                                 
138 Case N 350b / 2006 Changes of IBP of VPFM (OJ C 200, 28.8.2007, p. 1). 
139 Case C 23/2006 Technologie Buczek , decision of 23.10.2007 (not yet published). 
140 Case C 51/2006 Arcelor Huta Warszawa , decision of 11.12.2007 (not yet published). 
141 Case C 40/2007, Privatisation of Mittal Steel Roman  (OJ C 287, 29.11.2007, p. 29). 
142 Case C 48/2007, Restructuring of the Polish tube sector  (OJ C 282, 24.11.2007, p. 21). 
143 Framework on State aid to Shipbuilding (OJ C 317, 30.12.2003, p. 11). 
144 Case C 26/2006, Temporary Defensive Mechanism for Shipbuilding, Portugal  (OJ L 219, 24.8.2007, 
p. 25), and Case C 32/2007, TDM aid to ENVC, Commission decision of 11.12.2007 (not yet 
published). 
145 Council Regulation (EC) N° 1177/2002 concerning a temporary defensive mechanism to shipbuilding 
(OJ L 172, 2.7.2002, p.1), as amended by Council Regulation (EC) N° 502/2004 of 11 March 2004 (OJ L 8, 19.3.2004, p. 6). 
146 Cases C 17/2005, C 18/2005 and C 19/2005. 
147 Council Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry. 
 
EN 39   EN sector, and no decision in th e lignite sector. In particul ar, it approved the plan for 
access to coal reserves in Romania. Followi ng this decision, only one plan for access 
to coal reserves remains, namely that of Spain, which notified it in 2006. 
2.10.4. Agriculture 
150. In 2007 the Commission adopted a new de minimis  Regulation for primary 
production in agriculture, proc essing and marketing activities148 that had already 
been brought within the scope of the general de minimis  Regulation149. Compared 
with the previous de minimis  Regulation for agriculture150, the main new elements 
are: increase of the individual ceiling to EUR 7 500 per beneficiary over a period of 
three fiscal years; increase of the nati onal ceiling to 0.75% of  the value of the 
agricultural production; extension of th e scope of the Regulation to include 
guarantees as well as other types of measur es considered as transparent under certain 
conditions, as in the general de minimis  Regulation. 
151. The new Regulation, covering the period 2008-2013, has been designed primarily to 
allow Member States to react quickly in cases of emergency, such as natural disasters. 
2.10.5. Fisheries 
152. In July, the Commi ssion adopted a new de minimis  Regulation specific to the 
fisheries sector
151. This new Regulation has increased the ceiling of de minimis  aid 
from the previous ceiling of EUR 3 000 (whi ch was laid down in  provisions common 
to fisheries and agriculture in the former  de minimis Regulation) to EUR 30 000 per 
fishing enterprise per three-year period152. Moreover, the Member States must 
comply with the condition that the total am ount of aid granted to all enterprises 
during that 3-year period does not exceed 2.5% of the annual fisheries output of the 
Member State concerned (the total am ount having been 0.3% in the former 
Regulation). 
153. A draft of a new exemption Regulation153, intended to replace Regulation No 
1595/2004 which expired on 31 December 2004, was presented to Member States in 
an Advisory Committee on State aid in October. The second meeting of this 
Committee will be held early in 2008 with a view to adopting the Regulation shortly 
after. 
154. During 2007, 49 new State aid cases were registered and 17 decisions adopted. 
                                                 
148 Regulation (EC) No 1535/2007 (OJ L 335, 21.12.2007, p. 35). 
149 Regulation (EC) No 1998/2006 (OJ L 379, 28.12.2006, p. 5). 
150 Regulation (EC) No 1860/2004 (OJ L 325, 28.10.2004, p. 4). 
151 No 875/2007 of 24 July 2007. 
152 No 1860/2004. 
153 OJ C 248, 23.10.2007. 
 
EN 40   EN 3. S ELECTED COURT CASES  
3.1. Definition of aid 
155. In the Bouygues Télécom  case154, the CFI confirmed a Co mmission decision stating 
that by retroactively adapting the amount to be paid by Orange and SFR for the 
UMTS licence in connection with a first cal l for applications, in the light of the 
amount paid in connection with a second call for application by Bouygues Telecom, 
the French State did not grant any State ai d to SFR and Orange. The CFI ruled that 
the fact that the State may have waived  resources by retroa ctively adapting the 
amount of the licences may indeed have crea ted an advantage for the beneficiaries of 
the reduction in the fee. However, this was not considered sufficient to prove the existence of a State aid incompatible w ith the common market, given the specific 
provisions of Community la w on telecommunications read in the light of the 
common law on State aid. The waiver of the claim at issue was considered inevitable by the CFI, as the general scheme of the telecommunication system required non-
discriminatory treatment of operators. 
156. In the Olympic Airways  case
155, the CFI partially annulle d the relevant Commission 
decision in that it had considered the non-payment by Olympic Aviation (a 
subsidiary of Olympic Airways) of value added tax (VAT) on aviation spare parts as 
State aid. The CFI found that the Commission could not, in principle, presume solely 
on the basis of the non-payment that th e undertaking concerned had enjoyed an 
advantage. The Commission should have ve rified whether the non-payment of VAT 
conferred a real cash advantag e on the undertakin g concerned. 
157. The CFI also issued its judgment in Salvat père & fils e.a. v Commission156 
concerning the Rivesaltes Plan and th e CIVDN parafiscal levies, through which 
France sought to help wine production in the region in question (in particular through 
a set-aside premium and through an aid fo r promotion, partially financed by inter-
professional levies). The CFI rejected the case brought by the aid re cipient seeking to 
annul Commission Decision 2007/253/EC, which declared this aid incompatible. The 
judgment clarifies the financing of agricult ural inter-professions in relation to the 
Pearle  judgment157, while limiting its scope. Claima nts invoked the Pearle judgment 
to deny that a State-resource character coul d be imputed to inter-professional levies 
(financing of the measure) and to the set- aside premium (financed partly by levies 
but also by the State budget). The CFI esta blished the existence of State resources 
having regard to the role played by the Fren ch State in the inter-profession context. 
3.2. Procedural issues 
158. In the Lucchini  case158, the Grand Chamber of the EC J confirmed in an important 
ruling that national judges must ensure the effectiveness of Community law, 
including the provisions on the control of State aid. Community law therefore 
precludes the application of  a provision of national law which seeks to lay down the 
                                                 
154 Case T-475/04 Bouygues Télécom v Commission . 
155 Case T-68/2003 Olympiaki Aeroporia Ypiresies AE v Commission . 
156 T-136/05, CFI judgment of 20.9.2007. 
157 Case C-345/02 Pearle BV.  
158 Case C-119/05 Ministero dell'Industria, del Commercio e dell'Artigianato/Lucchini SpA . 
 
EN 41   EN principle of res judicata  in so far as the application of that provision prevents the 
recovery of State aid grante d in breach of Community law which has been found to 
be incompatible with the common market in a decision of the Commission which has 
become final. 
159. In the Koninklijke Friesland Foods  case159, building on the judgme nt of the ECJ in 
the Belgian coordination centres  case160, the CFI partially an nulled the decision of 
the Commission concerning a Dutch tax scheme  in favour of inte rnational financing 
activities insofar as the decision did not contain a transitional period for companies whose applications to benefit from the litig ious aid scheme were pending at the date 
of the opening of the procedure. The Comm ission has appealed against the judgment. 
160. In the Freistaat Sachsen  case
161, the CFI annulled a decisi on of the Commission to 
the extent that it declared certain aspect s of the notified scheme incompatible. The 
Commission had based its incompatibility  assessment on the fact that the aid 
provided under the scheme exceeded the aid intensities provided for in SME block exemption No 70/2001
162 adopted a few days after th e scheme had been notified, 
although this block exemption regulation di d not contain any e xplicit transitional 
provisions. The CFI essentially  considered that the rules to be applied on a given 
notification case were the rules in place at  the date on which the notification took 
place. The Commission has appealed against the judgment. 
161. In a case concerning failure to act initiated by Asklepios Kliniken163, the CFI clarified 
that the Commission was entitled  to defer its examination of the questions of fact 
raised by the complaint, pending clarification of the legal framework in the context of the proceedings in the Altmark case
164. 
162. In the parallel Bouychou  and FG Marine  cases165, the CFI had occasion to decide on 
two actions for damages following the annulme nt, by the ECJ, of the decision of the 
Commission in the Stardust  case166. The CFI considered that the causal link between 
the Commission decision annulled by the ECJ and the alleged damage of the applicants had been broken as the cessati on of payments decided by the beneficiary 
of the aid was not the direct consequen ce of the decision of the Commission. Indeed, 
at the date of declaration of cessation of payments, the Commission decision had not 
yet been notified to the French State. The debt to the French State was therefore not 
yet enforceable. 
163. In Technische Glaswerke Ilmenau v Commission
167 the CFI ruled, for the first time in 
the field of State aid, that the Commission should base its refusal to grant access to 
documents on the precise information cont ained in the documents, and not on a 
general analysis by category of documents. An individual and concrete examination 
                                                 
159 Case T-348/03 Koninklijke Friesland Foods v Commission . 
160 Cases C-182/03 and C-217/03 Forum 187 et al. v Commission . 
161 Case T-357/02 Freistaat Sachsen v Commission . 
162 Commission Regulation No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the 
EC Treaty to State aid to small and medium-si zed enterprises, OJ L 10, 13.1.2001, p. 33. 
163 Case T-167/04, Asklepios Kliniken v Commission . 
164 Case C-280/00, Altmark Trans and Regierungspräsidium Magdeburg  [2003] ECR I-7747. 
165 Case T-344/04, Bouychou v Commission  and case T-360/04 FG Marina SA v Commission . 
166 Case C-482/99, France v Commission (Stardust)  [2002] ECR I-4397. 
167 T-237/02, CFI judgment of 14.12.2006. 
 
EN 42   EN is not necessary, however, if the Commissi on gives as its reason that access should 
manifestly have been refused due to the particular circumstances of the case. The Court does not completely deny the possib ility for the Commission to refuse access 
to documents on the basis of Article 4(2) of Regulation 1049/2001. However, in the case at hand, the CFI held that the Commi ssion should have indicated in detail the 
reasons why the exception applied to the cate gories of documents and that it could 
not rely on purely hypotheti cal grounds. The Commission appealed this jugdment to 
the ECJ. 
164. In Fachvereinigung Mineralfaserindustrie v Commission
168, the CFI dismissed an 
action for annulment of two Commission decisions brought by a professional 
association. The Court confirmed in one of the judgments that, since the applicants 
had not sought annulment on the ground that  the procedural safeguards provided for 
by Article 88(2) EC were infringed, the mere fact that the applicants may be considered to be parties "concerned" could not be sufficient to regard them as having 
been individually affected by the contested decision. 
165. In Spain v Lenzing
169, the ECJ dismissed an appeal against the CFI judgment which 
partially annulled a non-aid Commission de cision challenged by Lenzing (competitor 
of the Spanish beneficiary "Sniace"). Th e Court confirmed that the CFI did not 
merely note in general terms that Lenzing and Sniace were in competition with each other, but that the CFI had in fact based it s findings regarding the adverse effect on 
Lenzing’s position on the market on a nu mber of factors adduced by Lenzing in 
respect of the competitive situation and effect of the aid on Sniace's prices. 
166. In Sniace v Commission
170, the ECJ also dismissed the appeal against the CFI 
judgment declared inadmissible the action initiated by Sniace ag ainst a Commission 
decision. The latter considered that the mesures adopted by Austria in favour of 
Lenzing were in part not an aid and in pa rt compatible aid. The ECJ confirmed that 
the appellant was not individually concerne d by the contested decision owing to two 
factors: the limited role played by Sniace in the formal examination procedure and 
Sniace’s failure to demonstrate that its position on the market was substantially 
affected. 
167. The Court stated that comparable situati ons were not treated differently. Sniace’s 
situation could clearly be di stinguished, in an essential respect, from that of the 
applicant in Lenzing v Commission . In the latter case, the applicant was in direct 
competition with the recipient of aid on the market concerned and this was considered by the CFI to be a determining factor in its assessment of the applicant’s capacity to bring proceedings ag ainst the Commission’s decision. 
168. In Stadtwerke Schwäbisch Hall and Others v Commission
171, the ECJ annulled a CFI 
judgment because the Court considered that  the CFI had construed the applicant's 
request incorrectly, as they  had only asked for the decision to be annulled. The CFI 
had stated that the objective of the appeal was to protect the applicants' procedural 
rights. 
                                                 
168 T-375/03, CFI judgment of 20.9.2007; T-254/05, CFI judgment of 20.9.2007. 
169 C-525/04 P, ECJ judgment of 22.11.2007. 
170 C-260/05 P, ECJ judgment of 22.11.2007. 
171 C-176/06 P, Stadtwerke Schwäbisch Hall and Others v Commission , ECJ judgment of 29.11.2007 
 
EN 43   EN 169. In Ireland and others v Commission172, the CFI annulled the Commission's final 
negative decision on the ground of an infringe ment of the duty to give reasons with 
regard to the non-application of Ar ticle 1(b)(v) of Regulation No 659/1999173 in the 
State aid field (Procedural Regulation) to the exemption from excise duty on mineral 
oils. The CFI considered that, given the particular circumstances of the contested exemptions, the Commission should have as certained whether the measures could be 
regarded as existing aid by reason of the f act that, at the time they were put into 
effect, they did not constitute aid, but that  they subsequently became aid due to the 
evolution of the common market and wit hout having been altered by the Member 
States concerned in accord ance with the abovementioned article of the Procedural 
Regulation. The Commission has ap pealed against the judgment. 
3.3. Recovery of aid 
170. In the MTU  case
174, the CFI interpreted Article 13(1 ) of the Procedural Regulation, 
which empowers the Commission to adopt a decision on the basis of the information 
available if a Member State fails to comply  with an informati on injunction from the 
Commission. The CFI concluded that Arti cle 13(1) does not allow the Commission 
to impose on a particular undertaking an ob ligation to repay a fixed part of the 
amount of the aid declared to be incompatib le, where the transfer  of State resources 
from which that undertaking benefited wa s hypothetical. The CFI underlined that the 
Member State concerned was, in any event,  under an obligation to require recovery 
from the actual beneficiaries under the Co mmission’s supervision, without it being 
necessary for the Commission to name those beneficiaries expressly in the recovery 
decision. The Commission has lodged an  appeal against this judgment. 
171. In Scott v Commission175 the CFI annulled a final negativ e decision with recovery on 
the grounds of erroneous assessment of the amount of State aid. The judgment lays 
an obligation on the Commission to ta ke into account the comments of the 
beneficiary filed after the time limit in certain circumstances. In this respect it referred to some errors by the Commission in the calculation of the aid amount. The 
CFI also annulled the decision, for insufficien t statement of reasons, in so far as it 
relied on the interest rate applied by the Commission in Département du Loiret v 
Commission
176. The Commission has lodged an ap peal against these judgments. 
172. In Commission v Spain177 the Court confirmed the failure of Spain to adopt, within 
the period prescribed, the measures n ecessary to implement the Commission's 
recovery decisions. In Commission v Italy178, the ECJ condemned Italy for failure to 
execute a Commission recovery decision. The Court confirmed the settled case-law that the only reason justifying non-execution is the complete impossibility to implement the decision, which wa s not proven in this case. 
                                                
 
172 T-50/06, T-56/06, T-60/06, T-62/06 and T-69/06, Alumina cases, CFI judgment of 12.12.2007 
173 Council Regulation No 659/1999 of 22 March 1999 laying down detailed rules for the application of 
Article 93 (now Art.88) of the EC Treaty, OJ L 83, 27.3.1999, p. 1. 
174 Case T-196/2002 MTU v Commission . 
175 T-366/00, CFI judgment of 29.3.2007. 
176 T-369/00, CFI judgment of 29.3.2007. 
177 C-177/06, ECJ judgment of 20.9.2007. 
178 C-280/05, ECJ judgment of 6.12.2007. 
 
EN 44   EN 173. In Commission v France179, the ECJ condemned France for failing to comply with a 
Commission recovery decision concerning France Télécom as well as for breach of 
the loyal cooperation obligati on under Article 10 EC. The Court confirmed the well 
established case-law acco rding to which the Comm ission, when ordering the 
recovery of the aid declared incompatible with the Common market, is not obliged to 
fix the exact amount of the aid to be rec overed. It is sufficient for the Commission's 
decision to include information enabling the Member State itself to work out that amount, without too much difficulty. 
174. In the present case the ECJ considered  that the Commission gave sufficient 
indications to France as to how the aid co mponent should be determined. Finally, it 
was stressed that, in the ev ent of serious difficulties encountered while fixing the 
precise amount to be recovered, the Member  State is obliged to  cooperate actively 
with the Commission in order to find an acceptable solution. 
D - THE ROLE OF COMPETITION POLICY IN THE WIDER POLICY FRAMEWORK  
175. During 2007 the Commission reviewed the Lisbon strategy180 with a view to its final 
phase (2008-2010)181. The review proposes to further embed competition in the 
wider Lisbon strategy framework. A particular focus is placed on the need to step up 
market monitoring combined, if necessar y, with enforcement in the service and 
network industry sectors182. These proposals are in line with the Single Market 
Review carried out by the Commission duri ng 2007. The importance of reforms in 
the area of competition is reflected by the very large number –in both relative and absolute terms - of recommendations proposed for endorsement by the Council under Article 99 EC. 
176. For example, the review proposes that co mpetition policy should contribute to the 
Lisbon strategy objectives in the gas, electr icity and financial se rvices sector through 
the following-up of sector  inquiries launched in 2005
183. Competition policy is also 
considered as a complementary instrument in connection with efforts to enhance the 
efforts being made to ensure  interoperability and standardisation in a timely manner. 
The review also mentions 'competition ru les' among the policies where the EU can 
contribute specific expertise wh ich could be beneficial to its key partners. This is 
closely linked to the need to ensure fair competition and a level playing field internationally
184. 
                                                 
179 C-441/06, Commission v France (France Télécom) , ECJ judgment of 18.10.2007. 
180 The Commission's Communication on  the 'Strategic Objectives 2005-2009' states that "[t] he top priority 
today is to restores sustainable dynamic growth in Europe in accordance with the Lisbon strategy ". 
COM(2005) 12 final, see page 3. 
181 Communication from the Commission to the European Council: Strategic report on the renewed Lisbon 
strategy for growth and jobs: la unching the new cycle (2008-2010) Keeping up the pace of change 
Part I (COM(2007) 803 final). 
182 Proposal for a Community Lisbon Programme 2008 – 2010 Brussels, 11.12.2007, COM(2007) 804 
final. See in particular Objective 5: The Commun ity will strengthen the single market, increase 
competition in services, and take further steps to integrate the financial services market. 
183 See the previously mentioned objective 5 as well as  objective 8 concerning Energy and climate change. 
See also the annex listing the EC level measures concerning these objectives. 
184 See section 3.4 of the Strategic report (COM(2007) 803 final) mentioned above . 
 
EN 45   EN 177. The following Section II on Sector Developm ents contains numerous examples of 
how competition policy during 2007 contributed to the Com mission's wider policies. 
178. A concrete example of how competition po licy can support the objectives of other 
Community policies and initiatives is the gui dance given in relati on to the significant 
exchange of data required by the Regulati on concerning the Registration, Evaluation, 
Authorisation and Restrict ion of Chemicals (REACH)185. In this context it was 
deemed necessary to issue specific compe tition law guidance to the industry on data 
sharing186. The guidance is provided in the form of practical rules helping 
undertakings to avoid a breach of compe tition law by e.g. reducing the frequency of 
information exchanges and using an inde pendent third party to anonymise the 
individual data. 
II – Sector Developments 
A – ENERGY  
1. O VERVIEW OF THE SECTOR  
179. European energy policy is built around three pi llars: sustainabilit y, security of supply 
and competitiveness. Reducing greenhouse gases is vital to combating climate 
change, and all European consumers ( households as well as commercial and 
industrial users) depend heavily on the s ecure and reliable provision of energy at 
competitive prices. These objectives can onl y be effectively met through a properly 
functioning, competitive European energy ma rket which sends the right signals to 
investors and policy makers. This requires continued efforts to open up Europe’s gas 
and electricity markets to competition and create a single European energy market. 
180. Competition policy in the energy field aims at ensuring a secure flow of energy, in 
particular electricity and gas, at comp etitive prices to the EU’s households and 
businesses. An open and competitive si ngle EU market would also guarantee a 
secure provision of ener gy in the future by sending the necessary signals for 
investment and making the European market attractive to external suppliers. Such a 
market would also be open to new energy mixes, and would play a major role in 
developing and deploying ne w environmentally friendly technologies. Prices that 
reflect costs will help encourage energy e fficiency, thereby supporting sustainability 
and security of supply. 
181. The Commission's competition sector inquiry  into the European gas and electricity 
markets187 concluded that energy markets are not  functioning properly. As a result, 
Europe's consumers, businesses and the ec onomy as a whole are still not benefiting 
                                                 
185 Regulation (EC) No 1907/2006 (OJ L 396, 30.12.2006, p. 1). 
186 http://reach.jrc.it/doc s/guidance_document/d ata_sharing_en.pdf 
187 Communication from the Commission: Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 
into the European gas and electricity sectors (Final  report), COM(2006) 851 final, and DG Competition 
report on energy sector inquiry, SEC(2006) 1724. 
 
EN 46   EN from the full advantages that should flow  from the opening up of European energy 
markets in terms of lower prices and a better choice of services. 
182. Three major structural problems and a number of other barriers persist. 
183. First, many energy markets are still too highly concentrated. The sector inquiry 
showed that incumbents have very high mark et shares in their re spective national gas 
markets, as well as in seve ral electricity markets. Many incumbents have retained 
firm control of the liberalised markets, a nd the markets themselves remain national in 
scope, with little new entry. All this en ables incumbents to impose high prices 
through their market power. Moreover, to pr otect their market positions and profits, 
incumbents engage in various practices that make it harder for new entrants to compete. 
184. Second, many energy markets are characte rised by a high degree of vertical 
integration, in particular in the form  of insufficient unbundling of network and 
supply activities. When incumb ents control the network, they also control the supply 
market. It is therefore no surprise that in cumbents view their networks as strategic 
assets that allow them to exclude co mpetition through discrimination. Moreover, 
where network and supply companies are integrated there are too few incentives to 
invest in networks – and this represents a major obstacle to new entry and a threat to 
security of supply. Many of Europe's inte rconnectors are chronically congested, there 
are insufficient tradable supplies on en ergy markets, and long-term contracts 
contribute to the locking-in of markets, thereby preventi ng alternative suppliers from 
supplying customers on retail markets. 
185. A third problem – of a structural nature – is the absence of cross-border integration 
and cross-border competition. Incumbents la rgely keep to their traditional markets, 
and rarely enter other national markets as large-scale competitors. While energy prices for commercial users vary significan tly from Member State to Member State, 
the differences are not competed away th rough imports. Moreover, different market 
designs between Member States make tran sfers of energy from one point in Europe 
to another difficult. 
186. In addition, the lack of transparency, for ex ample with respect to available transport 
capacity, harms all operators except the incumben ts. As a result, there is little trust in 
the pricing mechanisms. When prices do not  react to changes in actual supply and 
demand, security of supply and investme nt in alternative energy sources is 
threatened. 
2. P
OLICY DEVELOPMENTS  
187. On 10 January the Commission adopted a co mprehensive package of measures to 
establish a new Energy Policy for Europe to combat climate change and boost the EU's energy security and competitiveness
188. Together with this package, the 
                                                 
188 Communication from the Commission to the European Council and the European Parliament - an 
energy policy for Europe COM(2007) 1 final. 
 
EN 47   EN Commission also adopted the Final Repor t of the competition energy sector 
inquiry189. 
188. The inquiry’s findings are followed up th rough a number of carefully selected 
competition cases to address the key structural problems mentioned above. It should be underlined that enforcement in such  individual cases cannot open markets by 
themselves and that it is therefore necessa ry to complement the enforcement action 
with an improved legal framework. It is a le gislative priority to reinforce the current 
insufficient level of network unbundling, in or der to create the proper incentives for 
investment and do away with discrimina tion. To this end, DG Competition has 
worked very closely with DGs Transport a nd Energy in preparing the new legislative 
proposals. 
189. The European Council in March and the Eu ropean Parliament report on the Energy 
Package in July generally endorsed the Co mmission's January package. They also 
strongly supported the need for "effec tive unbundling". On this basis, the 
Commission put forward, on 19 September, a proposal for a th ird liberalisation 
package for the European electricity and gas markets
190. It focuses in particular on (i) 
effective unbundling of transm ission networks; (ii) strengthening of the powers and 
independence of regula tors; (iii) coop eration between regulator s and (iv) cooperation 
among transmission system operators. 
190. A second package of energy proposals, focusing on renewable energy and climate 
change, was prepared by the Commission during 2007 and was adopted  in January 
2008. In support of the Commission's overall climate change and renewable energy 
policies, the package also includes new guidelines on State aid to environmental 
protection, specifying the conditions under which aid to  environmental protection 
may be declared compatible with the Treaty. 
191. Full and combined use of the Commission’ s powers under antitr ust rules (Articles 
81, 82 and 86 EC) as well as merger cont rol (Regulation 139/ 2004) and State aid 
control (Articles 87 and 88 EC ) is also needed in order to maximise the overall 
enforcement impact. 
2.1. Antitrust enforcement 
192. Real competition requires, in  particular, that entrants can access (1) energy; (2) 
networks and (3) customers. 
                                                 
189 Communication from the Commission: Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 
into the European gas and electricity sectors (Final  report), COM(2006) 851 final, and DG Competition 
report on energy sector inquiry, SEC(2006) 1724. 
190 This package includes the following proposals:  Proposal for a Directive amending Directive 
2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules 
for the internal market in electricity, COM(2007) 528; Proposal for a Directive amending Directive 
2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules 
for the internal market in natural gas, COM(2007) 529; Proposal for a Regulation establishing an Agency for the Cooperation of Energy Regulators, COM(2007) 530; Proposal for a Regulation 
amending Regulation (EC) No 1228/2003 (electricity), COM(2007) 531 and Proposal for a Regulation 
amending Regulation (EC) No 1775/2005 (gas), COM(2007) 532. 
 
EN 48   EN 193. The Commission has focused in particular on cases in the electricity and gas sectors 
that address the main areas of market ma lfunctioning identified in  the sector inquiry. 
These investigations include both foreclos ure and collusion (market sharing) cases. 
In this work the Commission cooperates closely with National Competition Authorities (NCA)
191. 
194. As regards the foreclosure investigations, these initiatives cove r practices along the 
value chain, including: fo reclosure of downstream mark ets by long-term contracts 
with energy consumers; abusive practi ces by integrated network and supply 
companies in order to foreclose competitors from accessing networks (e.g. hoarding of network capacity and failure to invest); foreclosure of electricity retail markets by 
raising rivals' costs through the balancing system
192; foreclosure of downstream 
markets through the control of gas impor t infrastructure and long-term gas 
procurement agreements. Other issues invest igated include, for example, allegations 
of price manipulations on el ectricity markets through with drawal of capacity by 
generators. 
195. On 11 October the Commission adopted a d ecision under Article 9 of Regulation No 
1/2003 imposing binding commitments on the Belgian energy company Distrigas  to 
open the Belgian gas market (see also summary in I.A.2.3.2. above)193. The effect of 
these commitments is to ensure that Distri gas does not tie an excessive proportion of 
customers for more than one year ahead, wh ile allowing Distrigas as much flexibility 
as possible in managing its portfolio of contracts. 
196. As regards the electricity market, the Comm ission initiated proceedings on 18 July in 
two investigations concerning long-term contracts with fina l consumers (in particular 
large industrial consumers) in France194 (EDF ) and Belgium195 (Suez). In view of the 
de facto  and/or de jure  exclusive nature of the suppl y relationship, the share of the 
market that is tied and the duration of th ese contracts, it is suspected that these 
contracts prevent customers from switchi ng, thereby significan tly foreclosing the 
market concerned. 
197. On 11 May, the Commission initiated proc eedings in two investigations where 
abusive practices relating to gas transp ort networks are suspected of causing 
downstream market foreclosure. One case concerns alleged capacity hoarding and 
strategic underinvestment by the Italian energy group ENI on the TAG and TENP 
gas pipelines, leading to the fore closure of Italian supply markets196. The other case 
concerns suspicions that the German  energy group RWE may have abused its 
dominant position in the regional markets for the transport and wholesale supply of 
                                                 
191 A dedicated sub-group for energy has been set up as part of the cooperation within the European 
Competition Network (ECN). During 2007 this subgr oup addressed national experiences in relation to 
competition case remedies. 
192 The balancing system serves to ensure that injec tions and withdrawals on th e network are identical, in 
order to keep the system in equilibrium. 
193 Case COMP/37.966 Distrigas . 
194 See DG Competition website at http://ec. europa.eu/comm/competition/antitrust/news.htm 
195 See DG Competition website at http://ec.eu ropa.eu/comm/competition/antitrust/news.html 
196 MEMO/07/187, 11.5.2007. 
 
EN 49   EN gas in North Rhine-Westphalia by raising ri vals' costs and preventing (new) entrants 
from accessing capacity on gas trans port infrastructure in Germany197. 
198. The Commission also opened proceedings, on 18  July in a suspected collusion case 
under Article 81 EC, concerning the German  E.ON group and the French GDF group 
(E.ON-GDF )198. The alleged infringement takes th e form of an agreement and/or 
concerted practice restricting competiti on in the two companies' respective home 
markets, in particular concerning sales of natural gas trans ported over the MEGAL 
pipeline. 
199. As regards territorial rest rictions and price sharing mechanisms in gas import 
contracts, the Commission reached an  understanding with Algeria on 11 July, 
following a protracted dialogue199. As a result, the Algeri an gas producer Sonatrach 
will amend its contracts to ensure that impor ters are not restricted in reselling their 
gas within the EU. In particular, the use of price sharing mechanisms (obliging the 
importer to share part of its profits with th e producer if the gas is sold outside the 
agreed territory or use) in liquefied natu ral gas (LNG) contracts will no longer be 
possible once the title to the gas has passed to the importer. 
2.2. Mergers: concurrent application of int ernal market and competition rules 
(Article 21 of the Merger Regulation) 
200. The Commission adopted a number of d ecisions in the energy field in 2007. The 
most interesting case from the point of  view of competition and regulation was 
Enel/Acciona/Endesa200. 
201. The acquisition of joint control of Endesa  by Enel and Acciona was notified to the 
Commission on 31 May and cleared unconditi onally on 5 July. Enel and Acciona 
requested, under the releva nt national law, the appr oval of the Spanish energy 
Regulator (Comision Nacional de Energia (CNE)) for their acquisition of Endesa. 
202. On 4 July the CNE approved the transacti on subject to eleven  obligations, which 
included an obligation to inform CNE of a ll the strategic decisions taken by Endesa's 
board of directors in regulat ed markets and the right of  CNE to revoke any Board 
decision if ENEL's vote in the Board has been necessary for the approval of such 
decision in order to avoid "t he additional risks which ma y derive from the special 
powers that the Italian State s till has in Enel" (Condition 9). 
203. The Commission considered these conditions  to be incompatible with Community 
law and in particular with Articles 43 a nd 56 EC. Moreover, it forwarded to Spain a 
preliminary assessment in which it expressed the view that Spain had violated Article 
21 of the Merger Regulation by adopting, w ithout prior notification to and approval 
by the Commission, measures which unduly restricted a concentration of a Community dimension (i.e. the
 Enel/Acciona/Endesa transaction) and which were 
not necessary for and proportionate to the protection of a legitimate interest and 
therefore not compatible with Community law. 
                                                 
197 MEMO/07/186, 11.5.2007. 
198 See DG Competition website at http://ec.eu ropa.eu/comm/competition/antitrust/news.html 
199 IP/07/1074, 11.7.2007. 
200 Case COMP/M.4685 Enel/Acciona/Endesa  Commission decision, 5.12.2007. 
 
EN 50   EN 204. Enel and Acciona appealed against some of  the conditions of the CNE decision of 4 
July to the Spanish Minister for Industry and Tourism. The Minister revoked some of 
CNE's conditions and amended others, leaving unchanged the conditions that were not appealed against. 
205. The Commission considered that the remaining conditions as modified by the 
Minister were still contrary to Community law  and ordered Spain, by a decision 
dated 5 December, to withdraw them by 8 January 2008 at the latest. 
2.3. State aid: investigations opened in resp ect of regulated electricity tariffs that 
may favour certain undertakings 
206. In 2007, the Commission found indications that regulated electricity  tariffs in Italy, 
Spain and France could amount to State aid to large and medium-sized electricity 
consuming companies. 
207. In Italy, a preferential el ectricity tariff was originally  established in 1962 for three 
companies, ThyssenKrupp, Cementir and Terni Nuova Industrie Chimiche, as 
compensation for the nationalization of a hydro power plant owned by Società Terni, 
of which the three beneficiaries are the legal successors. Under the expropriation arrangement, Società Terni was to rece ive electricity suppl ies at cost price 
throughout the remaining duration of the company's hydro power concession, i.e. 
until 1992. After a first prolongation from 1992 to 2007, which was cleared by the 
Commission in 1992 under the State aid rules, Italy further prolonged the preferential 
tariff from 2005 to 2010 without notifyi ng the second prolongation to the 
Commission. In a decision taken in November
201, the Commission found that the 
second prolongation of the tariff consti tuted incompatible State aid. While 
compensation granted by the State to a co mpany in the context of an expropriation 
does not normally constitute State aid, in this case the preferential tariff could no 
longer be considered as compensatory, si nce the compensation already provided for 
in the original expropriation package was adequate, and since the predictability 
normally inherent in compensatory meas ures was lacking. The only effect of 
continuing to supply electricity to the be neficiaries below ma rket price was to 
improve their competitive position vis-à-vi s other EU producers who do not receive 
the same aid, by reducing the beneficiaries'  ordinary operating costs and enabling 
them to sell their products at a lower pri ce. The Commission found that none of the 
exceptions provided for in the EC Treaty fo r authorising such aid applied. The aid 
was therefore unlawful and must be r ecovered. The Commission decision is under 
appeal. 
208. In France and Spain, electricity users can pur chase their electricity either from the 
liberalised market or from the regulated market. On the regulated market, the prices, or "tariffs", are entirely regulated by the State. For some professional large electricity 
consumers in particular, the regulated tariffs are well below market prices. The tariffs 
are fully or partially financed by parafi scal levies imposed on all electricity 
consumers. The Commission is concerned th at the preferential tariffs may distort 
competition between large and medium-sized  companies on the internal market. In 
                                                
 
201 Decision of 20 November 2007 in State aid case C36/A/2006, not yet published in OJ, but available on 
the Internet site http://ec.europa.eu/comm/competition/state_aid/register/ 
 
EN 51   EN addition to distorting competition, the low tariffs may prevent the access of new 
entrants to the electricity market, which runs directly counter to the objective of 
creating a well-functioning Internal El ectricity Market. The Commission has 
therefore opened investigations concerni ng the tariffs in both France and Spain202, 
the final outcome of which is still to be decided. 
209. On 25 September the Commission adopted a State aid decision whereby it ordered 
the termination of long-term power purchase agreements (P PAs) entered into in the 
mid-nineties between power generators a nd the State-owned ne twork operator in 
Poland. The PPAs were concluded for a peri od of 15 to 25 years and covered around 
40% of the Polish power ge neration market. Their price formulae guaranteed the 
viability of the generators concerned for the entire duration of the agreements. Such conditions created a barrier to the prope r liberalisation of the power generation 
sector. The Commission concluded in its d ecision that the PPAs conferred an undue 
advantage on their beneficiaries and orde red their termination. The same decision 
approves compensation for stra nded costs for the generato rs that benefited from 
PPAs, on the basis of the Commission's Communication on Stat e aids linked to 
stranded costs. Compensation for stranded cost s is the tool that Member States can 
use to help smooth the transition to a liber alised market for the incumbents of the 
energy sector. A similar State aid pro cedure is on-going against PPAs covering 
around 80% of the power gene ration market in Hungary. 
                                                
 
202 Concerning France, see decision of 13 June 2007 in State aid case C17/2007, OJ C 164, 18.7.2007, p. 9; 
and concerning Spain, see decision of 24.1.2007 in State aid case C3/2007, OJ C 43, 27.2.2007, p. 9. 
 
EN 52   EN B – FINANCIAL SERVICES  
1. O VERVIEW OF THE SECTOR  
210. Financial markets are crucial to the func tioning of modern economies. The more 
integrated and the more competitive they ar e, the more efficient the allocation of 
capital and long-run economic performan ce. Banking, insurance and securities are 
three major areas of the fi nancial services sector. 
211. The European banking sector has undergone  significant growth and diversification 
over the last two decades. Today it directly  provides over three million jobs in the 
EU. Retail banking remains the most important  sub-sector of ba nking, representing 
over 50% of total EU activity in terms of gross income. The Commission estimates that in 2004 retail banking activity in the European Union generated gross income of EUR 250-275 billion, equivalent to a pproximately 2% of total EU GDP
203. However, 
a number of indicators, such as market fr agmentation, price rigidity and customer 
immobility, suggest that competition in the EU retail banking market may not have 
been working effectively. The Commission therefore decided in 2005 to open an inquiry into the reta il banking sector, in particular in rela tion to cross-border 
competition. The final report of the inquiry was published in January 2007 (see http://ec.europa.eu/comm/competition/sector s/financial_services/inquiries/retail.html
). 
212. To underpin the development of a single market for fina ncial services and harness 
the full potential benefits of the euro, the European banking industry under the aegis of the European Payments Council (EPC)
204 is creating a Single Euro Payments Area 
(SEPA). SEPA, if properly implemented, wi ll allow citizens, companies and other 
economic actors to make and receive paymen ts in euros, within Europe, whether 
between or within national boundaries  under the same conditions, rights and 
obligations, regardless of their location.  In other words making euro payments 
throughout Europe would become as easy, cheap and secure as making national payments today. 
213. SEPA aims at harmonising the millions of everyday electronic retail payments made 
with three payment instruments - payment car ds, credit transfers and direct debits – 
using a single bank account. 
214. The SEPA project is strongly supporte d by the European Commission and the 
European Central Bank (ECB). The tw o institutions share a common vision
205 for 
SEPA: an integrated market for payment services which is subject to effective 
competition . However, as the project is le d by the EPC - which is an association of 
undertakings - its implementation merits close scrutiny from a competition viewpoint. 
                                                
 
203 Figures taken from Interim Report II of the sector inquiry into retail banking. (see 
http://ec.europa.eu/comm/competition/sectors/financial_services/inquiries/interim_report_2.pdf ) 
204 EPC now consists of 69 members (banks and national banking associations). 
205 http://www.ecb.int/press/pr/date/2006/html/pr060504_1.en.html 
 
EN 53   EN 215. Against this background, DG Competition, together with the national competition 
authorities, has started to examine a numbe r of SEPA-related issues, including: the 
governance of the EPC and th e schemes; access to card sc hemes and infrastructures, 
particularly for non-bank payment services providers; the split between card schemes 
and infrastructures; standardization, certification and compliance; multilateral interchange fees (MIFs); and migr ation, in particular for cards. 
216. Another sector of financial services - name ly insurance - is of vital importance for 
big and small businesses throughout the Euro pean Union. EU insurers collect EUR 
375 billion in non-life premiums every year
206. The functioning of this industry in a 
pro-competitive way is crucial not only for the insurance industry as such, but for the 
economy as a whole. 
217. Business insurance is the most important se ctor of Non-life Insurance, generating 
gross premiums equivalent to aro und 3.3% of the EU's GDP. A competitive 
environment in business insurance is ther efore key to European economic growth. 
Taking into account that competition in this  sector within the common market may 
be restricted or distorted, the Commission initiated a sector inquiry into business 
insurance in 2005. The final report of th at inquiry was published in September 2007. 
2. P OLICY DEVELOPMENTS  
2.1. Sector inquiry into retail banking 
218. On 10 January the European Commission pub lished the Final Report of its sector 
inquiry into European retail banking markets207. It also adopted a Communication 
summarising the results of the inquiry and describing areas for fu rther investigation 
and antitrust enforcement to open up mark ets and stimulate competition. The inquiry 
covers two aspects: markets for payment car ds and payment systems, and markets for 
current accounts and related services (core retail banking products). 
219. The findings confirmed that markets ar e still fragmented along national lines. 
Fragmentation means that the potential of a market of 450 million citizens is not being fully exploited, that consumers have limited choices and often pay more than 
they should for current accounts, loans or payments. Despite all efforts at European 
level to further integrate the EU financia l services markets, access to several product 
markets and geographical markets still appear s to be difficult. The high degree of 
variation in prices, profit margins and selling patterns between Member States  and 
the contrasting homogeneity within individual Member States are indicative of 
regulatory or behavioural barriers. 
220. The European payment card industry channels flows of EUR 1 350 billion per year, 
generating an estimated EUR 25 billion in fees for banks. The industry is highly 
concentrated, entailing high fees and high pr ofitability. Another finding is that the 
rules governing the networks can also cr eate significan t barriers to entry. For 
                                                
 
206 Source: Swiss Re, Sigma 2/2005, p. 39 and 5/2006, p. 35; cf. Interim Report of the Business Insurance 
Sector Inquiry, p. 37. 
207 IP/07/114 and MEMO/07/40, 31.1.2007. 
 
EN 54   EN example, several national card schemes run by the main domestic banks are giving 
rise to competition problems. 
221. There are large variations in payment car d fees across the EU. Retailers in some 
countries pay fees up to four  times higher than in other countries for accepting the 
same major credit card. 
222. The publication of the repor t has already brought about  changes in a number of 
Member States where market players and/or  authorities have ta ken steps to address 
the competition concerns in the area of payment cards and payment systems208. 
223. The findings of the sector i nquiry also underlined the impor tance of clos e monitoring 
of the Single Euro Payments Area (SEPA). The inquiry raised concerns that the 
banking industry could use the migration to SEPA as a pretext to increase prices by 
abolishing efficient national schemes, giving  rise to a situati on of monopoly rents. 
The Commission – together w ith the national competition authorities – will therefore 
be following the SEPA devel opments with great attention. 
224. Finally, the sector inquiry concluded that proportionate steps to enable customer 
mobility will enhance competition in the re tail banking sector. Certain problems the 
inquiry identified in relation to customer choice and mobility in core retail banking 
activities (current accounts and related services) are being followed-up by national 
competition authorities and the Commi ssion. In Hungary, for instance, the 
Competition Authority  launched a sector inquiry on customer mobility.  At the 
European level, the Commission, in the context of the Green Paper on Retail Financial Services
209, has announced a series of initia tives including an invitation to 
the banking industry to develop a Code of Conduct on bank account switching210. 
2.2. The Commission prohibits MasterCard's Multilateral Interchange Fees for 
certain cross-border card payments in the EEA 
225. On 19 December the Commission adopted a decision prohibiting MasterCard's 
multilateral interchange fees (MIFs) for cro ss-border card payments with MasterCard 
and Maestro branded consumer credit and de bit cards between Member States of the 
European Economic Area (intra-EEA MIFs)211. The adoption of this decision 
virtually coincided with the expiry of the Commission's exemption of VISA's cross-
border MIFs on 31 December, widely consid ered as the Commission's leading case 
on MIFs over the last five years212. 
226. MasterCard's intra-EEA MIF is a charge levied on each payment at a retail outlet 
when the card payment is processed. This  charge, which is paid by the acquiring 
                                                 
208 Report on the retail banking sector inquiry, point B 2.2, p. 93 (electronic version). 
209 COM(2007) 226. 
210 SEC(2007) 1520 published alongside COM(2007) 724 final. 
211 IP/07/1959 and MEMO/07/590, 19.12.2007. 
212 In 2002, the Commission exempted a similar system proposed by Visa (see IP/02/1138) after Visa 
offered substantial reforms to its MIF. The exemption, however, expires on 31 December 2007 and Visa will from that moment on be responsible to ensure that its system is in full compliance with EU 
competition rules. See Commission Decision of 24.7.2002, VISA II, OJ L 318, 22.11.2002, p. 17 and 
Competition Newsletter 2002 Number 3, p. 33. 
 
EN 55   EN bank213 to the issuing bank214, largely determines the pr ice that merchants pay for 
accepting payment cards. The decision conclu ded that MasterCard's intra-EEA MIF 
inflated the cost of card acceptance by merchants without countervailing efficiencies. 
MasterCard was ordered to discontinue charging the fees. While no fines were 
imposed as MasterCard had given notification of its intra-EEA MIF and the specific circumstances of the case, the decision doe s provide for daily penalty payments in 
the event of failure to comply. If MasterCard does not withdraw its intra-EEA MIF by 20 June 2008 (i.e. six months after notif ication of the deci sion) the Commission 
may order MasterCard to pay 3.5% of its global daily turnover as a daily penalty. 
227. The Commission's decision did not declare MIFs illegal as  such. However, it did 
make clear that, where card schemes such as MasterCard operate on the basis of a 
business model that includes a MIF, the MIF must contribute  to technical and 
economic progress and benefit consumers in order for it to comp ly with Article 81 
EC. The onus for demonstrating these positiv e effects is on the pa yment association. 
The outcome of the Commission's assessmen t in a given case will depend on the 
claimed purpose, plausibility and impleme ntation of the specific model underlying a 
MIF scheme, as well as the MIFs' object and effects on the relevant market(s). 
MasterCard's argument was that its MIF scheme maximised output while generating 
objective efficiencies to the benefit of c onsumers. Yet MasterCard has failed - after 
four years of in-depth investigation - to  furnish empirical evidence to demonstrate 
any positive effects on innovation and efficien cy which would allow a fair share of 
the alleged MIF benefits to be passed on to consumers. The Commission therefore 
concluded that MasterCard's MIF scheme di d not fulfil the first three conditions of 
Article 81(3) EC. 
228. The adoption of the decision follows the i nquiry into retail banking (see 2.1. above), 
which found that interchange fee agreements  might stand in the way both of a more 
cost-efficient payment cards industry and of  the creation of SEPA. The inquiry also 
concluded that in five EEA countri es (Denmark, Finland, Luxembourg, the 
Netherlands and Norway) payment car d systems function without MIFs. 
2.3. Morgan Stanley/Visa International and Visa Europe 
229. On 3 October the Commission fined Visa In ternational and Visa Europe (Visa) the 
sum of EUR 10.2 million for refusing to admi t Morgan Stanley as a member from 
March 2000 to September 2006
215. The Commission took the view that Visa's 
behaviour constituted a serious infringement  of Article 81 EC and Article 53 of the 
EEA Agreement216, as an effect of which Morgan Stanley was excluded from the 
market. 
                                                 
213 An acquiring bank is a financial institution that ha s a contractual relation w ith a merchant for accepting 
a certain payment card. 
214 An issuing bank is a credit institution that has a c ontractual relation with a cardholder which allows for 
the provision and use of a payment card. 
215 Case COMP/37.860. 
216 Visa is a membership association, members of wh ich engage in an economic activity. Hence, rules and 
regulations setting out the functioning of Visa, adopted by its board of directors, are regarded either as 
decisions of association or as ag reements between undertakings within  the meaning of Article 81(1) EC. 
 
EN 56   EN 230. At the time of the infringement, the Morg an Stanley group owned the Discover card 
network in the US. However, Discover wa s not present on the UK market, or even on 
any of the EU markets. Until Visa finally admitted Morgan Stanley Bank as a member, the card operations of Morgan Stanle y in the EU were confined to issuing 
MasterCard cards in the UK. 
231. The case was initiated following a complaint submitted by Morgan Stanley in 2000. 
In 1999, Morgan Stanley incorporated Morgan Stanley Bank in the UK and in 2000 Morgan Stanley Bank's request to become a member of the Visa organisation was 
rejected by Visa. 
232. The Commission's investigation revealed that  retailers expect banks to offer card 
acceptance contracts as a package that in cludes both Visa and MasterCard. Visa’s 
refusal to admit Morgan Stanley as a me mber therefore not only prevented Morgan 
Stanley from providing servic es to merchants as regards Visa transactions (which 
make up around 60% of the market), but al so as regards transa ctions with other 
payment cards. 
233. In August 2004 the Commission sent Visa a st atement of objections setting out the 
preliminary findings of its investigation. Visa subse quently (in September 2006) 
concluded a settlement agreement with Morg an Stanley allowing it to become a Visa 
member. As a consequence, Morgan Stanley withdrew its complaint to the Commission. 
234. The Commission found that the exclusion of Morgan Stanley from Visa membership 
restricted competition in the provision of credit card acceptance services to 
merchants in the UK. In the UK, the market for providing merchants with card acceptance capabilities (the so-called "ac quiring" market) is highly concentrated. 
235. Within a very narrow circle of possible entrants, Morgan Stanley was one of a small 
number of operators that ac tually considered entry an d had the qualifications to 
operate efficiently. It was reasonable to assume that Morgan Stanley’s entry would 
have positive effects on prices and on the quality of acquiring services in the UK. 
236. As a reason for excluding Morgan Stanle y from membership, Visa invoked an 
internal rule according to which it w ould not accept as a member any applicant 
deemed by the board of directors to be a competitor of the Visa scheme. However, 
the Commission's investigation showed that Morgan Stanley was not a competitor of Visa in the EU and had no plans to enter at the material time
217. Furthermore, the 
internal rule was applied by Visa in a discriminatory manner, as Visa admitted Citigroup (the owner of the Diners Club network competing with Visa) and several 
shareholders of JCB Co. Ltd. (equally a competitor of Visa) as Visa members. 
237. Although the complaint was withdrawn and the infringement ceased, the 
Commission decided to impose a fine, as Mo rgan Stanley was excluded from the UK 
acquiring market for six and a half year s and more than two years after the 
Commission's statement of objections to Visa. 
                                                
 
217 Because it had no payment card network and - given the high entry barriers to  the networks market - 
there was no realistic possibility that Discover, Morg an Stanley’s US card network, would expand to 
the EU. 
 
EN 57   EN 2.4. Groupement des Cartes Bancaires 
238. In its decision of 17 October, the Commi ssion concluded that the price measures of 
the Groupement des Cartes Bancaires (CB) ha d an object and an effect of restricting 
competition and hence infringed Article 81 EC218. The Groupement des Cartes 
Bancaires manages the "CB" card payment system in France, which accounts for 
over 70% of card payments in France. Visa  and MasterCard cards issued in France 
operate within this system as "CB" cards. The Groupement, which has around 150 
members, is managed by the largest French banks219. 
239. The Commission found that the Groupement had adopted price measures hindering 
the issuing of cards at competitive rates by certain member banks in France , thereby keeping the price of payment cards artificiall y high to the benefit of the major French 
banks. The measures at issue were fees a dopted by the Groupement which had to be 
paid by certain members under certain conditio ns on the basis of the number of cards 
issued, also taking into account the acq uiring activity. A key measure was the 
"MERFA" (“Mécanisme Régulateur de la Fonction Acquéreur”), a formula 
determining whether a fee of up to EUR 11  on each card issued should be paid by 
member banks that are not "sufficiently" active in terms of acquiring merchants or 
installing automated teller machines (ATMs). The other measures at issue in the 
decision included a membership fee of EU R 12 per card, an additional membership 
fee and a “sleeping member” fee (“mécanisme de réveil des dormants”) of EUR 12 per card issued in excess of a maximu m number of cards stipulated by the 
Groupement. Although the fees were in princi ple applicable to all members of the 
Groupement, they were designed to hinder the issuing of cards at a price lower than that of the large banks. 
240. Although the Groupement claimed that the meas ures were necessary to combat "free-
riding" on the investments and to encourag e new competitors to acquire merchants 
and install ATMs, the Commission's investig ation revealed that the measures were 
introduced to restrict competition in the French payment card market and that this has in fact been their effect. 
241. The implementation of the measures was suspended in 2004 pending the 
Commission decision on their compatibility  with Community law. The measures 
nevertheless continued to ha ve an effect on the market , since until they were 
abolished competitors of the major banks we re forced to issue fewer cards at less 
competitive rates than they would have done  if the restrictive measures had not 
existed. 
242. The Commission ordered the Groupement to cancel the measures concerned with 
immediate effect and to avoid taking any measures in the future with a similar 
purpose or effect. In the specific circumstances of the case, the Commission decided not to impose a fine on the Groupement si nce the measures had been notified in 
December 2002 and were kept in effect only for a very short time after the entry into 
force of Regulation 1/2003. 
                                                
 
218 http://ec.europa.eu/comm/competition/antitrust/cases/decisions/38606/dec_en.pdf 
219 Crédit Agricole, Crédit Lyonnais, Crédit Mutuel, Crédit Industriel et Commercial, Société Générale, 
Crédit du Nord, BNP-Paribas, Natexis-Banques Populaires, the savings banks, the Post Office and 
Crédit Commercial de France. 
 
EN 58   EN 2.5. Business insurance sector inquiry 
243. The Commission decided on 13 June 2005 to initiate a sector inquiry into the 
provision of insurance produc ts and services to businesses in the Community, based 
on Article 17 of Council Regulation (EC) No 1/2003220. Business insurance includes, 
inter alia, coverage for property risks and interruption of business; shipping; motor 
vehicles; general, professi onal and environmental liabili ty; personal accidents and 
credit risks. 
244. On 25 September, the Commission adopted the Final Report on the Business 
Insurance Sector Inquiry221, which was released togeth er with a comprehensive 
working document of the Commission's serv ices containing the full findings (the 
Working Document). 
245. The Final Report and the Working Document focused on a number of key issues and 
concerns in relation to th e financial aspects of the industry, the harmonization of 
premiums in coinsurance and reinsurance, the distribution of business insurance, the 
horizontal cooperation amongst insurers and the duration of business insurance contracts. 
246. It appears from the findings of the sector  inquiry that profitability in business 
insurance at the EU-25 level has been sust ained over recent years in the majority of 
Member States, albeit wi th significant variations. 
247. The Commission found that widespread practice
222 in both reinsurance and 
coinsurance markets almost always results in a de facto  alignment of premiums and 
other conditions of coverage, including premiums. 
248. The Commission's provisional view of the practices described is that individual 
instances of them, when they result from  agreements between undertakings, may fall 
within the scope of Article 81(1) EC. The Commission questions in particular 
whether the element of premium alignment is indispensable, or whether the same efficiencies could not be achieved from au ctioning the remaining part of the risk. 
However, the Commission has not at this st age heard persuasive arguments to justify 
their indispensability as required by Article 81(3) EC. 
249. In respect of insurance intermediaries , the market surveys and the public 
consultation highlight the fact that current ma rket practices - in particular the lack of 
spontaneous disclosure of remuneration re ceived from insurers and other possible 
conflicts of interest - create an environment in which business insurance clients, in many cases, are unable to make fully inform ed choices. Disclosure by intermediaries 
of relevant information in relation to remuneration received from insurers and services provided to insurers may help mitigate conflicts of interest. The Commission intends to look at these issues anew in the framework of the Insurance 
Mediation Directive. 
                                                
 
220 http://ec.europa.eu/comm/competition/sectors/financial_services/inquiries/decision_insurance_en.pdf 
221 IP/07/1390, 25.9.2007. 
222 The Commission's concerns relate exclusively to the pr ocedure in two stages; this involves the selection 
of a lead insurer in the first round and then the attribution of the remaining risk to insurers who do not 
reassess it but simply conclude agreements on identical terms to those of the lead insurer. 
 
EN 59   EN 250. Practices aimed at giving brokers an incen tive to place business with particular 
insurers ("contingent commissions") have the potential to undermine fair competition in the insurance market. Such practices mi ght result, instead, in insurers competing 
against each other on the level of remunerati on afforded to brokers in an attempt to 
"buy" distribution, or at the very least to influe nce the broker's choice. 
251. Some forms of cooperation between insure rs are at present subject to a block 
exemption under Regulation (EC) No 358/2003. The current Block Exemption 
Regulation  was adopted for a period of seven years and is thus due to expire on 31 
March 2010. 
252. In their responses, industry stakeholders we re very much in favour of prolonging the 
current Block Exemption Regulation when it expires in 2010 and usually observed 
that the forms of cooperation and agreem ents exempted by the Block Exemption 
Regulation are pro-competitive. However, some respondents disputed that the 
insurance industry needs special treatment under antitrust rules. 
253. Under the terms of the enabli ng legislation the Commission is required to submit, by 
31 March 2009, a report on the functioning and future of the Block Exemption Regulation. A consultation process involvi ng industry participants, consumers' 
organizations and other interested stake holders is due to take place in 2008. 
254. The Commission also looked at the duration of contracts  and at clauses concerning 
their renewal and extension, b ecause of the competition co ncerns to which a general 
practice of excessively long-term contracts might potentially give  rise in terms of 
foreclosing the market to new entry. If customers are committed to the same insurer for a long period, this could affect competito rs who are trying to gain access to the 
market or to increase their market share. 
255. Further to the findings of th e Interim Report (which showed  that the average duration 
of contracts in Austria was 8 years, in Sl ovenia 7 years, in Italy and the Netherlands 
6 years), the replies received were insufficient to dispel competition concerns in Austria. The Commission believes that it would be appropriate to give further 
consideration to the situation in Austria, without prejudging the ro ute that this might 
take. 
2.6. State aid in the fina ncial services sector 
256. On 18 July the Commission cleared the tw o remaining recapitalisation cases in the 
German Landesbanken sector (WestLB and Nord/LB) as complying with the private market economy investor test
223. During the summer, the US subprime crisis began 
to impact seriously on seve ral European banks, requiring considerable public support 
measures to keep the banks afloat. The Co mmission launched investigations into two 
cases concerning the German banks, IK B and Sachsen LB. For the UK bank, 
Northern Rock, a decision was taken on 5 December declaring rescue aid to be 
compatible with State aid rules224. Subsequent additional measures in support of 
Northern Rock are also being assessed. 
                                                 
223 OJ C 4, 9.1.2008, p. 1. 
224 IP/07/1859, 5.12.2007. 
 
EN 60   EN 257. The support measures in these cases are assessed according to the market economy 
investor principle ("MEIP"). Under this test it is assessed whether, in similar circumstances, a private investor opera ting in normal conditions of a market 
economy would have entered into the transa ction in question (e.g. providing loans or 
funds to the bank) and whether it would have done so on similar terms. The comparison between the conduct of public a nd private investors must be made by 
reference to the attitude which a private i nvestor would have had at the time of the 
transaction in question, having regard to the available information and foreseeable 
developments at that time. If a market economy investor coul d have acted in the 
same way, no State aid is involved. 
258. On 13 November the Commission initiated the formal investigation procedure in 
respect of a French tax scheme for insu rance companies that offer complementary 
health insurance contracts with strong solidarity components
225. This is one of the 
rare cases where compatibility of the aid is claimed on the basis of Article 87 (2) (a), i.e. aid (i) with a social obj ective (ii) granted to the fina l consumers and (iii) without 
discrimination as to the origin  of the product. As the aid is indirect, the Commission 
opened proceedings to ascertain that a ll three criteria are indeed present. 
259. On 30 May the Commission opened the formal  investigation procedure against an 
Italian tax scheme aimed at realigning the ta x value of the assets of certain banks in 
Italy resulting from company reorgani sation transactions under Law 218/1990 on the 
privatisation of the public  banking sector in Italy
226. Although it is not the first time 
that the Commission has investigated tax br eaks relating to the re organisation of the 
banking sector in Italy227, the Commission has never previously examined the 
compatibility of this subsequent tax sche me of 2003 aimed at clearing the suspended 
tax liabilities deriving from such reorganisations. In opening the formal 
investigation, the Commission took the view that the scheme seemed to provide a 
sizeable advantage to a limited number of Ita lian banks and that this seemed liable to 
distort competition, especi ally against the background of ongoing c onsolidation in 
the banking sector. 
260. The recent turmoil in the financial markets triggered by the US subprime crisis has 
raised concerns among governments and regul ators about financial stability. In this 
context the ECOFIN Council on 9 October ad opted Conclusions suggesting a series 
of actions to enhance the arrangements fo r financial stability. In these conclusions 
the ECOFIN Council invited the Commission and Member States to work together 
towards clarifying when a banking crisis c ould be considered by the Commission as 
“a serious disturbance of the economy” under the Treaty and State aid rules, and invited the Commission to c onsider streamlining procedures to focus on how State 
aid enquiries under critical circumstances  can be dealt with  rapidly. In its 
Conclusions, the ECOFIN Council also set out a strategic Roadmap for the period 
until 2009. 
                                                
 
225 IP/07/1692, 14.11.2007. 
226 OJ C 154, 7.7.2007, p. 15. 
227 See Commission Decision 2002/581/EC of 11.12.2001 on the tax measures for banks and banking 
foundations implemented by Italy (OJ L 184, 13.7.2002, p. 27); Commission Decision 2000/600/EC of 10.11.1999 conditionally approving the aid granted by Italy to the public banks Banco di Sicilia and 
Sicilcassa (OJ L 256, 10.10.2000, p. 21); and Commission Decision 1999/288/EC of 29.7.1998 giving 
conditional approval to the aid granted by Italy to Banco di Napoli (OJ L 116, 4.5.1999, p. 36). 
 
EN 61   EN 2.7. Mergers in the financial services sector 
261. The Commission assessed and authorised a numb er of concentrations in the financial 
services sector. In the ABN AMRO  cases228, the Commission anal ysed the proposed 
acquisition of the Dutch bank ABN AMRO by a consortium formed by RBS, Fortis and Santander. The three members of th e consortium intended to distribute ABN 
AMRO’s assets between themselves. The Co mmission therefore considered that the 
consortium's operation gave rise to th ree different concentrations. While the 
acquisitions proposed by RBS and Santande r were unconditionally authorised by the 
Commission in Phase I, the Phase I clearance of the Fortis acquisition was subject to 
conditions. The extensive market investig ation had revealed that the proposed 
acquisition raised competition concerns in commercial banking (defined for the purposes of the case as financial services to corporate customers with a turnover of 
EUR 2.5 million to EUR 250 million) and f actoring. To address the Commission's 
concerns, Fortis undertook to divest a corporate banking business (consisting of 
ABN AMRO's subsidiary Hollandsche Bank Un ie N.V. (HBU)), two corporate client 
departments, 13 "Advieskantoren" and ABN AMRO's Dutch factoring activities to a 
large international bank. 
C – ELECTRONIC COMMUNICATIONS  
1. O VERVIEW OF THE SECTOR  
262. Growth in the electronic communications sector in the EU was slightly slower in 
2007 than in the preceding years. While traditional fixed voice services were 
continuing to decline, in the mobile voice market revenues continued to rise and penetration increased significantly while prices continued to fall
229. The most 
dynamic segment, fixed broadband, continue d to develop steadily, benefiting from 
continued investment by alternative ope rators and increased infrastructure 
competition. Mobile broadband take-up remained limited although is showing signs of growth. 
263. Confronted with slower gr owth in their traditional revenues, telecom operators 
reoriented their business mode ls towards convergent services (telecoms, media and 
internet). To support this shift, a new cy cle of investment in convergent and high 
speed networks - the “Next Generation Networks ” – has taken off, in particular in the 
form of large scale, fibre access roll-out projects. 
264. Increased retail competition enabled consumers to continue to benefit from both 
lower prices and an increasing variet y and quality of fixed and mobile 
communication services. 
265. The vast majority of providers of electr onic communications services continued to 
operate within the confines of the EU  regulatory framework for electronic 
                                                
 
228 Case COMP/M.4843 RBS/ABN AMRO assets  Commission decision, 19.9.2007, Case COMP/M.4845 
Santander/ABN AMRO assets  Commission decision, 19.9.2007 and Case COMP/M.4844 Fortis/ABN 
AMRO assets  Commission decision, 3.10.2007. 
229 Progress Report on the Single European Electronic Communications Market 2007 (13th Report), p. 3. 
 
EN 62   EN communications (Regulatory Framework)230, which is designed to facilitate access to 
legacy infrastructure, foster investment in alternative network infrastructure and 
bring choice and lower prices for consumers. 
2. P OLICY DEVELOPMENTS  
266. For most of 2007 the original Recommendati on on the relevant markets remained in 
force231. This Recommendation identified 18 prod uct and services markets, at both 
wholesale and retail level, as being susceptible to ex ante  regulation. Within the 
Community consultation mechanism under Ar ticle 7 of the Framework Directive232 
(FD) the Commission assessed 170 notif ications from NRAs and adopted 66 
comments letters and 49 no-comments letters in 2007. In five cases, the Commission 
raised serious doubts as to the compatibility  of the notified meas ures with EU law 
and opened second phase investigations unde r Article 7(4) FD. In one case the 
Commission adopted a veto decision233. 
267. The work on the review of the Regulat ory Framework continued during 2007 and 
resulted in the adoption in November of  a comprehensive Commission proposal for a 
revised regulatory package (see 2.1. below).  
268. As far as the application of EU competition law in the electronic communications 
sector was concerned, the most significan t decision adopted by the Commission in 
2007 was the decision of 4 July against Telefónica (see I.A.2.3. above). In this 
decision the Commission imposed a fine of over EUR 151 million on Telefónica for 
having abused its dominant position on the Sp anish broadband market in the form of 
a margin squeeze between its wholesale and re tail prices, despite th e fact that sector-
specific regulation was in place234. 
269. The issue of unrestricted application of EU competition law in addition to sector-
specific regulation was also addressed by the Commission in the infringement 
procedure against the Czech Republic (see I.A.2.4. above). 
2.1. Review of the Regulatory Framewor k: reduction of markets subject to ex ante 
regulation  
270. The review of the Regulatory Framework in  the course of 20 07 led the Commission 
to propose a regulatory package (coveri ng the Directives and the Recommendation 
on relevant markets plus a proposal fo r a Regulation establishing a European 
                                                 
230 Directive 2002/21/EC (Framework Directive) (OJ L 108, 24.4.2002, p. 33), Directive 2002/19/EC 
(Access Directive) (OJ L 108 , 24.4.2002, p. 7), Directive 2002/ 20/EC (Authorisation Directive) (OJ 
L 108, 24.4.2002 p. 21), Directive 2002/22/EC (Universal Service Directive) (OJ L 108, 24.4.2002, p. 
51), Directive 2002/58/EC (Directive on privacy a nd electronic communications) (OJ L 201, 31.7.2002, 
p. 37). 
231 Commission Recommendation C (2003) 497, 11.2.2003, OJ L 114, 8.5.2003, p. 45. 
232 Directive 2002/21/EC of 7/3/2002 of the European Parliament and of the Council, OJ L 108, 24.4.2002, 
p. 33. 
233 For details on the second phase investigations and the veto decision see chapter "Application of the 
Regulatory Framework" below. 
234 For details see chapter "Margin squeeze in a regulat ed sector" (section "Application of Articles 81, 82 
and 86 EC") above. 
 
EN 63   EN Electronic Communications Market Authority (EECMA)) in November235. With the 
exception of the new Recommendation on relevant markets, which entered into force in December, the legislative parts of the proposed regulatory package will enter into 
force after their adoption by the Council a nd the European Parliament, which is 
expected in 2010-2011. 
271. The Recommendation on relevant markets is  an important part of the Regulatory 
Framework. It lists those markets wh ere, in the view of the Commission, ex ante  
regulation is the appropriate tool to pr omote competition, investment and consumer 
choice. From a competition policy perspectiv e the main objective of the review has 
been to assess where ex ante  regulation is still needed and where it can be lifted.  
272. The Regulatory Framework is helping to ma ke communications markets increasingly 
competitive. Competing operators are providing more fixed telephony services to consumers and building more core networ k infrastructure. Mobile network access 
and broadcasting transmission services are becoming increasingly competitive. Against this background the Commission has more than halved the number of 
markets susceptible to ex ante  regulation, from 18 to 7. Following the adoption of the 
new Recommendation, ex ante  regulation is now likely to be lifted in many areas and 
a greater part of the industry will be subject only to EU competition rules
236. The 
markets for retail access, fi xed call origination, fixed call termination, physical 
network infrastructure access, wholesale br oadband access, terminating leased lines, 
and mobile call termination remain in the new Recommendation. 
273. Where bottlenecks persist, ex ante  regulation will therefore c ontinue to be necessary 
in the future and will have to be even mo re effective. This is why the Commission's 
proposal contains an extension of the Commission's veto powers (currently only 
covering market definition and findings of significant market power) to include 
remedies. However, in order to already begi n to address issues related to remedies, 
the Commission has started to work on Recommendations for remedies. The 
envisaged Recommendations would provide for regulatory oversight through advice 
to the NRAs on how to achieve a more harmonised remedial system further upstream (i.e. before the question of a veto decision even arises). 
274. As part of the review of the Regulat ory Framework, the Commission proposes to 
create an independent European Electron ic Communications Market Authority with 
advisory powers to provide expert  advice to the Commission on issues inter alia 
related to the national market assessments . The Authority would also assist the 
Commission in identifying the remaining bottlenecks where further harmonisation is 
needed. 
                                                
 
235 Commission proposal for a directive of the European Parliament and of the Council, SEC(2007)1472 
and SEC(2007)1473, and Proposal for a regulation of the European Parliament and of the Council 
establishing the European Electronic Communications Market Authority COM(2007) 699 for an 
overview see the website of DG Information Society: http://www.ec.europa.eu /information_society/policy/ecomm /library/proposals/index_en.htm 
236 Commission recommendation of 17.12.2007 on relevant product and service markets within the 
electronic communications sector, OJ L 344, 28.12.2007, p. 65. 
 
EN 64   EN 275. It is also proposed to in troduce functional separation237 as a measure in the NRA's 
tool-box. However, this reme dy would be a last resort to  be used by the national 
regulator only if other remedies have faile d on a persistent basis. Moreover, the NRA 
would have to inter alia  analyse the effects on the incumb ent's incentives to invest in 
upgrading its network and on consumers. 
276. Overall, the Commission proposal for th e future regulation of electronic 
communications markets marks yet another im portant step in the transition of this 
sector from monopoly to competition. While  parts of the sector will now be 
completely free of ex ante  regulation, it will continue to be governed by competition 
law. 
2.2. Application of the Regulatory Framework and other policy developments 
277. On 11 January the Commission adopted its fifth veto decision238 under Article 7(4) 
Framework Directive. The case concerned th e retail markets for access to the public 
telephone network at a fixed location in Poland. The Commission had serious doubts 
about the market definition proposed by the Polish regulator, which included 
broadband connections (such as DSL connections) in the same product market as narrowband connections. Under the proposed measures broadband connections 
would be made subject to the same retail  regulation as PSTN and ISDN connections. 
In its revised analysis
239 following the Commission's veto the Polish NRA still 
partially included retail broadband access in the market, which resulted in a further 
letter expressing serious doubt s. In April, the Polish NRA decided to change its 
market definition by removing all retail broadband services from the scope of the product market definition, and the measures  were finally able to be adopted. 
278. In other cases, taking account of the Comm ission's position, several NRAs opted for 
withdrawal of draft measur es. This was the case in a second-phase investigation 
concerning the wholesale broadband access market in Malta
240. Similarly, the NRA 
withdrew the draft measure in a case concerning the w holesale market for mobile 
origination services to non- geographic numbers in Italy241. The Belgian NRA 
withdrew the notification in a case th at concerned the wholesale markets for 
broadcasting transmission serv ices (mostly TV transmissi on by cable) in the French-
speaking part of Belgium242. Similarly, the Polish NRA withdrew a notification 
concerning the market for trunk segments of leased lines243. 
279. Mobile telephony markets continued to rece ive attention from telecom regulators and 
competition authorities in 2007. This was partly  due to their growing market share in 
comparison with fixed telephony, but also to  the availability of new products and 
                                                 
237 Functional unbundling involves incumbents running telephone networks as a separate business from 
that of providing call and internet services. 
238 PL/2006/0518. The second phase investigation was opened already in 2006. 
239 PL/2007/0593. 
240 MT/2007/0563. 
241 IT/2007/0575. 
242 BE/2007/0578. 
243 PL/2007/0668. Leased lines are connections, typically via undergro und fibre optic cab les, that are 
owned by one operator and (partially) used by another operator. From an economic perspective leased 
lines are subdivided into terminating segments (bet ween a network node and a final destination) and 
trunk segments (between two different network nodes) 
 
EN 65   EN services. 2007 was the year when 3G took off. Some 86 operators were offering 3G 
on a commercial basis at the end of 2007, up from 70 in 2006. 3G services have now 
become available in all Member  States. It is expected that  the greater availability of 
spectrum and flexibility of usage conditi ons, as proposed in the review of the 
Regulatory Framework, will stimulate further development of mobile data services. 
280. In general, mobile telephony markets tend to  be effectively comp etitive at the retail 
level. However, wholesale markets for mobile call termination and, under the 
previous Recommendation on relevant markets, for mobile access and call origination were recommended for ex ante  regulation. 
281. In 2007, five NRAs (Belgium, Estonia, Ge rmany, Gibraltar and Hungary) notified 
draft measures applying to the wholes ale market for mobile access and call 
origination. Only in Gibraltar was the mark et found not to be effectively competitive. 
This indicates that removing the market from the revised Recommendation was the 
correct course of action. 
282. As regards wholesale markets for mobile cal l termination, all regulatory authorities 
found that each operator has a monopolistic pos ition with regard to  terminating calls 
on its mobile network. Consequently, ex ante  remedies were imposed in most, if not 
all, Member States. 
283. The consistently high international roaming charges led the Commission to propose a 
Roaming Regulation
244 on the basis of Article 95 EC . This regulation entered into 
force on 30 June and will be applicable for three years. As a result, in all Member States mobile operators were obliged to offer to all their customers by 30 July a 
Eurotariff, which in principle applied automatically from 30 September unless a 
customer chose to opt out. The Eurotariff sets a retail price cap for calls made or received abroad
245. The Regulation also stipulates a price cap for wholesale roaming 
charges, and obliges operators to keep customers informed about roaming prices. 
284. On 18 July the Commission closed pro ceedings conducted under Article 82 EC 
against Vodafone UK, O2 UK, Vodafone Germany and T-Mobile Germany, which 
concerned international roaming tariffs applied by these operators246. 
2.3. Developments in the area of State aid 
2.3.1. Support for broadband services 285. Wide availability of broadband services at affordable prices is of crucial importance 
for the economic and social development of  the European Union. In its assessment of 
public funding schemes under the State aid rules, the Commission acknowledges 
that, in the absence of pub lic funding, private operators  often have no economic 
incentive to offer broadband in scarcely populated areas. However, public support 
                                                
 
244 Regulation (EC)717/2007 of the European Parliament and of the Council of 27.6.2007on roaming on 
public mobile telephone networks, OJ L171, 29.6.2007, p. 32. 
245 At EUR 0.49 excl. VAT for calls made and EUR 0.24  excl. VAT for calls received; these price caps 
will be further reduced in 2008 and 2009. 
246 Case COMP/38.097 Follow up International Roaming UK  and case COMP/38.098 Follow up 
International Roaming Germany;  no decision has been issued. 
 
EN 66   EN schemes for broadband have to be properl y justified and propor tionate either by 
pursuing an objective of so cial or economic cohesion or remedying a well-defined 
market failure. 
286. During 2007 the Commission adopted several decisions concerning public funding 
schemes for broadband in rural or remote  areas with no or only limited broadband 
coverage247. The Commission also accepted Stat e intervention, in specifically 
defined circumstances, in favour of advan ced broadband services in areas where the 
incumbent operators were only partly offering basic broadband services248. In a case 
relating to the procurement of broadband se rvices by the public sector in Wales, the 
Commission also clarified certain aspect s relating to the in terface between public 
procurement and State aid rules249. As the project was only intended to meet the 
needs of public sector organisa tions, no State aid was present. 
287. Following a complaint, the Commission conduc ted a preliminary investigation into 
the “Wireless Prague” project - the first m unicipal wireless netw ork case assessed by 
the Commission under the State aid rules250. The case was considered by market 
observers as an important precedent and wa s watched closely by municipalities with 
similar plans. 
288. During the Commission's prelim inary investigation and fo llowing the opinion of the 
Czech competition authority, the Prague au thorities considerably reduced the scope 
of the project. In particular, the modi fied project will now serve only the public 
sector and the free broadband access provide d to citizens will be limited to public-
sector websites and e-Government services. As no economic advantage within the meaning of Article 87(1) EC Treaty was granted to the selected service provider, to 
public-sector content providers or to citizens and businesses using the network, it 
was considered that no State aid was present. 
289. After an in-depth investigation la unched in December 2006, the Commission 
approved the investment by the municipa lity of Amsterdam in a glass fibre 
telecommunications network
251. The municipality is inve sting on equal terms with 
two private investors active in the sector, both of which took signi ficant stakes in the 
investment. In particular, all investing parties will bear any losses in the event of the 
business underperforming. The structure of the new company ensure s that the private 
investors have significant stakes in the project in a set-up where no single 
shareholder can exercise sole control over the company. Together with the detailed 
analysis of the business plan, this inform ation provided sufficient evidence for the 
Commission to conclude that the investment  was in line with the market economy 
investor principle and theref ore did not involve State aid. 
                                                 
247 Cases N 475/2007 National Broadband Scheme Ireland  Commission decision, 25.9.2007; N 473/2007 
Broadband connections for Alto Adige Commission decision, 11.10.2007; N 570/2007 Broadband in 
rural areas of Baden-Württemberg  Commission decision, 23.10.2007; N 442/2007 Aid in favour of 
broadband in remote areas of Veneto Commission decision, 23.10.2007. 
248 Cases N 746/2006 North Yorkshire NYNET Project United Kingdom  Commission decision, 21.2.2007; 
N 890/2006 Aide du Sicoval pour un réseau de très haut debit  Commission decision, 10.7.2007. 
249 Case N 46/2007 Welsh Public Sector Network Scheme  Commission decision, 30.5.2007. 
250 Case NN 24/2007 Prague Municipal Wireless Network  Commission decision, 30.5.2007. 
251 Case C 53/2006 (ex. N 262/2005) Citynet Amsterdam  Commission decision, 11.12.2007. 
 
EN 67   EN 290. The Commission emphasised that it is not su fficient for public authorities to become 
involved in projects merely by claiming th at they are acting lik e a normal market 
investor. It needs be a comprehensively demonstrated, for instance by means of a 
sound business plan and a significant particip ation by private invest ors, that a public 
investment conforms to the conditions of the market. In addition, as stated in the 
decision concerning the above-mentioned case,  the private parties would have to 
assume the commercial risk linked to the investment under the same terms and 
conditions as the public investor. 
2.3.2. Aid to Greek incumbent operator 
291. In June 2007 the Commission approved un der Article 87(3)(c) EC the Greek 
government's plan to participate in OTE's early voluntary retirement scheme252. The 
case raised a number of issues, principally the definition of "aid" within the meaning 
of Article 87(1) of the Treaty as well as in  relation to the scope of the compatibility 
assessment carried out under Article 87(3) wi th regard to underta kings that enjoyed a 
monopoly in the past and are now operating in liberalised bu t still regulated markets. 
292. Owing to the quasi-permanent status of its employees, which was protected by law 
and dated back to the monopoly era, OTE could not dismiss its  personnel like any 
other private company. Instead, OTE had to agree to an early voluntary retirement 
scheme (VRS). The material difference between OTE's VRS and an ordinary VRS 
was that, apart from the incentives to employ ees to take up the early retirement offer, 
OTE also had to make up the loss of future revenues or social advantages associated 
with the enjoyment of a permanent employme nt status and high salaries fixed by law. 
These "extra costs" were the main reason th at led the Greek State to assume part of 
the overall costs of the VRS. In exchange , OTE had obtained the union's consent to 
put an end to the permanent employment status for future employees. In its notification the Greek State argued that  its contribution di d not procure any 
advantage to OTE since it simply repr esented compensation for a structural 
disadvantage within the meaning of the Combus  judgment
253. 
293. Having opened a formal investigation, th e Commission finally concluded that the 
notified measure, examined in conjuncti on with relevant case-law, including the 
Combus  judgment, might be regarded as Stat e aid. In any event, the matter did not 
need to be pursued since the scheme was in any event compatible with the common market under Article 87(3)(c) of the Treat y. The Commission found that the State's 
contribution did not exceed the amount of th e verifiable "extra costs" incurred by 
OTE, that it was an appropriate instrume nt for reorganising the company and could 
pave the way for the compa ny's envisaged privatisation. 
2.4. Merger Control 
294. In the area of merger control, the Comm ission assessed whether a merger between 
two foreign mobile network operators opera ting in two different countries would 
significantly interfere with effective co mpetition. In such a case, even without 
horizontal overlaps, the issue stems from the vertical relationships between the 
                                                
 
252 Case C 2/2006 (ex. N 405/2005) OTE – Early retirement scheme  Commission decision, 10.5.2007. 
253 Case T-157/01, Danske Busvognmænd v Commission, 16.3.2004, ECR II-0917. 
 
EN 68   EN markets for wholesale international roaming and the markets for fixed and/or mobile 
telecommunications in the countries where th e parties to the transaction operate. This 
issue is particularly relevant to international roaming telecoms markets. In France 
Télécom/Mid Europa Partners/One , the Commission found that the transaction 
would not harm competition in any such markets and the merger was cleared without commitments
254. 
295. The Commission adopted a dynamic approach in respect of these fast-moving 
markets. An example is the Syniverse/BSG255 merger where the Commission 
assessed the market for GSM roaming data clearing services. The characteristics of 
the market warranted a straight clearance de cision (after an in-depth investigation) 
even though the merger entailed a reducti on in the number of market players 
currently active in Europe. The necessary t echnology in order to enter this market 
was in fact available to new potential entrants, while tec hnological advances 
underway were likely, in the short term, to re-shape the current market structure. 
D – INFORMATION TECHNOLOGY  
1. O VERVIEW OF THE SECTOR  
296. The information economy is a significant sector of economic activity. Including the 
provision of infrastructure and services fo r the creation, exchange and processing of 
information and communication services and the sale of information itself, this 
market is now in most developed countries  in the range of 10 % of GDP and accounts 
for more than half of their economic grow th. Software is one of the key elements 
driving ICTs’ role in the economy256. The information technology sector is 
characterised by digital convergence, the gr owing importance of in teroperability and 
the key role of standa rd-setting organisations. 
297. Digital convergence continues to restructure the three traditional market segments – 
IT, telecommunications, and media. Separate , vertically integrated networks are 
transformed into horizontal ly interconnected functional layers. In this new and 
evolving setting, network ope rators, IT players and the big media conglomerates all 
compete for market share. Convergence co ntinues to redefine devices, endowing 
them with new functionalities. PCs are alr eady being used to store and manipulate all 
types of media and are becoming the hubs of  the digital world. Consumer equipment 
products such as hi-fis and cameras, communicate with each other and with 
computing devices. 
298. The opportunities opened up by convergence  and the demands on the high-tech 
ecosystem to deliver the benefits of convergence lead to a growing need and 
increasing scope for interoperability in te rms of scope, scale and complexity. Indeed, 
given the prevalence of network effects in th e ICT sector, interoperability is a crucial 
feature of these markets. Apart from the be nefits of interoperabi lity, other important 
                                                 
254 Case COMP/M.4809 France Télécom/Mid Europa Partners/One  Commission decision, 21.9.2007. 
255 Case COMP/M.4662 Syniverse/BSG  Commission decision, 4.12.2007. 
256 OECD Information Technology Outlook 2006 Highlights. 
 
EN 69   EN objectives such as incentives for innovation an d security also need to be taken into 
account in defining and enforcing compe tition policy in this dynamic sector. 
299. In this context, standard-setting organisa tions can play a key role by facilitating 
interoperability. It is important that st andard-setting organisations establish rules 
which ensure fair, transparent procedures a nd early disclosure of relevant intellectual 
property. The Commission will continue to follow the operation of standard-setting 
organisations in this regard. 
300. Open source software has become an establ ished feature of the mainstream software 
market. In fact, in many software market s it is now the only competitive constraint 
on incumbents. The “proprietary” business model, on the one hand, where the source code of the software is usually not made  available and the “open source” business 
model, on the other hand, are not incompatib le in the sense that the same company 
may develop and distribute certain produc ts following the open source business 
model and other products in binary source code only (i.e. following the proprietary 
model). 
2. P
OLICY DEVELOPMENTS  
301. In 2007 the Commission continued its pro ceedings against Microsoft to ensure 
compliance with the 2004 Decision257 with regard to prici ng and licensing terms for 
the interoperability information in question (Interoperability Information). These terms should be reasonable and non-discrimi natory, in accordance with Article 5 of 
the 2004 Decision. In 2006 the Commission had already imposed a definitive penalty 
payment of EUR 280.5 million on Microsoft fo r not providing complete and accurate 
Interoperability Information
258. Consequently, on 1 March,  the Commission issued a 
statement of objections addressed to Mi crosoft which set out the Commission's 
preliminary assessment that Microsoft had not complied with its obligation to offer 
complete and accurate Interoperabili ty Information on reasonable and non-
discriminatory terms259. 
302. Following the judgment by the Court of  First Instance (see I.A.3.1. above) 
dismissing the substantive elements of Micr osoft's application for annulment of the 
2004 Decision260, on 22 October Microsoft announced a significant re duction of its 
licence fees. It also offered an updated versi on of its relevant licence agreements. As 
of that date the Commission has no furt her objections concerning Microsoft's 
compliance with the 2004 Decision261. 
303. A statement of objections was sent to In tel on 26 July indicating the Commission's 
preliminary conclusion that Intel has enga ged in three types of abusive practices 
aimed at excluding AMD, Intel's main ri val, from the x86 Computer Processing 
                                                 
257 Commission decision of 24.5.2004 relating to a proceeding pursuant to Article 82 of the EC Treaty and 
Article 54 of the EEA Agreement against Mi crosoft Corporation,  Case COMP/37.792 Microsoft , OJ 
L 32, 6.2.2007, p. 23. 
258 http://ec.europa.eu/comm/competition/antitrust/cases/decisions/37792/art24_2_decision.pdf 
259 http://ec.europa.eu/rapid/start/cgi/guesten.ksh?p _action.gettxt=gt&doc=MEM O/07/90|0|RAPID&lg=EN  
260 IP/07/1567, 22.10.2007. 
261 http://ec.europa.eu/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/07/1567|0|RAPID&lg=EN 
 
EN 70   EN Units (CPU) market. First, Intel provided substantial rebates to various Original 
Equipment Manufacturers (OEMs) conditional on  them obtaining all or most of their 
CPU requirements from Intel. Second, in a nu mber of instances, Intel made payments 
in order to persuade an OEM to either delay or cancel the launch of a product line 
incorporating an AMD-based CPU. Third, in  the context of bids against AMD-based 
products for strategic customer s in the server se gment of the market , Intel on average 
offered CPUs below cost. Each abuse is pr ovisionally considered to constitute an 
abuse of a dominant position (Article 82 EC) in its own right. In addition, the 
Commission's preliminary conclusion is that  the three types of  conduct reinforce 
each other and that they form part of  a single overall anti-competitive strategy262. 
304. The Commission sent a statement of objecti ons to Rambus on 30 July. The statement 
of objections outlines the Commission’s prel iminary view that Rambus has abused a 
dominant position by claiming unreasonable r oyalties for the use of certain patents 
for “Dynamic Random Access Memory” chips (DRAMS) subsequent to a so-called 
"patent ambush." DRAMS are the com puter’s "working" memory. In 2006 
worldwide sales of DRAM chips exceeded USD 34 billion. Virtually all PCs have 
DRAMs that are compliant with a standa rd developed by the standard setting body, 
JEDEC.  Rambus owns and is asserting patent s which, it claims, cover the technology 
included in these JEDEC standards. 
305. The Commission’s preliminary view is that Rambus engaged in intentional deceptive 
conduct in the context of the standard-setting process, fo r example by not disclosing 
the existence of the patent applications wh ich it later claimed were relevant to the 
adopted standard. This type of behavi our is known as a "patent ambush". The 
Commission's preliminary view is that w ithout its "patent am bush" Rambus would 
not have been able to charge the roya lty rates that it is currently charging263. 
306. On 30 August, the Commission opened proceedings264 against Qualcomm Inc., a US 
chipset manufacturer and holde r of IP rights in the CDMA and WCDMA standards 
for mobile telephony. The investigation resu lts from separate complaints lodged by 
six European, US and Japanese mobile phone and/or chipset manufacturers. The 
complaints allege that Qualcomm's licensi ng practices are not Fair, Reasonable and 
Non-Discriminatory ("FRAND") and theref ore may breach EC competition rules 
(Article 82 EC). The openi ng of proceedings does not imply that the Commission has 
conclusive proof of an infringement, but  only that the Commission has decided to 
assign priority and more resour ces to analysing this case. 
307. In the ICT sector the Commission also enfo rced the Merger Regulation with the aim 
of preventing effective competition from being hampered by merging companies, while maintaining opport unities and incentives for innovation. Against this 
background the Commission cleared a joint venture between ST Microelectronics 
and Intel
265 in the area of flash memory, a type of semiconductor memory used to 
retain content when a device is switched off.  There are a number of applications that 
integrate flash memory, such as data st orage cards, mobile phones, networking and 
telecom equipment. The investigation into  this highly dynamic industry showed that 
                                                 
262 See http://ec.europa.eu/comm/competition/ antitrust/cases/index/by_nr_75.html#i37_990 
263 See http://ec.europa.eu/comm/competition/ antitrust/cases/index/by_nr_77.html#i38_636 
264 See http://ec.europa.eu/comm/competition/antitrust/cases/decisions/39247/proceedings.pdf 
265 Case COMP/M.4751 STM/Intel  Commission decision, 10.8.2007 
 
EN 71   EN the market would remain competitive even after the proposed transaction, given that 
strong players are active in the marketpla ce. The Commission also concluded that 
innovation concerning the evolutiona ry floating gate technologies266 underway in this 
area was not adversely affected by the merger. 
308. In the area of mergers  the Commission also opened an in-depth investigation into 
Google's proposed acquisition of DoubleClic k, a transaction i nvolving the markets 
for online advertising and intermediati on services and technologies over the 
Internet267. This decision is without  prejudice to the merged entity's obligations under 
Community legislation in relation to the pr otection of individuals  and the protection 
of privacy with regard to the processing of personal da ta and the Member States' 
implementing legislation. 
309. In the field of State aid the Commissi on adopted a final decision approving the 
French tax credit in respect of the creation of video games268. This measure had been 
notified under Article 87(3)(d ) EC. It enables video game producers that are subject 
to taxation in France to deduct 20% of th e eligible costs of production of certain 
video games. Only video games that m eet certain criteria will be eligible. 
310. The Commission opened the formal investiga tion because of doubts as to whether all 
video games eligible under the initial criteria had a verifiable cultural content as was 
claimed by the French authorities. Follo wing this investigation, the French 
authorities were asked to clarify the selec tion criteria. The new selection test made it 
possible in this case to conclude that th e measure in question had a genuine cultural 
objective. In addition, in view of the small market shares of the beneficiaries and the 
fact that the French authorities agreed to  include sub-contracting expenses in the 
eligible costs, the measure was deemed to have a limited impact on competition and trade between Member States. This is the first time that the cultural exception laid down in Article 87(3) (d) has b een applied to video games. 
E – MEDIA AND SPORT  
1. O VERVIEW OF THE SECTOR  
311. As new technologies increase the number of  ways in which people can access 
entertainment and information, competition to attract audiences in the media sector is 
becoming tougher. Traditional distribution channels, such as newspapers, television 
and compact discs, are facing competition from new distribution platforms such as 
the internet or mobile devices. The incr ease in the overall num ber of distribution 
channels is fuelling the demand for content. As a result, there is a trend towards 
consolidation between the more esta blished media players and new media 
                                                 
266 Floating-gate technologies are devices that retain the stored information even when not powered (non-
volatile memory). 
267 Proceedings initiated on 13.11.2007  (see IP/07/1688). The merger wa s cleared without conditions on 
11.3.2008 (see IP/08/426). 
268 Case C 47/2006 Crédit d'impôt mis en place par la France pour la création de jeux vidéo  Commission 
decision, 11.12.2007. 
 
EN 72   EN businesses, as well as between the owners of infrastructure networks and content 
producers. 
312. The switch from analogue to digital broad casting, which Member States are due to 
complete by the beginning of 2012269, is already providing consumers with a greater 
number of TV channels and radio stations , and better sound and picture quality. The 
digital switchover concerns  all commonly available broadcasting transmission 
platforms such as satellite, cable and te rrestrial, obliging broadcasters and network 
operators to update their transmission equi pment, and viewers to install digital 
decoders. The Commission is committed to supporting the digital switchover and recognises that the process may be delayed if  left entirely to market forces. A number 
of Member States are providing public funding to encourage broadcasters and 
consumers to facilitate the switchover. The Commission has no general objection to 
the granting of State aid in this area. However, Member States have to demonstrate 
that the aid is a necessary and appropria te instrument, is limited to the minimum 
necessary and does not unduly distort competition. 
313. Commercial operators conti nue to be concerned about State aid for public service 
broadcasters, with whom they compete for au dience share, especially for what they 
consider to be purely comm ercial programmes such as live sports or blockbusters. 
They also allege that the State funding for public service broadcasters may exceed 
what is necessary for their public service mission, allowing such broadcasters to use 
these funds for their commerc ial activities. Commercial op erators are also concerned 
that public broadcasters are engaging in  anti-competitive practices, for example by 
inflating the price of televisi on content such as sports rights. Priv ate operators claim 
that the public funding of public service br oadcasters' new media activities distorts 
competition and discourages private initia tives from developing new and innovative 
services. 
314. Technological developments are also affec ting the way copyright is administered, 
especially for works distributed over the internet. The traditi on of managing rights 
based on territorial borders is not suited to online, EEA-wide distribution, which 
could bring many benefits to  artists and consumers. 
315. With firms joining forces in a context of  continuous evolution of the media sector 
(such as the gradual digitalisation of cont ent available for distribution across various 
platforms) there is an increased need to pr eserve the efficient competitive structure of 
network and multi-media markets. Therefor e, the Commission’s main concerns in 
the area of merger control are that mergers do not restrict consumer  choice, that they 
maintain incentives and scope for technol ogical innovation possible and that they 
ensure continued price competition. In th is context, the Commission's aim is to 
preserve access to the key elements of co mpetition in this sector (content, technology 
or interconnection). 
                                                
 
269 Commission Communication on accelerat ing the transition from analog ue to digital broadcasting, 
COM(2005) 204 final (OJ C 49, 28.2.2006, p. 24). 
 
EN 73   EN 2. P OLICY DEVELOPMENTS  
316. The Commission's main objective from a comp etition perspective is to ensure that 
there is a level playing field in the media sector, whethe r between different 
commercial operators or between comm ercial operators and publicly-funded 
operators. 
2.1. Digital Broadcasting 
317. In 2007, the Commission continued to mon itor the switchover from analogue to 
digital broadcasting in the EU Member Stat es. In July, the Comm ission sent Italy a 
reasoned opinion, which is the second stag e of the infringement procedure under 
Article 226 of the EC Treaty that had begun in 2006 following a complaint by the 
Italian consumer association, Altroconsumo270. The Commission considers that the 
Italian legislation is contrary to th e EU Regulatory Framework for Electronic 
Communications271 as it places unjustified restrictions on the provision of 
broadcasting transmission services and attr ibutes unjustified adva ntages to existing 
analogue operators. The Commission consid ers that there is a risk that existing 
situation in analogue TV, namely that only a few operators are able to compete on 
the market for broadcasting transmission se rvices, will be reproduced in digital 
terrestrial TV, thereby further reducing c hoice for Italian cons umers. The Italian 
authorities have drafted a la w aimed, inter alia, at ame nding the existing broadcasting 
legislation. The draft law is pending  before the Italian Parliament. 
318. In the field of State aid the Commissi on continued throughout 2007 to apply the 
approach adopted in earlier decisions c oncerning State funding to support the digital 
switchover. The Commission approved th ree support scheme s (two Italian272 and one 
Spanish273) for the acquisition of digital decoders with open API274 and for covering 
the costs of adapting existing collect ive analogue terrestrial antennas. 
319. The Commission adopted two negative deci sions regarding subsidy schemes in 
Italy275 and in the German Land of North Rhine-Westphalia276. In the first case, Italy 
had provided subsidies to consumers for the acquisition of digital terrestrial 
decoders. The investigation led the Commi ssion to conclude that  the exclusion of 
satellite decoders from the measure intr oduced a distortion whic h was not necessary 
in order for the switchover to be carried out. An appeal against the decision was 
lodged before the Court of First Jus tice by the three main beneficiaries277. 
                                                 
270 IP/07/1114, 18.7.2007. 
271 Notably, Commission Directive 2002/77/EC of 16 September 2002 on competition in the markets for 
electronic communications networks and services (OJ L 249, 17.9.2002, p. 21). 
272 Cases N 270/2006 Subsidy to digital decoders with open API  (OJ C 80, 13.4.2007), N 107/2007 
Subsidies to idTV – Italy  (OJ C 246, 20.10.2007). 
273 Case N 103/2007 Support for the acquisition of digital decoders and for the adaptation of antennas in 
Soria , Commission decision, 25.9.2007 (OJ C 262, 1.11.2007). 
274 Open API is a word used to describe advanced pr ogram interfaces (API) that facilitate interoperability, 
i.e. portability of interactive cont ent between delivery mechanisms with  full functionality of the content 
intact. 
275 Case C 52/2005 (ex NN 88/2005) Subsidy to digital decoders  in Italy  (OJ L 147, 8.6.2007). 
276 Case C 34/2006 (ex N 29/2005) Introduction of digital terrestrial television (DVB-T) in North Rhine-
Westphalia , Commission decision of 23.10.2007, not yet published. 
277 Cases T-96/07, T -177/07 and T-188/07. 
 
EN 74   EN 320. The second case concerning North Rhine-Westphalia was very similar to the funding 
previously envisaged by the Land of Berlin-Brandenburg, which was declared 
incompatible with the EU St ate aid rules in November 2005278. The Media authority 
of the Land of North Rhine-Westphalia wa nted to grant subsidies to commercial 
broadcasters present on the digital terrest rial platform to finance part of the 
transmission fees that these broadcasters pay to the operator of  the DVB-T network. 
The investigation led the Co mmission to conclude that the planned funding was not 
an appropriate way to address specific pr oblems in relation to digitisation and was 
not necessary to effect th e switchover. The planned State aid disregarded the 
principle of technology neut rality and only envisaged supporting transmission over 
the digital terrestrial platform. The envi saged funding would thereby have distorted 
competition between terrestrial, cable and sa tellite transmission. The Media authority 
of the Land of North Rhine-Westphalia  has appealed against the decision 279. 
321. The Commission closed the investigation in to a similar scheme in the German Land 
of Bavaria280 following the German authorities' de cision to limit the subsidies to the 
de minimis threshold set in Regulation 1998/2006281. 
2.2. Public service broadcasting 
322. In line with the Interpretative Protocol on the system of public  service broadcasting 
(Amsterdam Protocol), the Commission reco gnises that it is the prerogative of 
Member States to organise and fund pub lic service broadcasting. The aim of the 
Commission's policy towards State aid for public service broadcasters is to ensure that public funding does not exceed what is necessary for them to fulfil their public 
service mission and does not lead to unnecessary distortions of competition. 
323. The Commission considers that the financ ing of public service broadcasters by 
means of budgetary contributions or licen ce fee financing constitutes State aid, also 
in view of the conditions set out in the Altmark judgment
282. State aid to public 
service broadcasters may, however, be declared compatible if it fulfils the requirements of Article 86(2) (as speci fied further in the Broadcasting 
Communication
283). In its assessment of numerous complaints against the financing 
of public service broadcasters on the ba sis of the Broadcasting Communication, the 
Commission has further clarif ied and developed the requi rements in its decisions. 
324. The Commission accepts a broadly defined publ ic service mission to offer balanced 
and varied programmes, including informa tion as well as entertainment and sport. 
The Commission also recognises that th e public service remit may include new 
                                                 
278 Case N 25/2004 Einführung von DVB-T in Berlin-Brandenburg (OJ L 200, 22.7.2006, p. 14). 
279 Case T-2/08. 
280 Case C 33/2006 (ex N 576/2004) Introduction of digital terrestrial television (DVB-T) in Bavaria , not 
yet published. 
281 Commission Regulation (EC) No 1998 /2006 of 15 December 2006 on th e application of Articles 87 and 
88 of the Treaty to de minimis aid (OJ L 379, 28.12.2006). 
282 Case C-280/00, (Reference for a preliminar y ruling from the Bundesverwaltungsgericht) Altmark Trans 
GmbH, Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH ,[2003] ECR I-
7747. 
283 Communication from the Commission on the application of State aid rules to public service 
broadcasting (OJ C 320, 15.11.2001, p. 5). 
 
EN 75   EN media activities, provided that they serve the same democratic, social and cultural 
needs of society as traditional broadcasting. 
325. The Commission continued to approve State financing for public service 
broadcasters where both the public service re mit and the financing are determined in 
a fully transparent manner and where th e State funding does not exceed what is 
necessary to fulfil the public  service mission. In 2007, in line with its established 
decision-making practice, the Commission adopted two decisions concerning the 
financing of public service broadcasters pursuant to Article 86 (2) EC Treaty in 
conjunction with the Broad casting Communication. The firs t concerned the financing 
by the Spanish Government of workforce re duction measures taken by the Spanish 
public service broadcaster, RTVE. The Co mmission approved the financing, taking 
the view that the measures allowed RTVE  to provide a more cost-efficient public 
service which enabled it to reduce the overall need for public support284. The second 
decision concerned the genera l financing regime for public  service broadcasters in 
Germany (ARD and ZDF). Having receiv ed undertakings from the German 
Government to amend the current fina ncing regime by May 2009, the Commission 
closed the investigation. Th ese undertakings concerned m easures to ensure a more 
precise definition and a proper entrustment of the public service mission as regards 
new media activities, ade quate safeguards against ove rcompensation and cross-
subsidisation, observan ce of market principles in th e public service broadcasters' 
commercial activities and greater transparency  as regards the subl icensing of sports 
rights. In particular in term s of the possible offer of new media activities, the current 
legal framework will be amended to allow an evaluation of new offers based on a set of criteria and following a procedure which also allows third parties to submit their views
285. 
326. Under the Commission's rules concerning se rvices of general economic interest, 
compensation paid to small local or regi onal public service br oadcasters may be 
compatible with Article 86(2) and not s ubject to prior notific ation under certain 
conditions286. 
2.3. Rights management and online distribution 
327. In April, the Commission sent a statement of objections to major record companies 
and Apple in relation to agreements between each record company and Apple 
deemed to restrict online music sales, in contravention to Article 81 EC. Apple 
operates an iTunes on-line store selling musi c downloads with different views in the 
European Economic Area (EEA). EEA consumers can only buy music from the view which is directed at their respective count ry of residence and which contains the 
music that is copyright-cleared for sale in that country. iTunes checks the consumers' 
country of residence through their credit car d details. For example, in order to buy a 
music download in the UK, a c onsumer must use a credit ca rd issued by a bank with 
                                                
 
284 The full text of the decision  is published in English:  
http://ec.europa.eu/comm/competition/state_aid/ register/ii/doc/NN-8-2007-WLWL-07.03.2007.pdf 
285 The full text of the decision  is published in English:  
http://ec.europa.eu/comm/competition/state_aid/ register/ii/doc/E-3-2005-W LWL-en-24.04.2007.pdf 
286 Commission decision, 28.11.2005, on the application of Article 86(2) of the EC Treaty to State aid in 
the form of public service compensation granted to cer tain undertakings entrusted with the operation of 
services of general economic interest (OJ L 312, 29.11.2005, p. 67). 
 
EN 76   EN an address in the UK. The prices of dow nloads for UK consumers were appreciably 
higher than in the eurozone countries. Th e different treatment of UK consumers was 
a major concern for Which? - a UK consum er protection organi sation - who filed a 
formal complaint with the Commission. 
328. As part of these proceedings Apple announced  that it would equalise its prices for 
downloads of songs from its iTunes online store in Europe by mid-2008, thus putting an end to the different treatment of UK consumers. The Commission's antitrust proceedings further clarified that the agreements between the major record 
companies and Apple do not force Apple to set up national online stores and to sell 
downloads only from the iTunes online store of the consumer's residence, provided 
that the record companie s have licensed the song fo r the relevant country. 
Consequently, the Commission closed the case. 
329. In the context of rights management, the Co mmission continued its assessment of the 
CISAC case after having issu ed a statement of objections
287 in 2006 against CISAC 
and the individual collecting societies in the EEA contracting countries that are 
members of CISAC. The Commi ssion expressed concerns about certain provisions in 
the CISAC model contract and the systema tic and uniform implementation of these 
provisions by CISAC members. According to  the Commission's preliminary findings 
these restrictions of comp etition mean that right holde rs cannot select the EEA 
collecting society of their choice a nd commercial users cannot obtain multi-
repertoire, multi-territorial licences for their satellite, cable and online activities. In 
2007, CISAC and 18 EEA collecting societie s offered commitments under Article 9 
of Regulation No 1/2003288. These commitments were market tested by the 
publication of an Article 27(4) notice on 9 June289. 
2.4. Premium sport content 
330. The Commission continues to gi ve high priority to ensuring  that premium content is 
made available under open and transparent c onditions that allo w a maximum number 
of operators to bid for the rights. In 2007, the Commission closed its investigation 
under Article 81 EC concerning the joint buying of TV rights of sports events by the 
European Broadcasting Union (EBU) and its members. 
331. EBU is an association of radio and TV broadcasting organisations. Its members are 
mainly public broadcasters. Through th e joint buying agreement, EBU acquires 
audiovisual rights for interna tional sports events on beha lf of its members. There 
were concerns that competitors of EBU members, in particular commercial broadcasters, were not in a position to acqui re the rights to broadcast these events in 
their respective national TV markets due to the existence of EBU's pan-European 
joint buying agreement. Until the end of the 1990s, the rights of the major 
international sports events such as the FIFA World Cup, the  UEFA European 
Football Championship and the Olympic Game s had systematically been sold to 
EBU, which shared the events among its members. However, the investigation 
revealed that the markets for the acquisiti on of top internationa l sports rights have 
                                                
 
287 MEMO/06/63, 7.2.2006. 
288 IP/07/829, 14.6.2007. 
289 OJ C 128, 9.6.2007. 
 
EN 77   EN changed considerably in recent years. Contra ry to the previous situation, EBU is no 
longer the sole buyer of premiu m international spor ts rights, as rights owners tend to 
diversify the sale pattern of their medi a rights. The Commission will continue to 
monitor the rapidly changing media s ector. Access to premium content by 
broadcasters and, in particular, new me dia operators remains a concern for the 
Commission. 
2.5. White Paper on Sport 
332. On 11 July the Commission adopted a White Paper on Sport290 providing a strategic 
orientation on the role of s port in Europe, with the focu s on its economic and social 
dimension. The EU antitrust rules are addre ssed in more detail in Annex I to the 
accompanying Staff Working Document "The EU and Sport: Background and 
Context"291. DG Competition was involved in th e preparation of the White Paper, 
including its Annex I on "Sport and EU Competition rules", which provides an 
overview of the main case law of the Co mmunity Courts and the decision-making 
practice of the Commission with respect to the application of Articles 81 and 82 of 
the EC Treaty in the sport sector. 
333. The White Paper also proposes a number of  actions to be implemented or supported 
by the Commission. These actions  are brought together in the Pierre de Coubertin 
Action Plan292. DG Competition is participati ng, together with other Commission 
services, in the implementation of the Actio n Plan especially as regards players' 
agents, licensing systems and selling of media rights. 
2.6. Film and other audiovisual works 
334. The Commission continued to assess film support schemes on the basis of its 2001 
Cinema Communication, which sets out the criteria under which such aid can be 
approved under the cultural exem ption from the general ban on State aid. In June, the 
Cinema Communication was extended unt il 31 December 2009 at the latest. 
335. The most significant decisions in 2007 concerned the Dutch film support schemes293 
and the UK film production and development funds . As with all other film support 
decisions in 2007, the Commi ssion approved these measures on the basis that they 
would be amended by the national authorities  to take account of any changes in the 
State aid rules during th eir period of operation. 
336. Against the background of growing compe tition between film support schemes 
around the world to try to attract large film productions, particularly through tax incentives, the Commission continued to pa y closer attention to such schemes. 
                                                
 
290 COM(2007) 391 final, available at http://ec.europa.eu/sport/whitepaper/wp_on_sport_en.pdf 
291 SEC(2007) 935, available at http://ec.europa.eu/sport/whitepaper/dts935_en.pdf 
292 SEC(2007) 934, available at http://ec.europa.eu/sport/whitepaper/sec934_en.pdf 
293 Case N291/07 The Netherlands film fund , Commission decision, 10.7.2007. 
 
EN 78   EN 2.7. Application of merger control 
337. A prominent example of application of the merger control in the media sector was 
the SFR/Tele2 merger294, where the concentration was approved subject to 
conditions ensuring effective competition in the French pay-TV market. SFR was 
controlled by Vodafone and Vi vendi. Vivendi controlled th e dominant player in the 
French pay-TV market, Groupe Canal+, whic h inter alia enjoyed a large measure of 
control over attractive televi sion content for pay-TV (p rogrammes and channels). 
Tele2 France was active in DSL TV. The DSL operators were collectively the main players capable of exerting competitiv e pressure on Canal+. The Commission 
ensured that, post-merger, other DSL operators would enjoy equal treatment with the new entity as regards access to television content owned by Groupe Canal+. 
338. As regards the music i ndustry, in the case of Sony/BMG-II
295 the European 
Commission granted regulatory approval to the joint venture combining the recorded music businesses of Sony and Bertelsmann, after the Court of First Instance had 
annulled the previous Commission decision of 2004. After a very extensive and in-
depth investigation, the Commi ssion concluded that the merg er did not entail adverse 
horizontal coordination effect s between the recording music companies as regards 
their pricing behaviour, nor as regards ot her non-price elements including cultural 
diversity aspects. 
339. In the area of music publishing rights, th e Commission cleared the merger between 
Universal and the BMG music publishing activities
296 on the condition that the new 
company divested several successful cata logues. The Commission concluded that, 
absent those remedies, the merger woul d have had adverse effects on the online 
music distribution via digital channels sin ce the merged entity would have been in 
control of a large percentage  of "must-have" titles thr ough the combination of its 
publishing and recording rights. 
F – AUTOMOTIVE INDUSTRY  
1. O VERVIEW OF THE SECTOR  
340. The automotive industry is one of the mo st significant industries in the EU, 
accounting for around 3% of the EU's GDP297 and employing around 2.3 million 
people directly298, with a further 850 000 engaged in the production of parts and 
components299. The EU remains the world leader  in automobile production. Of the 
69 million motor vehicles produced wo rldwide in 2006, 18.6 million (16.1 million 
                                                 
294 Case COMP/M.4504 SFR/Tele2  Commission decision, 18.7.2007 
295 Case COMP/M.3333 Sony/BMG-II  Commission decision, 3.10.2007 
296 Case COMP/M.4404 Universal Music Group/BMG Music Publishing  Commission decision, 22.5.2007. 
297 Cars 21 – A competitive Automotive Regulation System for the 21th century. Final Report to the 
European Commission 2006, p. 9. 
298 ACEA, European Automobile Industry Report 2007/2008, p. 2. 
299 Design Directive Impact Asse ssment, COM(2004) 582, p. 11. 
 
EN 79   EN passenger cars) – the equivalent of 27% of worldwide production – were 
manufactured in the EU300. 
341. While the industry has been plagued by worldwide overcapacity in recent years, 
forcing certain manufacturers in Europe to  close plants, other manufacturers have 
opened new manufacturing sites in the EU, taking advantage of the favourable cost 
situation in the new Member States and Eastern Germany, as well as the geographic 
proximity to Western European markets. 
342. Automotive production in the ne w Member States increased  (albeit from low initial 
levels) by 26% in 2006 compared to the previous year, making up 13% of EU production
301. 
343. The growing share of vehicles produced in  the new Member States has led to the 
formation and development of clusters, in  particular in southern Poland, eastern 
Czech Republic, western Slovakia and north ern Hungary. Component suppliers tend 
to follow vehicle manufacturers. Investment  in these locations reduces the overall 
costs in the European production chain an d enhances the global competitiveness of 
the EU industry, as the bulk of direct investment origin ates from manufacturers of 
European origin. 
344. The importance of the automotive sector extends beyond the primary market of 
manufacturing. Employment in the sales busin ess and the aftermarket for the repair 
and maintenance of motor vehicles am ounts to close to three million people302. In 
2004, the turnover of the European market fo r the service and repair of motor was 
around EUR 100 billion. 
2. P OLICY DEVELOPMENTS  
345. In 2007, DG Competition continued its enfo rcement and monitoring efforts in the 
automotive sector, including the manufactur e of motor vehicles and components as 
well as the sale, maintenance and repair of  motor vehicles. DG Competition monitors 
developments in the sector on an ong oing basis through its car price reports303. 
346. The motor vehicle block exemption (C ommission Regulation 1400/2002) lays down 
a regime specific to the automotive sect or through Commission Regulation (EC) No 
1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to 
categories of vertical agreements and concer ted practices in the motor vehicle sector 
(OJ L 203/30, 1.8.2002)304. The Regulation aims at strengthening intra-brand 
competition in response to a perceived le ssening of inter-brand competition due to 
the process of consolidation that the indus try went through in the late 1990s and to 
                                                 
300 ACEA, European Automobile Industry Report, p. 2. 
301 ACEA Economic Report. 
302 CECRA 2007 available at http ://www.cecra.eu/en/about/about.php 
303 Latest car price report published 27 July 2007, 
http://ec.europa.eu/comm/competition/sectors/motor_vehicles/prices/2007_05_full.pdf 
304 Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the 
Treaty to categories of vertical ag reements and concerted practices in the motor vehicle sector (OJ L 
203/30, 1.8.2002). 
 
EN 80   EN fears of market power being further conc entrated in the hands of ever fewer 
incumbents.  
347. However, there are ample indications – in the shape of falling real prices, a number 
of successful entries, relatively few exits, significant fluctuations in market shares, 
moderate and decreasing degr ees of concentration, incr eased choice in the sub-
segments of the market, a shortening of model life-cycles and higher rates of range 
renewal - that inter-brand competition in  the car sales market is strong and 
increasing. 
348. In 2007, work began on preparing the evalua tion report for 2008 which is required by 
Article 11(2) of Regulation 1400/2002. This report, which will contain a wealth of 
statistical and other information on the state of the sector, will serve as the basis for 
determining the future regime governing the sector. 
349. While there is healthy competition in the mark et for the sale of new cars, there seem 
to be rather more problems in the market for after sales services  and, in particular, 
the market for components and parts for first assembly. Therefore, in addition to the aftermarket, where consumers are often captive, specific attention will be paid to the upstream market for parts and components. 
350. The pressure exerted by vehicle manufact urers on their compone nt and spare parts 
suppliers seems to have led some of th ese suppliers into conduct that may be 
anticompetitive. An example of such acti on is the suspected cartel in automotive 
glazing, where a statement of objections was sent in April to four companies active 
in the production and supply of car glass
305. 
351. In addition, merger activity upstream has resulted in high concentration in many 
parts markets, leaving only three to four suppliers. 
2.1. Antitrust enforcement 
352. On 13 September, in order to increase  competition in the aftermarket, the 
Commission adopted four de cisions involving four car manufacturers related to 
access to technical information, which is a cr ucial input for independent repair shops. 
Independent repair outlets are important fo r European consumers because they exert 
competitive pressure on the franchised networks. 
353. These four decisions legally bind DaimlerChr ysler, Toyota, General Motors and Fiat 
to commitments to provide technical inform ation about car repairs to all independent 
garages in the EU306. The decisions were adopted unde r Article 9(1) of Regulation 
No 1/2003.  The commitments were given following a Commission investigation 
which found that inadequate access to the full range of technical information could 
force independent repairers out of the mark et and that the agreements between the 
carmakers and their authorised repairers we re therefore likely to infringe EC Treaty 
rules on restrictive business practices (Art icle 81 EC). The resulting reduction in 
                                                 
305 European Commission sends Statemen t of Objections to alleged participants in cartel for car glass. 
IP/07/147, 23.4.2007. 
306 See e.g. Commission decision of 13.9.2007 relating to a proceeding pursuant to Article 81 of the EC 
Treaty (Case COMP/39.140 DaimlerChrysler ) (OJ L 317, 5.12.2007, p. 76). 
 
EN 81   EN competition between car repairers could lead  to less choice and higher prices for 
consumers. Independent repairers are often cheaper than authorised outlets, sometimes by over 50%. These differences are all the more significant when one considers that, over a car's lifetime, repair  and maintenance costs can amount to the 
price originally paid for the car by its first owner. 
354. As cars become more complex, even basic re pairs require qualifie d technicians with 
access to brand-specific technical in formation. The Commission's preliminary 
finding in all four cases was that the ca rmakers seem to have withheld certain 
technical information from independent  repairers and have provided other 
information in a way that does not meet the needs of independe nt repairers. The 
commitments which are made binding by the decisions are broadly similar and have 
three core elements. First, they clarify what is meant by technical information and 
require that all such information provided to  authorised repairers must also be made 
available to independent repairers on a non-discriminatory basis. Second, although 
car manufacturers may withhold information re lating to certain f unctions (anti-theft 
or performance-limiting functions of on-board electronics), they must ensure that the 
withholding of this information does not  prevent independent repairers from 
performing repairs that are not dire ctly related to these functions. 
355. Third, the commitments ensure that independe nt repairers can obtain information that 
is both unbundled and priced in a way that takes into account the extent to which 
independent repairers use the information. 
356. The websites chosen by the parties as their main means of providing technical 
information will be kept operational during the period of validity of the commitments. Access will be based on time slot s, with the hourly price set at a level 
that ensures equality between inde pendent and authorised repairers. 
357. The commitments will be binding until th e expiry of the motor vehicle block 
exemption (Commission Regulation (EC)  1400/2002) in May 2010. By then the 
Vehicle Emissions Regulation (Council Regulation (EC) 715/2007)
307 will have 
entered into force. This places an obliga tion upon vehicle manufacturers to provide 
independent repairers with standardised access to all technical repair information. 
2.2. Merger Control 
358. After 2005 and 2006, 2007 was another year in  which merger activity within the 
automotive industry largely involved the automotive supplier segment. A major deal in 2007 was the acquisition of Siemens VDO by Continental, resulting in an 
important tier-one supplier that was active on a world-wide scale. 
359. On 29 November, the Commission cleared the proposed merger between the two 
German companies, Continental AG and Siemens VDO Automotive AG, under the 
                                                
 
307 Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type 
approval of motor vehicles with respect to emissions from light passenger and commercial vehicles 
(Euro 5 and Euro 6) and on access to vehicle repair and maintenance information (OJ L 171, 29.6.2007, 
p. 1). 
 
EN 82   EN EU Merger Regulation308. The Commission concluded th at the transaction did not 
raise serious doubts as to its comp atibility with the common market. 
2.3. State aid control 
360. While there are no State aid rules specific to the automotive sector, a number of 
cases concerning this sector  were addressed in 2007 unde r certain general State aid 
frameworks, such as the rules on regional aid309 and restructuring aid. 
361. On 11 May the European Commission authorised an ad hoc  aid of EUR 111 million, 
by the Czech Government to Hyundai Mo tor Manufacturing Czech, a wholly owned 
subsidiary of the Korean Hyundai Motor Company, for the setting-up of a new 
passenger car production plant in  the Moravia-Silesia region310. 
362. Two months later, on 19 July, the European Commission authorised ad hoc  aid of 
EUR 32 million that the Slovak Government planned to grant to Kia Motors Slovakia, a wholly owned subsidiary of the Kia Motors Corporation of Korea, for the 
expansion of its car manufacturing pl ant situated in Žilina, Slovakia
311. 
363. These two cases were declared  to be compatible with State aid rules on large regional 
investment projects, also taking into  account the Commissi on's cohesion policy. 
364. The Commission also examined the term s of privatisation of State-owned car 
manufacturers. In the case of Automobile Craoiva, a Ro manian car plant (formerly 
Daewoo Craoiva), the Commission opened th e formal investigation procedure under 
Article 88(2) EC as the conditions attached to the privatisation appeared liable to confer an advantage on the unde rtaking undergoing privatisation
312. In particular, 
conditions intended to secure a certain futu re production level for structurally loss-
making companies are liable to have an effect similar to restructuring aid and are 
paid for by the State in the form of reduced proceeds from the privatisation. 
                                                 
308 Case COMP/M.4878 Continental/Siemens  VDO  Commission decision, 29.11.2007. 
309 The relevant provisions are found in Commission Regulation (EC) No 1628/2006 of 24 October 2006 
on the application of Articles 87 and 88 of the Treaty to national regional investment aid (OJ L 302, 
1.11.2006, p. 29) or earlier provisions in the same field. 
310 N 661/2006 Investment incentives for Hyundai  Motor Manufacturing Czech  (OJ C 262, 11.1.2007, p. 2) 
311 N 857/2006 Kia Motors Slovakia (OJ C 214, 13.9.2007, p. 4). 
312 Case C 46/2007 Privatisation of Automobile Craoiva, Romania  (OJ C 248, 23.10.2007, p. 25). 
 
EN 83   EN G – TRANSPORT  
1. O VERVIEW OF THE SECTOR  
365. The transport industry accounts for about  7% of European GDP and around 5% of 
employment in the EU. 
366. Competition policy in the transport sector aims to ensure the efficient functioning of 
markets which have been recently liberalised or which are in the process of liberalisation. Making liberalisation a success requires action on two fronts. First, it 
means ensuring that the existing regulatory  framework continues to be modernised 
where this has not been done to a sufficient extent. For decades, sector-specific rules 
governed the application of competition rule s (both substantive and procedural) in 
the field of transport. Bringing transport within the generally applicable competition law framework remains a general objective of competition policy. Second, since it is essential that regulatory efforts are not  hindered by anticompetitive conduct, other 
objectives of competition policy in this sector are vigilant monitoring of market developments and targeted enforcement actions . This is particularly true of markets 
where incumbents retain significant market power or where market players are now subject to the full force of competition law. 
367. Road transport of passengers and goods  in the EU is characterised by the 
predominance of small companies and the impact on competition of considerable differences in fuel tax levels between Member States. 
368. In the area of road transport international markets are largely liberalised for both 
passenger and freight. National road haulage is also liberalised through a Council 
Regulation on cabotage
313 while national passenger markets are still largely 
protected. Demand is driven by the increas ing importance of door-to-door and just-
in-time service, contributing to strong sust ained growth in road transport, which 
forms the largest component (44%) of intra-EU goods transport. 
369. As a result, road congestion has increased and is costing the EU  about 1% of GDP. 
Harmful emissions from road  transport have declined significantly; the introduction 
of catalytic converters, part iculate filters and other vehi cle-mounted technologies, for 
example, has helped to reduce emissions of NOx and particulates by between 30% 
and 40% over the last 15 years,  despite rising traffic volumes. 
370. EU legislation has opened up the market fo r international tran sport of passengers. 
International bus lines are competing thr ough low fares with in ternational railway 
services and low-cost airlines. As to re gular services, the Commission presented a 
proposal to Parliament and Council in Ma y to simplify the procedures for issuing 
authorisations. 
                                                 
313 Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which 
non-resident carriers may operate national road haulage services within a Member State, OJ L 279, 
12.11.1993, pp. 1–16. 
 
EN 84   EN 371. The market for the national public trans port of passengers has so far not been 
liberalised through Community legislation. A certain degree of market opening has 
resulted from the application of the Pub lic Procurement Directives, which apply to 
contracts – other than concessions – that  are concluded for the provision of public 
transport services. The Public Procuremen t Directives do not apply to concessions 
for public transport services, which are a common way of organising public 
transport, particularly in central Eur ope. The granting of such concessions 
nevertheless remains subject to th e general rules of the EC Treaty. 
372. The opening of the market for rail freight transport  was completed in 2007. The 
third railway legislative package  will also open up internati onal passenger transport, 
including cabotage. Enforcement of the acquis by national regulatory bodies is 
needed to facilitate the spread of the improvement of performance of the railway 
sector, already observed in those Member St ates which have opened their markets, to 
the whole EU internal market. However, th ere remain structural obstacles to the 
competitiveness of the rail industry. These include technical barriers, such as low 
levels of interoperability, lack of mutual recognition of rolling stock, weak 
coordination of infrastructure and interconne ction of IT systems, and the problem of 
the single wagon load314. 
373. Major problems as regards competition in rail freight have been related to 
unbundling/independence of essential functions  for non-discriminatory access to the 
network and a lack of administrative capac ity and independence of rail regulatory 
bodies (as appears from the 2006 Commissi on report on the implementation of the 
First Railway Package315 and recommendations made in  the context of the Lisbon 
strategy316). The Commission has sent questionnaire s to Member States to investigate 
in detail how they have implemented a num ber of key provisions of the first railway 
package. The aim of this investigation is to  decide whether or not it is necessary to 
open infringement procedures against Member States to ensure that they comply with 
their Treaty obligation to fully and correctly transpose EU law. 
374. Rail has shown its strength in passenger transport , in particular on high-speed 
connections between city centres. Enlarg ement has opened up further long-distance 
(over 500 km) rail links which, combined with efficient logi stics operations, can 
compete with road transport in providi ng environmentally friendly door-to-door 
service. 
375. With an annual volume of around 130 billion tonne-kilometres of freight, the modal 
share of river transport accounts fo r an overall 6% of the total inland transport  in 
the European Union, but can be as high as 43% in North-Western Europe (e.g. in the catchment areas of major seaports). 
                                                
 
314 About 50% of rail freight transport in Europe is carried out as single wagonload traffic. However, due 
to high fixed costs (e.g. operation of marshalling and shunting yards as well as private sidings) this 
production mode is often not competitive compared to other modes such as road haulage. 
315 See the Commission report on the implementation of the 1st railway package COM(2006) 189 final of 3 
May 2006. 
316 See the Commission recommendation of 11 Decembe r for a Council recommendation Brussels on the 
2008 update of the broad guidelines for the economic policies of the Member States and the 
Community (COM(2007) 803 final). See in particul ar the recommendation in respect of France and 
Germany. 
 
EN 85   EN 376. Traditionally, inland shipping has enjoye d a strong position in the long-distance 
haulage of bulk transport. In the last two decades, inland shipping has also successfully entered new markets, such as the hinterland transport of maritime containers, posting an annual growth rate in double digits. 
377. Maritime transport  of goods is crucial to the Eur opean economy. Transport by sea 
accounts for about 50% of the external trad e in goods in terms of weight and about 
20% of the trade between Member States. 
378. The expected growth of sea transport will need to be absorbed through the EU's port 
infrastructure. Increased investment in ports and into the hinterland is necessary in order to improve and extend services so th at ports become poles for growth instead 
of potential transhipment bottlenecks. A competitive ports sector depends on sound competition both within and between ports, clear rules for public contributions to 
investment and transparent access to port services, the availability of competitive 
services and an increase in quality employment. 
379. The internal air transport  market has become more of a reality, as well as an engine 
of growth. The restructuring of the sector  and its integration are well advanced. The 
sector has developed substantially as a re sult of the growth of air connections in 
Europe, the growth and importance of lo w-cost carriers and the development of 
regional airports. The European Union is an  important world player, both in terms of 
the production of aircraft and as regards the market for air transport services. 
380. Financing of airports, start-up aid to airlines departing fr om regional airports and the 
conditions of providing airport services all play a role in shaping competition 
between airports. 
2. P
OLICY DEVELOPMENTS  
2.1. Road Transport 
381. In the area of State aid, the Commission ma intained its policy of approving aid to 
favour the uptake of cleaner technology, in pa rticular on old vehicl es. As in the past, 
the Commission approved State aid for the acquisition of lorries satisfying the Euro V pollution standard in anti cipation of the compulsory a pplication of the standard 
from October 2009 onwards. The Commission adopted a favourable decision in two 
cases during the reference period. The firs t was a German case related to guidelines 
for the promotion of environm ental friendly heavy vehicles
317 and the second was an 
Italian case concerning environm ental investment aid to Fercam318. 
382. With regard to the application of public  procurement and State aid rules to public 
service contracts and public service con cessions, a revised regulation for public 
services in the field of land transport was adopted and will enter into force in 
                                                 
317 Commission decision N 649/06, OJ C 139, 23.6.2007, p. 13. 
318 Commission decision N 607/06, OJ C 307, 18.12.2007, p. 10. 
 
EN 86   EN December 2009319. The main objectives of this Regul ation are, first, to introduce the 
obligation to conclude a public service cont ract when a competent authority decides 
to grant an exclusive right to an operator and/or compensation, of whatever nature, in return for the discha rge of public service obligations and, secondl y, to introduce rules 
concerning certain tendering obligations when choosing the transport operator. 
383. In the meantime the Commission is applying the existing State aid rules to public 
service contracts and public servic e obligations. In its Altmark ruling
320, the Court 
clarified the circumstances under which public  service subsidies will not be regarded 
as constituting State aid. Since this clarification of the applicable rules, the Commission has received a large number of complaints as well as certain 
notifications of subsidised local and regional bus services. Such complaints mainly focus on contracts that have been awar ded without prior public tender. Indeed, 
without such a prior tend er procedure, it is di fficult to prove that the Altmark  criteria 
are satisfied and thus that the compensa tion does not involve State aid. Following 
complaints by competitors in the bus tr ansport sector, the Commission initiated 
formal investigation pr ocedures in Germany
321, Austria322 and Ireland323. Further 
investigations in these and other Member State are ongoing. 
384. Concerning State aid for road infrastructure in the context of the liberalisation of the 
road services sector in Finland, includi ng road maintenance and road construction, 
the Commission, after opening the formal  investigation procedure, cleared 
transitional aid to the incumbent while at the same time putting an end to the unlimited State guarantee
324. The Commission took the view  that the measures to 
assist the construction of a motorway325 and a tunnel326 in Greece did not constitute 
State aid because the respective concession  agreements were concluded following 
tendering procedures conducted on an ope n and non-discriminatory basis, which 
ensured selection of the bids which were the least costly for the State and which incorporated the strictest profit-capping arrangements. 
2.2. Rail Transport and Combined Transport 
2.2.1. Railways liberalisation: further integr ation of European rail transport markets 
385. As from 1 January, rail tr ansport services for frei ght were fully opened to 
competition in the European Union. 
386. As regards passenger transport, on 23 Oct ober the Council and the Parliament finally 
adopted the third railway package, endi ng a long legislative process begun in 2004 
                                                
 
319 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on 
public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 
1191/69 and 1107/70, OJ L 315, 3.12.2007, p. 1. 
320 Judgment of the Court of 24 July 2003, Case C-280/00 Altmark Trans GmbH and Regierungspräsidium 
Magdeburg v Nahverkehrsgesellschaft Altmark GmbH ("Altmark") [2003] ECR I-7747. 
321 Commission decisions NN22/05 and NN55/07. Not yet reported. 
322 Commission decision C 16/07 (ex NN 55/06), OJ C 162, 14.7.2007, p. 19. 
323 Commission decision C 31/07 (ex NN 17/07), OJ C 217, 15.9.2007, p. 44. 
324 Commission decision C 7/2006, not yet reported. 
325 Commission decision N 508/07, OJ C 298, 11.12.2007, p. 4. 
326 Commission decision N 134/07, OJ C 234, 6.10.2007, p. 2. 
 
EN 87   EN with the proposals put forward by the Commission327. This package contains a full 
set of measures allowing the further libe ralisation and integrat ion of the railway 
sector. International passenger rail services  will be opened up to competition from 1 
January 2010. 
387. Furthermore, as mentione d earlier, the Regulation  on public passenger transport 
services by rail and by road (the so-cal led PSO Regulation) was also adopted on 23 
October. This Regulation creates a new lega l framework for public transport and will 
introduce some elements of liberalisation into local transport328. 
2.2.2. Applying Merger Rules to rail transport – DeutscheBahn /EWS 
388. In November, the Commission cleared the proposed acquisition of English, Welsh & 
Scottish Railway Holdings (EWS), the successo r of the freight business of the former 
UK national rail monopoly, by Deutsche Bahn (DB) - the state-owned German-based 
railway company329. 
389. EWS is active in rail freight transport and related services in the UK and the Channel 
Tunnel; it also recently entered the French market. The DB Group is one of Europe's 
leading rail operators engaged in, inter alia , rail passenger and freight transport 
services in Germany, Italy, the Netherlands  and Denmark. It also has a significant 
freight forwarding business (by all modes of transport), and a logistics and ancillary 
services business. 
390. The proposed merger did not give rise to a ny significant overlaps in the activities of 
the parties. However, although there was no overlap in the parties' rail freight 
transport activities in any national geogr aphic market, the Commission had concerns 
that the proposed transaction, as initia lly notified, would result in a lessening of 
competition in the French rail freight ma rket. The French rail freight market is 
currently dominated by the incumbent rail operator, SNCF. The Commission's investigation indicated that EWS, although a new entrant in this market, was likely to 
exert significant competitive pressure on the French incumbent in the future. The Commission was concerned that DB would not have the same incentives to pursue 
rail freight transport expansion in France with the same intensity as EWS would if there were no merger, and that the merger  would therefore lead to a lessening of 
competition on the French rail freight market. To address these concerns, DB undertook to carry out EWS's expansion plans in France and to provide non-
discriminatory access to certain EWS training  activities and mainte nance facilities in 
France for a period of five years. 
                                                
 
327 Directive 2007/58/EC of the European Parliament and of the Council of 23 October 2007 amending 
Council Directive 91/440/EEC on the development of the Community's railways, and Directive 
2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of 
railway infrastructure, OJ L 315, 3.12.2007, p. 44. Directive 2007/59/EC of the European Parliament and of the Council of 23 October 2007 on the certification of train drivers operating locomotives and 
trains on the railway system in the Community, OJ L 315, 3.12.2007, p. 51;  Regulation (EC) No 
1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passengers’ rights 
and obligations, OJ L 315, 3.12.2007, p. 14. 
328 Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on 
public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 
1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1). 
329 Case COMP/M.4746 DeutscheBahn/EWS , decision of 6.11.2007. 
 
EN 88   EN 2.2.3. Applying State aid rules to rail transport 
391. The Commission adopted severa l decisions to promote rail transport and combined 
transport. It authorised the renewal of a Czech aid measure which guarantees a loan 
to Czech Railways ( Česke ráhy)330 to facilitate the purchase of new passenger rolling 
stock. The Commission also adopted a final decision, following the opening of the 
procedure in 2006, concerning aid for the acqui sition of certain mobiles assets for the 
use of combined transport operations in Czech Republic331. The Commission also 
authorised the prolongation of  an aid scheme for the deve lopment of certain private 
railway infrastructure (private sidings332) in Austria333. The Commission also decided 
to approve restructuring aid to the fr eight transhipment and logistics firm, 
InterFerryBoats334. 
392. Concerning State aid to rail infrastructure, the Commissi on decided that rescue aid 
granted by the UK authorities to the Metron et Companies, (the entities responsible 
for the maintenance and upgrading of the London Underground) was compatible with the common market
335. 
2.3. Inland Navigation 
393. The year 2007 was the first full year of  the implementation of the NAIADES Action 
programme for the promotion of inland waterw ay transport at all levels (EU, MS and 
the industry itself), and on 5 December the Commission adopted a Communication 
containing a first pr ogress report on NAIADES336. The report describes progress in a 
number of areas, including measures adopt ed by Member States to promote this 
environmentally friendly mode of transport. 
394. As regards inland navigation,  the Commission a dopted several decisions to promote 
inland navigation. For example, it authorised an Italian measure to increase safety in inland and maritime transport of local nature
337. The purpose of this measure aims is 
to scrap old vessels that do not comply  with the latest safety measures. 
2.4. Maritime Transport 
2.4.1. Policy developments 395. After a one-year consultation of all port stakeholders the Commission adopted, on 18 
October, a Communication on Port Policy
338, which forms part of a package on 
                                                 
330 Case N 770/06 State guarantee for the purpose of financing the purchase of railway rolling stock by 
Ceske Dráhy (Czech Railways ) decision of 10.5.2007 (OJ C 227, 27.9.2007, p. 4). 
331 C 12/2006 (ex N 13/05). 
332 Private sidings are railway track ow ned by undertakings used to dispat ch and/or receive freight as part 
of their commercial activities. 
333 Case N 707/06, Austria, Prolongation of aid scheme for th e development of private railway sidings  (OJ 
C 137, 21.6.2007, p. 4). 
334 C 46/2005, not yet reported. 
335 Case NN 47/07  United-Kingdom, Metronet Rail CV Lim ited and etronet Rail SSL Limited in 
administration (Rescue aid) . 
336 COM(2007) 770 final. 
337 N 848/06, not yet reported. 
338 COM(2007) 616. 
 
EN 89   EN freight logistics339. The Communication sets out the ma in objectives of the European 
Ports Policy and outlines an action plan for achieving them. It also includes three sections on the application of  the Treaty principles of freedom of establishment and 
freedom to provide services to port con cessions, port services and work in ports. 
2.4.2. Applying State Aid Rules to Maritime Transport 
396. In 2007 the Commission promoted the close convergence of aid schemes in maritime 
transport, including towage and dredging ac tivities, which was aimed at achieving a 
level playing field within Eu rope as far as possible. In  particular, the Commission 
approved the introduction of a Tonnage Tax in Poland
340, but opened an investigation 
on features of the scheme that appeared not to be in line with former approved 
tonnage tax schemes. It also  opened investigations with respect to Denmark's desire 
to introduce changes to the scope of its  existing schemes for maritime transport 
(extension to cable laying activities)341 and to bring in ring-fencing measures 
(alleviation of information ob ligations concerning intra-group transactions between a 
company benefiting from a tonnage tax sc heme (tonnage company) and a foreign 
affiliate342, and alleviation of the c onditions applying to the eligibility of chartered-in 
vessels on a time basis343). 
397. As regards State aid for the provision of public service obligations in the maritime 
sector, the Commission adopted two positive decisions concerning Italy344. In 
addition, the Court of First Instance345 dismissed the action for annulment of the 
Commission decision of 6 August 1999 concer ning State aid to the Gruppo Tirrenia 
di Navigazione companies346. 
398. The Commission took the view that the financ ing of certain port in frastructures, such 
as the Rotterdam main port development project 347, the Eastern extension of the 
Muuga Port Harbour in Estonia348 and a real estate exemption for Polish Ports349, did 
not constitute State aid. 
399. In this context, public financing of trans port infrastructure may ra ise State aid issues 
at two levels, i.e. at the level of the user s and at the level of the manager/operator of 
the infrastructure in question. The Commission is of the vi ew that, in general, no 
form of State aid within the meaning of Article 87(1) is present at the user's level if transport infrastructure is open to all pot ential users on equal and non-discriminatory 
terms. On the other hand, where public infrastr ucture is used to pr ovide infrastructure 
for a particular user, giving it an unfair advantage over its competitors, the financing may fall within the prohibition laid down in Article 87(1). 
                                                
 
339 COM(2007) 606. 
340 N 93/06 (OJ C 300, 12.12.2007, p. 22). 
341 C 22/07, not yet reported. 
342 Case C 5/07, not yet reported. 
343 Case C 58/07, not yet reported. 
344 N 265/06 and N 62/05 (OJ C 196, 24.8.2007, p. 3). 
345 Case T-246/99, not yet reported. 
346 Case C 64/99 (ex NN 68/99) Italy, State aid to the Gruppo Tirrenia di Navigazione companies  (OJ 
L 53, 26.2.2005, p. 29). 
347 N 60/06 (OJ C 196, 24.8.2007, p. 1). 
348 N 507/06 (OJ C 133, 15.6.2007, p. 4). 
349 N 510/05 (OJ C 238, 10.10.2007, p. 2). 
 
EN 90   EN 400. At the level of the infrastructure manager/ operator, there are ge nerally no State aid 
elements involved in the financing of an infrastructure in cases when the port manager finances the infrastructure from its own resources, without intervention by 
the public authorities, in cases where th e infrastructure cannot be exploited 
economically and its financing falls under th e public policy remit, and/or when the 
behaviour of port managers/operators is gui ded by the prospects of  profitability in 
the longer term. 
401. The Commission continued to enhance mar itime safety by approving an Italian 
scheme aimed at expediting the withdrawal of single-hull vessels
350. 
402. The Commission adopted favourable decisions as  regards social ai d for seafarers in 
Estonia351, Belgium352 and Sweden353. The Commission adopted a positive decision 
concerning innovation aid for ship-owners in the Netherlands354. The Court of First 
Instance  dismissed as inadmissible for want of a legal interest in bringing 
proceedings355 the action against Commission D ecision C (2002) 4370 final of 13 
November 2002 not to raise objections to the Danish fiscal measures applicable to 
seafarers on board vessels registered in the Danish international register356. 
403. The Commission also continued to investigat e the injections of finance granted by 
the French State to Société Nationale Mari time Corse-Méditerranée in the context of 
its partial privatisation and the ne w restructuring plan, with a view, inter alia , to 
ensuring a level playing field in maritime cabotage. 
2.5. Aviation 
2.5.1. Enforcement of Article 81  – SkyTeam airline alliance 
404. On 19 October the Commission invited in terested parties to comment on the 
commitments proposed by eight members of the SkyTeam airline alliance, namely 
Aeromexico, Alitalia, CSA Czech Airlines, Delta Air Lines, KLM, Korean Air, 
Northwest Airlines and Air France357. These commitments are designed to meet 
concerns under Article 81 EC raised by the Commission in its statement of 
objections of 15 June 2006358. The Commission is concerned that the cooperation in 
passenger air transport services between these SkyTeam members may have adverse 
effects for passengers on a limited number of routes where they enjoy a strong 
market position and where barriers to entry are significant . To address these 
concerns, the parties have offered commit ments designed to facilitate new entry on 
the routes in question, mainly by offering to  make slots available at appropriate EU 
airports for competitors and by shari ng their frequent flyer programmes. 
                                                 
350 N 54/06 (OJ C 187, 10.8.2007, p. 1). 
351 N 65/07 (OJ C 307, 18.12.2007, p. 12). 
352 NN132/2000 and NN-73/03 (OJ C 238, 10.10.2007, p. 1). 
353 N 749/06 (OJ C 282, 24.11.2007, p. 2). 
354 N 225/06 (OJ C 196, 24.8.2007, p. 2). 
355 T-30/03, not yet reported. 
356 Appeal brought on 11 July 2007 in the ECJ, C-319/07 (OJ C 211, 8.9.2007, p. 27). 
357 IP 07/1558, 19.10.2007. 
358 MEMO/06/243, 19.6.2006. 
 
EN 91   EN 405. Comments on the proposed commitments were received by 19 November. If the 
Commission's assessment of the comments  supports the view that the proposed 
commitments were to resolve the comp etition concerns, the Commission would 
adopt a so-called "commitments decisi on" under Article 9 of Regulation 1/2003. 
2.5.2. Applying merger rules to aviation 
406. On 27 June the Commission took a decision to prohibit the propos ed takeover of Aer 
Lingus by Ryanair. The acquisition would ha ve combined the two leading airlines 
operating from Ireland which compete vigorously against each other. Both Ryanair and Aer Lingus were by far the largest airlines  offering short-haul flights to and from 
Ireland. Their position was particularly str ong on routes to and from Dublin, where 
the merged entity would have accounted for around 80% of all intra-European traffic. 
407. Consistent with its approach in previous airline merger cases, the Commission 
analysed the effects of the merger on the individual routes on which the two 
companies' activities overlapped. The Comm ission's extensive in-depth investigation 
of the case showed that Aer Lingus and Ry anair competed directly with each other 
on 35 routes to and from Ireland. On 22 of  these routes, the merger would have 
presented customers with a monopoly. On the remaining routes, Aer Lingus and 
Ryanair were each other's closest competitors, and the merger would have 
significantly reduced consumer choice, w ith the merged entity holding a market 
share of between 60% and over 90%. Further, the market investigation revealed that 
competing airlines were unlikely to enter into direct competition against a merged 
Ryanair/Aer Lingus in Ireland. This was not only because the merged entity would be able to operate from the very large bases of Ryanair and Aer Lingus in Ireland, 
having access to customers through their tw o well-established brands, but also 
because Ryanair has a reputation of aggressi ve retaliation agains t any entry attempt 
by competitors. The likelihood of entry was further reduced by peak-time congestion 
at Dublin airport and other airports on overlapping routes. The Commission thus 
concluded that the proposed acquisition would have impeded effective competition 
on a large number of routes  to and from Ireland, direct ly affecting more than 
14 million passengers every year. 
408. While Ryanair offered various remedies to resolve the competition issues identified, 
the Commission concluded that the scope of these remedies was insufficient to 
ensure that customers would not be harmed  by the transaction. In particular, the 
limited number of airport "slots" offered was unlikely to stimulate market entry on the scale necessary to replace the competitive pressure currently exercised by Aer Lingus. Moreover, the remedies contained a number of other formal and substantive 
shortcomings and were thus not sufficient to remove the identified impediment to 
effective competition. 
409. The facts of this case differed from those of  previous airline mergers. This was the 
first time the Commission assessed a proposed merger of the two main airlines in a 
single country, with both operating from the sa me "home" airport, namely Dublin. It 
was also the first time the Co mmission assessed a merger of  two "low-cost" airlines, 
operating on a "point-to-point" basis. Fi nally, the number of overlapping routes 
compared with previous ai rline cases is unprecedented. 
 
EN 92   EN 2.5.3. International Aviation Policy – Applic ation of Regulation (EC) No 847/2004 
410. On 15 February and 31 May respectivel y, the Commission adopted two decisions359
 
under Regulation 847/2004 on the negotiation and implementation of air service 
agreements between Member States and third countries. In those decisions, the 
Commission sets out the criteria accordi ng to which it assesses the agreements 
negotiated by Member States with a view to authorising or not the provisional 
application or conclusion of such agreemen ts by Member States in line with EU law. 
411. It is settled case law that Article 10 EC, read in conjunction with Articles 81 and 82 
EC, requires Member States not  to introduce or maintain in  force measures, even of a 
legislative or regulatory natu re, which may render ineffective the competition rules 
applicable to undertakings. This would be the case - the Court of Justice has 
declared360 - if a Member State were to requir e or favour the adoption of agreements, 
decisions or concerted practices contrary to Article 81 or to reinforce their effects. A 
fair proportion of bilateral air service ag reements concluded between Member States 
and third countries require or encour age air carriers designated under these 
agreements to agree on or coordinate ta riffs and/or the capacity they operate. 
412. In its decisions under Regulation 847/2004, the Commission found that such air 
service agreements infringe Articles 10 and 81 when taken in conjunction. 
Accordingly, the Commission allows Member  States to provisionally apply or to 
conclude such agreements, inter alia on condition that the provisions breaching 
Articles 10 and 81 are brought into  line with EU law within 12 months of the date of 
notification of the decisions. 
2.5.4. International aviation policy – application of the Horizontal Mandate 
413. On 5 June 2003, the Council adopted a decision (the Horizontal Mandate) 
authorising the Commission to negotiate Co mmunity-level agreements with third 
countries to replace certain specific provisions agreed bi laterally by Member States. 
The rationale of these Community-lev el agreements, known as Horizontal 
Agreements, is to bring the air service agreements between  Member States and third 
countries into line with EU law. 
414. Four Horizontal Agreements containi ng provisions on EU competition law were 
signed in 2007 between the Community, on the one hand, and Paraguay, Malaysia, Kyrgyzstan and United Arab Emirates on th e other. These Horizontal Agreements 
ensure that the 55 air service agreements  between Member States and the four 
countries concerned are brought fu lly into line with EU law, inter alia by resolving 
any infringements of Articles 10 and 81 EC in these air service agreements. A further seven Horizontal Agreements were initiall ed in 2007 with Panama, Jordan, Armenia, 
Mongolia, Pakistan, Nepal and Kazakhsta n, containing similar provisions and 
referring to 91 air service agreements between Member States and those seven countries. 
                                                
 
359 Commission decisions C(2007) 434, 15.2.2007 and C(2007) 2230, 31.5.2007. 
360 Case 267/86 Pascal Van Eycke v ASPA NV [1988] ECR 4769, paragraph 16. 
 
EN 93   EN 2.5.5. Applying State Aid Rules to Air Transport 
415. During 2007, the Commission adopted several decisions in the air transport sector. 
This was partly the result of  the successful dialogue with Member States aimed at 
bringing the existing aviati on support measures into line with the 2005 Aviation 
State aid guidelines by June, as well as the result of a large number of complaints 
made in particular about the relations between airport managers and airlines. 
416. The Commission approved State aid to inve stments in airport infrastructure at 
airports in Italy (Tortolì-A rbatax Airport in Sardinia361), Poland ( Łódź, Rzeszów 
Jasionka362) United Kingdom (New quay Cornwall Airport363) and Germany 
(Augsburg Airfield364, Memmingen Regional Airport365, Kiel-Holtenau366) where it 
concluded that the support measures envi saged were proportionate and necessary to 
the development of the airports. In othe r cases the Commission considered that 
financing of certain airport infrastructures – in the abse nce of a transfer of State 
resources - were not to be considered as State aid (the Rehabilitation of Tallinn 
Airport Airside project367 and the Upgrading of Tallinn airport passenger terminal 
and plant health and veterinary border inspection point projects368). 
417. Another category of support measur es in Italy (G rosseto airport369, Puglia regional 
airports370), Belgium (Antwerp Airport371) and Sweden (Norrköping372) was linked to 
start-up aid for airlines departing from smaller regional airports where such 
temporary support was intended to contribute  to the development of the airport and 
of the whole region. 
418. The Commission also widened the scope of it s inquiry relating to matters covered by 
the 2005 Aviation State aid guidelines. A numbe r of formal investigation procedures 
were opened in respect of a number of air ports. These cases involved the financing of 
the airports and business relationships with  various airlines. The airports concerned 
were those of Lübeck-Blankensee373, Tampere-Pirkkala374, Berlin-Schönefeld375, 
Alghero376, Dortmund377 and Pau-Bearn378. 
                                                 
361 N  491/06 (OJ C 133, 15.6.2007, p. 4). 
362 NN 22/07 & NN 21/07 (OJ C 319, 29.12.2007, p. 3). 
363 N 303/07 (OJ C 319, 29.12.2007, p. 1). 
364 N 619/06 (OJ C 133, 15.6.2007, p. 7). 
365 N 620/06 (OJ C 133, 15.12.2007, p. 8). 
366 NN 57/07 (OJ C 307, 18.12.2007, p. 11). 
367 N379/06 (OJ C 196, 24.8.2007, p. 3). 
368 N380/06 (OJ C 196, 24.8.2007, p. 4). 
369 N 194/07 (OJ C 284, 27.11.2007, p. 2). 
370 N 55/07 (OJ C 133, 15.6.2007, p. 10). 
371 N 156/07 (OJ C 271, 14.11.2007, p. 2). 
372 N 791/06 (OJ C 227, 27.9.2007, p. 6). 
373 C 24/07 (OJ C 287, 29.11.2007, p. 27). 
374 C 25/07 (OJ C 244, 18.10.2007, p. 13). 
375 C 27/2007 (OJ C 257, 30.10.2007, p. 16). 
376 C 37/2007 (OJ C 12, 17.1.2008, p. 7). 
377 C 26/2007 (OJ C 217, 15.9.2007, p. 25). 
378 C 53/2007, not yet reported. 
 
EN 94   EN 419. During 2007 the Commission completed its in vestigation into government assistance 
to a carrier in difficulty ( Cyprus Airways379), concluding that the restructuring plan 
submitted by the Cypriot authorities was co mpatible with the common market. In 
relation to the long-running case of Olym pic Airways/Airlines, the Commission 
opened a further investigativ e procedure into alleged State aid granted to this 
company since 2005380. In addition, in the Olympic Airways dossier, the Court of 
First Instance381 confirmed Commission Decision 2003/372/EC382 while annulling it 
partially because it did  not contain an adequate statement of reasons with regard to 
toleration of non-payment of charges due to Athens Airport and VAT on fuel and spare 
parts.  
2.5.6. International avia tion policy – EU-US open aviation agreement 
420. On 30 April, the European Union and th e United States of America signed an 
agreement establishing an open aviation area between the EU and US383. This 
agreement, which enters into force on 30 March 2008, allows for the consolidation of 
the EU aviation sector by recognising all European airlines as "Community air 
carriers" and allowing any such Community air carrier to fly between any point in 
the EU and any point in the US, without any restriction on pricing or capacity. 
421. This agreement replaces individual agreem ents between each Member State and the 
US, which usually included nationality rest rictions on airlines and which the Court 
had found to be in breach of the Treaty384. 
422. This agreement is a significant step towa rds liberalising intern ational aviation and 
can be expected to foster competition on th ese markets. It also includes provisions 
for the strengthening of cooperation between the Commission and the US 
Department of Transportation (DoT) in the field of competition385. In this context, 
the Commission is committed to working with the DoT in order to promote compatible regulatory approaches on these markets. 
H – POSTAL SERVICES  
1. O VERVIEW OF THE SECTOR  
423. Postal services in the EU generate about  0.9% of the gross domestic product (GDP). 
The postal sector is thus ve ry important for the EU economy as a whole. Virtually all 
Universal Service Providers (“USPs”) in the EU are public undertakings controlled 
by the Member States, with the notable ex ception of Germany and the Netherlands. 
424. Postal services are an essential vehicle of communication and tr ade, and they are 
vital for many economic and social acti vities. Many key sectors, such as e-
                                                 
379 C 10/06, not yet reported. 
380 C 61/07, not yet reported. 
381 T 68/03, not yet reported. 
382 C 19/02 (OJ L 132, 28.5.2003, p. 1). 
383 OJ L 134, 25.5.2007, p. 4. 
384 For instance Case C-466/98 European Commission v UK [2002]. 
385 In particular Annex 2 of the agreement, cf supra . 
 
EN 95   EN commerce, publishing, mail order, insuran ce, banking and advertising depend on the 
postal infrastructure. Postal services brin g social benefits which cannot always be 
qualified in economic terms. Postal services  are labour intensive and are also one of 
the principal public employers in Europe. Employment in the se ctor is first and 
foremost provided by USPs and is fair ly stable; USPs employ about 1.71 million 
persons386. However the number of jobs relate d to postal activities, i.e. that are 
directly dependent on or result from the postal sector387, is roughly 5 million. 
425. Postal services are changing rapidly. The sect or is at the crossroads of three dynamic 
business areas which are vital to the European economy, namely communications, 
advertising and transportation/logistics. The main drivers for change within the 
postal sector include demand and changing customer needs, organisational change, 
market opening, automation/new technol ogies and electroni c substitution. 
426. Most USPs in the EU are active in at leas t five separate service markets. All USPs 
provide express and unaddressed mail serv ices. Similarly, most USPs offer mail 
preparation services, hybrid mail services, e-mail services and financial services. Eight public postal operators (“PPOs”), main ly active in Member States with high 
volume markets, are active in ten or more different mail related markets. To varying 
extents these activities share the same co mmercial and logistical infrastructure, 
which is also used for the provision of services under monopoly and/or universal service obligations. 
427. The objective analysis of competitors' mark et shares of as well as the subjective 
perception of key players both confirm th at, even in cases where the monopoly has 
been completely abolished or substantially reduced, real competition is only in its infancy. Meaningful competition in the letter  post market has yet to develop. In the 
letter post segment, most of which is s ubject to monopoly rights, profit margins can 
vary between 10% and 20%, while in the pa rcel and express segment profit margins 
are between 2.5% and 10%
388. Therefore, despite ongoing diversification of 
activities, monopolies are sti ll the main source of cash flow and profits for USPs. 
2. P OLICY DEVELOPMENTS  
2.1. Objectives of the Commission 
428. Postal services are an important compone nt of the internal market for services389. In 
connection with the relaunch of the Lis bon strategy in 2005, postal services were 
described as a source of econom ic growth and job creation390. The Commission also 
considered postal services to be an e ssential element for ensuring social and 
territorial cohesion and for contributing to competitiveness391. Postal services is 
                                                 
386 WIK Consult, Main Developments in the Postal Sector (2002-2004), 2006. 
387 Pls Rambøll, Employment trends in the EU postal sector, October 2002. 
388 See Section 4.4 of Annex to Commission Report on the application of the Postal Directive 
(Directive 97/67/EC as amended by Directive 2002/39/EC), SEC (2006) 1293. 
389 Communication from the Commission, Internal Market Strategy – Priorities 2003-2006, COM(2003) 
238 final, p. 13. 
390 Presidency Conclusions, Brussels European Council, 22/23 March 2005. 
391 Communication from the Commission, Common Actions for Growth and Employment: The 
Community Lisbon Programme, COM(2005) 330 final. 
 
EN 96   EN moreover one of the sectors where the Commission's review of the Lisbon strategy 
conducted in December recommends enhanced monitoring from a competition policy point of view
392. 
429. The Postal Directive393 in force lays down a harmoni sed regulatory framework, the 
main elements of which are the minimum characteristics of the universal postal 
service which is to be guaranteed by all Member States, quality standards for intra-
EU cross-border services, ta riff principles and principles  governing tran sparency of 
accounts of universal service providers, and the separation of regulatory and 
operational functions in the postal sector and, especia lly, common maximum limits 
for those services which may be reserved by a Member State to its universal service provider(s) to the extent necessary to ensure  the maintenance of th e universal service. 
These maximum limits have been pr ogressively reduced in 1999, 2003 and 2006. 
430. The 2006 Commission Report on the applic ation of the Postal Directive
394 confirmed 
that a wide range of high quality universa l postal services are available throughout 
the Community, in compliance with the requi rements of the Postal Directive. The 
guiding principles of the Commission's policy towards this sector are the 
preservation of this acquis  and, at the same time, the adaptation to a more 
competitive and customer-focused environment. This policy has thus been geared, on 
the one hand, towards a stepwise reduction of the services on which monopoly rights 
are granted to USPs and, on the other ha nd, towards the preservation of competition 
in liberalised areas of the postal market so as to avoi d a de facto re-monopolisation 
by USPs. 
2.2. Initiatives of the Commission 
431. On 18 October 2006, the Commission put forw ard a proposal to open EU postal 
markets fully to competition by 2009, in line with  the indicative target date set out in 
the current Postal Directive. In 2007, the Commission actively negotiated its 
proposal under the co-decisi on procedure (Article 251 EC ). Following Parliament's 
first reading of, the Council reached a poli tical agreement in the Telecommunications 
and Energy Council in Luxem bourg on 1 October. On the ba sis of this agreement, 
the common position was formally adopted by the Council on 8 November. Since the 
lead committee in the European Parliame nt (Transport and Tourism) supported the 
common position without any amendments, th e Directive should be adopted soon. 
Although the starting date for market openi ng laid down in the Common Position is 
2011 and, for certain Member States, 2013, which is later than the 2009 target date set in the original proposal, the Commissi on believes that the Common Position is a 
compromise that is acceptable for all. It achieves what the Commission was aiming 
for, namely unconditional market opening while safeguarding the universal service. 
                                                
 
392 Proposal for a Community Lisbon Programme 2008 – 2010 Brussels, 11.12.2007 COM(2007) 804 final. 
See in particular Objective 5: The Community will strengthen the single market, increase competition in 
services, and take further steps to integrate the financial services market. 
393 Directive 97/67/EC of the European Parliament and Council of 15 December 1997 on common rules for 
the development of the internal market of Community postal services and the improvement of quality of 
service (OJ L 15, 21.1.1998, p. 14), as amended by Directive 2002/39 of the European Parliament and of the Council of 10 June 2002 amending Directive 97/67/EC with regard to the further opening to 
competition of Community postal services (OJ L 176, 5.7.2002, p. 21). 
394 COM(2006)596 final. Previous reports were COM(2005) 102 final and COM(2002) 632 final. 
 
EN 97   EN It also incorporates provis ions that guarantee that ma rket opening will work and 
monopoly is not introduced "by the back door". 
432. Regarding the application of State aid rules to the postal sector in 2007, the 
Commission adopted several decisions with a view to ensuring that postal operators 
and their subsidiaries do not enjoy unduly gr anted advantages which could neutralise 
the effects of the on-going liberalisation. 
433. In particular, the Commission thoroughly ex amined compensations for public service 
obligation granted to postal operators to ensure that these compensations do not exceed the actual costs of discharging the public service obligations and do not cross- 
subsidise commercial activities. 
434. Where compensation for a service of general economic interest (SGEI) does not 
fulfil the conditions set out in the Altmark
395 case law, and therefore has to be 
characterised as State aid, it can nevertheless be declared compatible with the Treaty 
according to Art 86(2)396. The conditions under which compensation for SGEI can be 
declared compatible were clarif ied by the 2005 Community Framework397. The 
Framework requires in particular that th e compensation does not exceed the costs 
incurred in discharging the public servic e obligations. Where the undertaking also 
carries out activities falling outside the scope  of the SGEI, only the costs associated 
with the SGEI may be taken into consideration. In the light of the Chronopost398 case 
law, the Commission has gone further into the analysis of the met hods applied by the 
postal operators to allocate costs between uni versal services and ot her services and to 
calculate the financial burden of the public tasks. 
435. On 7 March, as the requirements of th e 2005 Community Framework were satisfied, 
the Commission authorised a proposed GBP 313 million funding by the UK Government to allow Post Office Ltd to c ontinue to provide public services through 
the network of post offices in the financial year beginning 1 April
399. On 29 
November, the Commission authorised GBP 634 million for the following three years starting 1 April 2008, as well as th e continuation, over the same period, of 
existing loan facilities which allow the netw ork to fund the provision of cash services 
at post office counters
400. 
436. On 12 September, the Commission decided to open a formal i nvestigation against 
Germany to assess whether Deutsche Post AG was overcompensated for the carrying 
                                                 
395 Case C-280/00, Altmark Trans GmbH  [2003] ECR I-7747. 
396 Under Article 86(2), undertakings entrusted with a SGEI can escape the application of the rules on 
competition if the application of these rules obstructs th e performance, in law or in fact, of the particular 
tasks assigned to them. 
397 Community Framework for State aid in the form of public service compensation (OJ C 297, 
29.11.2005, p. 4) 
398 Joined cases C-83/01 P, C 93/01 P and C 94/01 P, Chronopost SA  [2003] ECR I-6993. 
399 Case N 822/2006, Debt payment funding to Post Office Limited  (OJ C 80,13.4.2007, p. 5) 
400 Case N 388/2007, Post Office Ltd: Transformation. The decision is available on DG Competition's 
website http://ec.europa.eu/comm/competition/state_aid/register/ii/  and is to be published in the OJ. 
 
EN 98   EN out of its universal service obligations401 in addition to the aid already found to be 
incompatible in a 2002 Commission decision402. 
437. In addition to assessing the compatibility of compensations granted to postal 
operators for providing SGEIs, the Commi ssion examined whether postal operators 
were enjoying other advantages. 
438. The Commission paid particular attention to the unlimited State guarantees granted 
to some postal operators. Such guarantees us ually result in lower financing costs and 
distort competition. On 25 April, the Commission formally took note of the agreement by Poland to put an end to the unlimited State guarantee enjoyed by the Polish Post Office
403. On 29 November, the Commissi on decided to launch an in-
depth investigation to examine whether Fr ance's la Poste, as a public law entity, 
enjoys an unlimited State guarantee404. 
439. The Commission also examined public aid to finance La Poste's pension scheme with 
a view to ensuring that such aid does not  exceed what is necessary to put the 
beneficiary of the aid on an equal footing with its competitors as regards social security contributions and tax. On 10 Oc tober, the Commission gave conditional 
authorisation for public aid to finance La Po ste's pensions for civil servants since, 
following the reform of the pe nsions, the social security contributions and tax paid 
by La Poste will be equivalent to those paid by its competitors
405. 
440. On 21 February, the Commission decided to open an in-depth investigation into a 
series of funding measures taken by the United Kingdom in favour of Royal Mail406. 
The Commission is examining whether these measures constitute State subsidies or 
whether they meet "market investor" conditions407. 
III – The European Competition Network and cooperation with 
National Courts 
A – GENERAL OVERVIEW  
441. 2007 was the third full year of implementa tion of the enforcement system set up by 
Regulation 1/2003. It saw a further strengthening of cooperation between the 
                                                 
401 Case C 36/2007, Complaint against the German State for unlawful state aid to Deutsche Post (OJ C 
245, 19.10.2007 p.21)). 
402 Commission decision of 19 June 2002 on measures implemented by Germany for Deutsche Post AG 
(OJ L 247, 14.9.2002, p.27) 
403 Case E12/2005, Unlimited State guarantee in favour of Poczta Polska  (OJ C 284, 27.11.2007). 
404 Case C 56/2007 (ex E15/2005), Garantie illimitée de l'Etat en faveur de La Poste. The decision is 
available on DG Competition's website http://ec.europa.eu/comm/competition/state_aid/register/ii/  
405 Case C 43/2006, Projet de réforme du financement des retraites des fonctionnaires de La Poste 
française. The decision is available on DG Competition's website 
http://ec.europa.eu/comm/competition/state_aid/register/ 
406 Case C 7/2007 (ex NN 82/2006 and NN 83/2006), Alleged aid in favour of Royal Mail  (OJ C 91, 
26.4.2007, p. 34). 
407 Provision of funding on terms which would be accept able to a private investor operating in a market 
economy is not considered to be State aid. 
 
EN 99   EN members of the European Competition Network (ECN), i.e. the EU Member States' 
National Competition Authorities (NCAs) and the Commission. The ECN continued 
to function well throughout the year under the mechanisms created by Regulation 
1/2003 to ensure the efficient and consis tent enforcement of  Articles 81 and 82. 
1. COOPERATION  ON  POLICY  ISSUES 
442. The actual intensity, scope and potential for cooperation within the ECN go beyond 
the legal obligations set out in Regulati on 1/2003. The ECN provi des a platform for 
EU competition authorities to constructivel y coordinate enforcement action, ensure 
upstream consistency and discuss policy i ssues of common interest. During 2007 the 
basic structure of the different EC N fora was maintained as follows. 
443. First, the Director-General of DG Competition and the heads of all NCAs met for 
their annual meeting in the ECN context to discuss important competition policy 
issues. 
444. Second, the NCAs and the Commission met on four occasions in so-called "plenary 
meetings", during which general issues of common interest relating to antitrust policy were debated and experiences and know-how were exchanged. Such 
discussions and exchanges further embed a common competition culture within the 
ECN. 
445. A key area of policy discussed in 2007 was th e ability of NCAs, in their application 
of Articles 81 and 82 EC, to disapply St ate measures that breach Article 10 in 
combination with the competition rules of  the Treaty addressed to undertakings  
(following the CIF ruling408 by the European Court of Justice). Typically, cases 
undertaken by the NCAs on this  basis are complex, and a debate was held on the 
conditions that have to be met for the disapplication of anti-competitive State 
measures. These exchanges in the network enhance the ability of  NCAs to tackle 
appropriate cases that invol ve the possible disapplicatio n of State measures. The 
Plenary also discussed cartel-related issues , ex officio investigations and the use of 
commitment decisions within the Network. 
446. Third, three working groups discussed sp ecific issues. One working group covered 
cooperation issues within the Network more  generally, such as cooperation in the 
context of sector inquiries and requests fo r assistance from NCAs pursuant to Article 
22 of Regulation 1/2003. A sec ond working group was dedicated  to issues relating to 
abuse of a dominant position and a third working group, consisting of chief competition economists from the agencies within the ECN, addressed issues such as the competition implications of information sharing and the ex-post evaluation of competition policy enforcement. These work ing groups provided an excellent forum 
for sharing experiences on concrete issu es and for developi ng best practices. 
                                                
 
408 Case C-198/01  Consorzio Industrie Fiammiferi (CIF) and Autorità Garante della Concorrenza e del 
Mercato [2003] ECR  I-8055. 
 
EN 100   EN 447. Finally, 15 ECN sectoral subgroups409 dedicated to particul ar sectors addressed 
specific issues and engaged in a useful ex change of experience and best practices. 
The sectoral subgroups ensure good upstr eam coordination and engender a common 
approach and broad consistency in the a pplication of EU competition law, going 
beyond individual cases. For example, the Energy subgroup has been very 
productive, most notably with regard to reme dies which were debated in detail by the 
heads of NCAs and national energy regulators. 
1.1. Further convergence of national laws  and instruments in the context of 
enforcement of Regulation 1/2003 by NCAs 
448. The year 2007 saw the conti nuation of the 'convergence' process observed in the 
context of Regulation 1/2003. Over and above the legal obligations arising from the 
implementation of the Regulation, there is a trend towards greater approximation of 
national procedural laws and policies. 
449. A prime example of this trend towards further convergence is the ECN Model 
Leniency Programme410. The Programme, which was developed within the ECN 
working group on leniency during 2006, has already achieved very encouraging 
results in the course of the first year following its endorsement. Seven Member 
States (Belgium, Denmark, France, Ital y, the Netherlands, Portugal and Czech 
Republic) have already revi sed their existing programmes or adopted new ones to 
align with the Model Programme. In additi on, the following twelve Member States 
are currently in the process of adopting or  revising leniency programmes: Bulgaria, 
Cyprus, Greece, Finland, Hungary, Latv ia, Luxembourg, Poland, Romania, Sweden, 
Estonia and Spain. Today, all Member Stat es, except for Slovenia and Malta, have 
adopted leniency programmes or are in the process of adopting them, compared to 
only four Member States operating such  programmes in 2002. A full evaluation of 
the implementation of the Model Programme is scheduled for the end of 2008. 
450. Currently, all but four Member States ha ve abolished (or are in the process of 
abolishing) their notification system. New, often largely convergent, instruments are 
being used increasingly in practice. For ex ample, a large number of NCAs now have 
the power to adopt commitment decisions in line with Article 9 of Regulation 
1/2003. As a consequence, a significant incr ease in such decisions was observed in 
2007 as a proportion of the decisions co mmunicated to the Commission under 
Article 11(4) of Regulation 1/2003 (29 commit ment decisions in 2007  as against 7 in 
2006). 
1.2. Cooperation in individual cases 
451. Cooperation between the ECN members in individual cases is organised around two 
principal obligations on the part of the NCAs, namely to inform the Commission 
when new cases are opened (Article 11(3) of the Regulation) a nd before the final 
decision is taken (Article 11(4) of the Regulation). The first requirement of 
informing the Commission and the network f acilitates the swift r eallocation of cases 
                                                 
409 Banking, Securities, Insurance, Fo od, Pharmaceuticals, Professional se rvices, Healthcare,  Environment, 
Energy, Railways, Maritime Transport, Mo tor vehicles, Telecoms, Media and Sports. 
410 The ECN Model Programme is available at http://ec.europa.eu/comm/competition/ecn/index_en.html 
together with a list of frequently asked questions (MEMO/06/356, 29.9.2006). 
 
EN 101   EN on the few occasions where this appears necessary, and promotes enhanced and 
effective enforcement, while the second re quirement plays an important role in 
ensuring the consistent application of EU law. 
1.2.1. Case allocation 
452. The Commission was informed of appr oximately 140 new case investigations 
launched by NCAs in 2007. Amongst the new cases about which the Commission was informed under Article 11(3) of the Regulation, approximately 45% concerned the application of Article 81 EC, 31.5% conc erned the application of Article 82 EC 
and 23.5% concerned the application of both Articles 81 and 82 EC. Clusters of 
cases were observed, inter alia, in  the energy, food and media sectors. 
453. With regard to work-sharing within the Network, the flexible and pragmatic 
approach introduced by the Regulation and the Network Notice continued to function 
very well in practice. In 2007, as in previ ous years, there were very few instances 
where case-allocation discussions took place, and even fewer occasions where a case 
changed hands. The situations where work-sha ring plays a role typically arise when a 
complainant or a leniency applicant choos es to contact both the Commission and one 
or more NCAs. In 2007, a small number of complaints were re-allocated from the 
Commission to those NCAs that were willing to follow up the matters raised. 
Furthermore, in a limited number of inst ances, the Commission and NCAs agreed on 
a way of dividing work on a case-by-case basis. 
454. The flexible approach of the Regulation and the Notice was confirmed by the Court 
of First Instance in its judgments in cases T-339/04 and 340/04 France Telecom v. 
Commission
411. The Court ruled for the first ti me on questions of work sharing 
between the Commission and a NCA in the EC N. In essence, the CFI confirmed that 
the Regulation has not in any way establishe d a division of competences that could 
preclude the Commission from investigating a case that a NCA is already dealing 
with. Nor can this be derive d from the Joint Statement412, the Network Notice413 or 
general principles of Community  law, including subsidiarity. 
1.2.2. Coherent application of the rules 
455. In 2007, the Commission services reviewed or  advised on a very  significant number 
of cases originating from NCAs, following up on information provided under Article 
11(4) or upon informal request . These cases related to a br oad range of infringements 
in different sectors of the economy. 
456. Cases dealt with by NCAs are often rela ted to the Commission's own enforcement 
action. For example, the French competitio n authority accepted commitments from 
Citroën concerning competition concerns that  were closely related to those addressed 
by the Commission in its decisions involvi ng Toyota, Fiat, DaimlerChrysler and GM. 
Similarly, both the Commission and a num ber of NCAs have investigated 
multilateral interchange fees in different contexts. These types of cases call for very 
                                                 
411 Judgment of 8 March 2007, not yet reported. 
412 Joint Statement of the Council and the Commission on the functioning of the Network available from 
the Council register at: http://register.consilium.eu.int (document No 15435/02 ADD 1). 
413 OJ C 101, 27.4.2004, p. 43. 
 
EN 102   EN close cooperation in order to achieve ma ximum consistency, for the benefit of 
undertakings that want a level playing fiel d. It is important to underline, however, 
that the Network aims at coherence, not  absolute uniformity. Ensuring an overall 
level playing field for European busine ss is achieved when the same type of 
arguments and considerations govern enfo rcement action by ECN members. Market-
specific or case-specific elements may resu lt in a different outcome for cases that 
might initially appear to be the same. Different ECN members may also opt for 
different instruments – such as prohibition or commitment decisions – to address the 
concern identified. 
457. For example, in 2007 the German NCA informed the Commission of its commitment 
decisions in respect of long-term gas supply agreements. These decisions are 
modelled on the E.ON Ruhrgas decision of  the German NCA which, in essence, 
prohibited E.ON Ruhrgas from continuing the existing gas supply agreements and from concluding new agreements with regional  and local gas resellers, if they exceed 
a two-year duration for a capacity coverage of more than 80% of the resellers' needs 
and if they exceed a four-year duration fo r a capacity coverage between 50 and 80%. 
These German gas cases may invite comparison with the Commission's commitment 
decision in the Distriga s case (see I.A.2.3.2. above). From the Commission's 
perspective, the approach a dopted in both inst ances is an example of coherent 
application that follows common principles  without seeking absolute uniformity of 
outcome. Both the Commission and the NCA l ooked at the overall foreclosure effect 
of the agreements under scrutiny, and a major element of their analysis was the consideration of the market coverage of such agreements. The outcome in both cases 
is adapted to the specific features of the unde rtakings and markets concerned and 
takes account of the ability of the unde rtakings concerned to implement the 
commitments. 
458. To date, the Commission has not made use of  the possibility of relieving an NCA of 
its competence in a given case by ini tiating proceedings under Article 11(6). 
2. A
PPLICATION OF EU COMPETITION RULES BY NATIONAL COURTS IN THE EU:  
REPORT ON THE IMPLEMENTATION OF ARTICLE 15 OF REGULATION 1/2003 
2.1. Assistance in the form of informat ion or in the form of an opinion 
459. Article 15(1) of Regulation 1/2003 allows national judges to ask the Commission for 
information in its possession or for an opinion on questions concerning the 
application of the EU competition rules. 
460. In 2007, the Commission issued three opin ions: two in reply to requests from 
Swedish courts and one to a Spanish court. 
2.1.1. The opinions requested by Swedish courts 
461. First, the Swedish Market Court (Marknadsdomstolen) submitted a request for an 
opinion at the end of 2006. Th is request related to: (i) the notion of "undertaking" 
under the Swedish Competition Act (which is to  be interpreted in the light of Articles 
81 and 82 EC) and (ii) the notion of "legi timate interest" for public authorities under 
Article 7(2) of Regulati on 1/2003. The case concerned two municipalities in the 
 
EN 103   EN northern part of Sweden that had entere d into an agreement with the dominant 
electricity provider, Ekfors, for the provision of networ k services and lighting for 
roads and other public places. Following a disagreement about the level of the fees, Ekfors decided to discontinue its services until the disagreement  had been resolved 
and the municipalities were le ft without lighting. Ekfors ar gued in this context that 
the municipalities could not be regarded  as "undertakings" and therefore had no 
"legitimate interest" to complain. 
462. The Commission's opinion outlined the consid erations that should be taken into 
account in order to assess whether an entity constitutes an undertaking. The opinion, inter alia, outlined criteria to distinguish  (non-economic) public authority activity 
from economic activity and explained that the same entity can constitute an undertaking with respect to one activity wh ile not constituting an undertaking with 
respect to another activity. As  regards the notion of "legitimate interest" of public 
authorities under Article 7(2) of Regul ation 1/2003, the opinion referred to the 
relevant paragraphs in the Commission Notice on the handling of complaints. 
463. Secondly, further to a request  received in 2006, the Commis sion provided an opinion 
to the Swedish Supreme Court (Högsta Domstolen). The case before this court 
concerned, inter alia, whethe r the port of Ystad had a bused its dominant position as 
the provider of port services  by charging excessive fees for the services used by the 
Danish stated-owned ferry ope rator, Bornholms Traffiken. 
464. The request for an opinion related to the definition of the relevant market. The 
Commission's opinion clarified the criteria and the evidence on which it relied to 
reach a decision on the relevant market in a case such as the one pending before the Högsta Domstolen. The opinion referred, in particular, to the Commission's Notice 
on the definition of relevant market and to the case law of the Court of Justice
414 and 
its own decision practice415. 
2.1.2. The opinion requested by a Spanish court 
465. A request for an opinion was submitted in 2006 in the context of litigation between a 
supplier on the Spanish wholesale market  for petroleum products and a service 
station operator. The Spanish court (Juz gado de lo Mercantil n°2 de Madrid) 
requested the Commission's opinion on the defi nition of the relevant market, whether 
such a contract between a wholesaler and a service station operator could affect inter-
State trade and lead to a restriction of co mpetition, which factors should be taken into 
account when assessing market foreclosure,  and whether Community law allows the 
declaration of nullity of a contract after it has expired. 
466. The opinion set out the crit eria and the evidence on which the Commission relies to 
reach a decision on the relevant market in a case such as the one pending, in 
                                                 
414 Cases C-179/90  Merci convenzionali porto di Genova Spa. v Siderurgica Gabrielli SpA  [1991] ECR I-
5889, at para. 15, Case C-18/93 Corsica Ferries Italia v Corpo dei piloti del porto di Genova (Corsica 
Ferries II)  [1994] ECR I-1783, at para. 41. 
415 Euro-Port A/s v Denmark (Port of Rødby ) (OJ L 55, 26.2.1994, p. 52 at para. 7), Sea Containers v 
Stena Sealink  (OJ L 15, 18.1.1994, p. 8, at paras 12 and 65) and Scandlines v Port of Helsingborg and 
Sundbusserne v Port of Helsingborg , Commission Decision of 23 July 2004 which is published on the 
Commission's website (http://ec/europa/eu/comm/competition/antitrust/cases/decisions/36579/en.pdf). 
 
EN 104   EN particular by reference to the Commission' s Notice on the relevant market and to its 
decision in Repsol416. It underlined that the issue of whether there is a restriction of 
competition has be assessed in the contex t of the network of such contracts 
concluded by the wholesaler and that th e effect on trade must be assessed 
accordingly. In this context, reference was made to the Commission's Notice on the 
effect on trade and the Commission's d ecision in Repsol. The opinion further 
explained how to assess whether the market is foreclosed in line with the European Court's case law (Delimitis) and Commissi on case practice (Repsol). Finally, the 
opinion confirmed that the principle of automa tic nullity is absolute and is capable of 
having a bearing on all the effects, either pa st or future, of the agreement or decision 
concerned, including giving ri se to retroactive effect
417. 
2.2. Judgments of national courts 
467. Article 15(2) of Regulation 1/2003 requires the EU Member States to forward to the 
Commission a copy of any wr itten judgment issued by national courts deciding on 
the application of Articles 81 or 82 EC. The Commission received copies of some 50 
judgments handed down in 2007, which were  posted on DG Competition's website in 
so far as the transmitting authority did not cl assify them as confidential (confidential 
judgments are merely listed). 
2.3. Amicus curiae intervention under Article 15(3) of Regulation 1/2003 
468. Article 15(3) of Regulation 1/2003 provides that, where the coherent application of 
Articles 81 or 82 EC so requi res, the Commission, acting on  its own initi ative, may 
submit written observations to courts of the Member States, and may also make oral 
observations with the permissi on of the court in question. 
469. The Commission decided to inte rvene as amicus curiae purs uant to Article 15(3) of 
Regulation 1/2003 in a case in the Netherlands concerning  the tax deductibility of 
Commission competition fines. In the initia l judgment of 22 May 2006 on this issue, 
the Dutch Rechtbank van Haarlem (Court of First Instance in Haarlem, particularly 
in tax matters) ruled that fines imposed by the Commission for infringement of EC 
competition rules are deductible from in come tax. The court found that, although 
Dutch law provides that administrative fine s cannot be deducted from income tax, 
fines imposed by the Commission cannot be understood accordin g to the national 
definition of a "fine" as, unlike fines imposed under Dutch law, they consist of punitive elements and elements intended to neutralise illegal gains. 
470. An appeal against this judgment was ma de to the Gerechtshof van Amsterdam 
(Belastingkamer) (Court of A ppeal of Amsterdam, tax chamber). The Commission 
moved to intervene as amicus curiae to highlight that Community fines for breach of the EC competition rules are not intended to skim off illegal gains, and that the principle of equivalence would be breach ed if fines imposed under EC competition 
law could be deducted, unlike fines under national law. Moreover, it would go 
against the principle of effectiveness, b ecause the impact of Commission decisions 
                                                
 
416 The complete decision is available on the Commission's website:  
http://ec.europa.eu/comm/competition/an titrust/cases/index/by_nr_76.html#i38_348 
417 Case 48/72 Brasserie de Haecht II  [1973] ECR 77, para. 26 and C-453/99 Courage v Crehan  [2001] 
ECR I-6297, para. 22. 
 
EN 105   EN would necessarily be reduced if companies that were fined for violation of Articles 
81 and 82 were able (at least partially) to deduct the amount from national income 
tax. 
471. In an interim judgment of 12 September, the Gerechtshof van Amsterdam decided to 
ask for a preliminary ruling to the Europ ean Court of Justice under Article 234 EC 
regarding the possibility for the Commission to intervene on the basis of Article 15(3) in such national (tax ) litigation. The Dutch court essentially considers that 
there is a reasonable doubt as to whether the Commission can submit observations in 
cases other than 'competition cases in the strict sense'. 
2.4. Financing the training of nation al judges in EU competition law 
472. Continuous training and education of nationa l judges in EU competition law is very 
important in order to ensure both effectiv e and coherent applica tion of those rules. 
Since 2002, the Commission has co-financed 35 training projects, which by the end 
of 2007 had provided training for approximate ly 3 500 judges. A new Legal Base has 
been adopted on 25 September (Decision of  the European Parliament and the 
Council No. 1149/2007/EC, establishing for the period 2007-2013 the specific 
programme "Civil Justice"). The corr esponding Work Programme 2007 allows for 
action grants to support projects aimed at  promoting judicial cooperation between, 
and the training of, national judges in the context of the implementation of Articles 
81 and 82 EC including th e issue of private enforcement, with the aim of 
contributing to the development and impl ementation of European competition policy 
and Community cooperation measures in the field of competition in order to ensure 
the consistency of Community competition policy. The budget foreseen for these action grants in 2007 is EUR 800 000. A call for proposals has been launched at the 
end of 2007. 
IV – International activities 
473. In an increasingly globalised world ec onomy, competition policy must also adopt a 
global outlook. DG Competition responds to this challenge by reinforcing and extending its relations with partners al l over the world in both bilateral and 
multilateral fora. Commissioner Kroes attach es the highest importance to effective 
international co-operation in the area of  competition. Her bilate ral meetings with 
counterparts in the US, Japa n and China, as well as he r participation in the ICN 
annual conference, testify to this commitment. 
A – ENLARGEMENT , WESTERN BALKANS AND NEIGHBOURHOOD POLICY  
474. In the context of Enlargement, candida te countries must fulfil a number of 
requirements in the field of competition as a condition for joining the European 
Union. Candidate countries must adopt natio nal legislation compatible with the EU 
acquis. They must also put in place the necessary administrative capacity and 
demonstrate a credible enforcement r ecord. DG Competition provides technical 
assistance and support to help the candidate countries fulfil these requirements and it 
continuously monitors the extent to which the candidate countries  are prepared for 
accession. 
 
EN 106   EN 475. During 2007, cooperation with Croatia and Turk ey was particularly close. These two 
candidate countries must fulfil "opening benchmarks" before accession negotiations 
on the competition chapter can start. I ssues such as shipbuilding and steel 
restructuring were high on the agenda for Croatia, while Turkey has yet to introduce a system for the control and monitoring of State aid. 
476. DG Competition assisted the Western Balkan  countries in further aligning their 
competition rules with EU law. This include d, among others, help in drafting laws on 
competition and State aid and advice on set ting up the necessary institutions for the 
enforcement of these rules. DG Comp etition was involved in negotiating the 
competition provisions in the Stabilisation and Association Agreements with Serbia, 
Montenegro and Bosnia and Herzegovina. 
477. In the framework of the Neighbourhood Policy, DG Competition monitored the 
implementation of the competition-related priorities in the bilateral Action Plans agreed between the EU and ENP countries, wh ich set out an agenda of political and 
economic reforms in the short and medium term. 
B – BILATERAL CO -OPERATION  
478. The Commission cooperates with numerous competition authorities on a bilateral 
basis and in particular with  the authorities of the European Union's major trading 
partners. The European Union has entered into dedicated coopera tion agreements in 
competition matters with the United States, Canada and Japan. 
1. A GREEMENTS WITH THE USA,  CANADA AND JAPAN  
479. As in previous years, there was very clos e co-operation with the United States of 
America. Based on two dedicated competition cooperation agreements418, there were 
frequent contacts between DG Competition and the Antitrust Division of the US Department of Justice (DoJ) and the US  Federal Trade Commission (FTC). These 
contacts ranged from cooperation in individu al cases to more general matters relating 
to competition policy. Numerous meetings  and video- or phone-conferences took 
place to discuss issues such as cooperation in  cartel investigations , abuse of dominant 
positions or the application of compe tition rules in particular sectors. 
480. In case-related contacts, case teams usually  update each other on the status of the 
investigations (subject to the limits laid down in the above-mentioned bilateral 
agreements). Merger control, in particular , calls for effective co -ordination with the 
DoJ and the FTC. The 2002 EU-US Best Practices on Cooperation in Reviewing 
Mergers
419 provide a useful framework for c ooperation, especially by indicating 
critical points in the procedure where coope ration could be partic ularly useful. The 
Owens Corning/Saint Gobain  and Schering-Plough/AkzoNobel  cases can be cited as 
examples of fruitful cooperation between the EU and US agencies. 
                                                 
418 1991 EU-US Competition Cooperation A greement (OJ L 95, 27.4.1995, pp. 47 and 50) and 1998 
positive comity agreement (OJ L 173, 18.6.1998, pp. 26-31). 
419 See http://ec.europa.eu/comm/competition/mergers/legislation/eu_us.pdf 
 
EN 107   EN 481. Commissioner Kroes met her US counterpart s, Chairman Deborah Majoras of the 
Federal Trade Commission and Tom Barnett, Assistant Attorney General, Department of Justice, at the annual bilateral meeting (held on 30 October in 
Washington) and on several other occasions. 
482. Cooperation with the Canadian Competitio n Bureau is based on the EU/Canada 
Competition Cooperation Agreement signed in 1999
420. Contacts between the 
Commission and the Bureau have been fre quent and fruitful. Case-related contacts 
concerned mainly merger and cartel investigatio ns. In the area of cartels the contacts 
focused on coordination of investigative measures; in the area of mergers the 
discussions centred on possible remedi es. The Commission and the Canadian 
Competition Bureau also continued their dialogue on general competition issues of common concern. High-level meetings took place both in Brusse ls and Ottawa, and 
there were reciprocal visits between  agency officials from both sides.. 
483. Cooperation with the Japan Fair Trade Commission (JFTC) is based on the 2003 
Cooperation Agreement
421. Commissioner Kroes met JFTC Chairman Takeshima at 
the occasion of the annual bilateral meeting on 14 September in Brussels. At the centre of discussions were policy initia tives on both sides, as well as recent 
enforcement actions. In addition to cont acts on individual cases, the Commission and 
the JFTC continued their ongoing dialogue on general competition issues of common 
concern. 
2. C
OOPERATION WITH OTHER COUNTRIES AND REGIONS  
484. The European Commission continued its  close cooperation with the EFTA 
Surveillance Authority in enforcing the Agreement on the European Economic Area 
(EEA). Protocol 23 to the EEA Agreement was amended in order to allow the EFTA 
Surveillance Authority and the competitio n authorities of the EFTA States to 
participate in policy discussions within the European Competition Network. 
485. Cooperation with China under the “EU- China competition policy dialogue”422 
remained a priority in 2007. Commissioner Kroes visited China for the annual bilateral meeting on 3 September. Contacts between DG Competition and the Chinese administration were intense and ma inly dealt with ques tions concerning the 
newly adopted anti-monopoly law, the futu re implementing legislation and the 
administrative setup of the Chinese enfo rcement agencies. On 20-21 November, DG 
Competition organised a workshop in Brussels on EU merger control for a high-level delegation from the Ministry of Commerce and representatives of the Legislative 
Affairs Office of the State C ouncil. It also hosted a vis itor from the Ministry of 
Commerce for a period of five months. 
486. In the course of the year, DG Competiti on and the Korean Fair  Trade Commission 
(KFTC) met on several occasions to negotia te a bilateral cooperation agreement in 
the field of competition. This agreement will contain provisions on enforcement cooperation, notification, consultation a nd exchange of non-conf idential information. 
                                                
 
420 1999 EU-Canada Competition Cooperation Agreement (OJ L 175, 10.7.1999, p. 50). 
421 2003 EU-Japan Competition Cooperation Agreement (OJ L 183, 22.7.2003, p. 12). 
422 Terms of Reference of the EU-China competition policy dialogue (May 2004). 
 
EN 108   EN Talks are fairly advanced. When it enters in to force, the agreem ent will replace the 
existing Memorandum of Understanding423 between DG Competi tion and the KFTC. 
487. Moreover, DG Competition played an active role in the ongoing negotiations on Free 
Trade Agreements with India and South Korea, and on the trade part of the 
Association Agreements with the Andean Community, with a view to ensuring that 
anti-competitive practices (including Stat e aid) do not erode the trade and other 
economic benefits sought through those agreements. 
C – MULTILATERAL CO -OPERATION  
1. I NTERNATIONAL COMPETITION NETWORK  
488. DG Competition continued to play a leading role in the International Competition 
Network (ICN). More specifically, DG Comp etition is a member of the Steering 
Group, co-chair of the cartels Working Gr oup and an active member of the other 
Working Groups (on Mergers, Competiti on Policy Implementation, and Unilateral 
Conduct).  
489. At the 2007 ICN Annual Conference (held in Moscow from 31 May to 1 June), 
Commissioner Kroes and Director-General  Philip Lowe delivered keynote speeches. 
1.1. Working Groups 
490. The Unilateral Conduct Working Group (UCWG), which was set up in 2006, 
delivered its first results at the 2007 ICN conference in the form of reports covering 
the aims of legislation on unilateral conduct and definitions of dominance. The year 
2006-2007 was UCWG's first year of activity . Its report to the Moscow Annual 
conference contains three parts: the objectiv es of laws regarding unilateral conduct, 
the assessment of dominance/Significant Market Power (SMP), and State-created 
monopolies. In 2007, UCWG also worked on Recommended Best Practices (RPs) for 
the assessment of domina nce/substantial market power and State-created 
monopolies, as well as on a f act-finding report on two part icular types of conduct: 
exclusive dealing/single bra nding and predatory pricing. Th e reports and the RPs will 
be presented at the 7th Annual Conference in Kyoto in April 2008. 
491. The Cartels Working Group, co-chaired by DG Competition, presented a report to 
the 2007 annual conference on cooperation between competition agencies in cartel investigations (this report was drafted within DG Competition). The Working Group 
also delivered reports on obstr uction of justice in cartel in vestigations, the interaction 
between public and private enforcement in cartel cases as well as a chapter on case 
initiation for the ICN cartel enforcemen t manual. The 2007 ICN Cartels workshop 
was held in El Salvador fr om 30 October to 1 November. 
                                                
 
423 Memorandum of Understanding on cooperation between the Fair Trade Commission of the Republic of 
Korea and the Competition Directorate-General of the European Commission (October 2004). 
 
EN 109   EN 1.2. OECD 
492. DG Competition continued to contribute actively to the work of the OECD 
Competition Committee and participated in  all round tables on competition policy 
(including on refusal to deal and facili tating practices in oligopolies, dynamic 
efficiencies in merger analysis, evaluation of the actions of competition authorities, energy security and vertical mergers). DG Co mpetition submitted contributions to all 
roundtables and gave presenta tions on the results of the energy sector inquiry, the 
maritime review, the draft EC guidelines  on non-horizontal mergers (subsequently 
adopted in November) and th e decision in the Ryanair/Ae r Lingus merger case (see 
II.G.2.5.2. above). 
 
EN 110   EN V – Outlook for 2008 
A – ANTITRUST  
493. During 2008, the Commission will commence a review of the block exemption 
regulations on vertical rest raints and horizontal cooperation which expire in 2010, 
with a view to either amending or extending them. 
B – MERGERS  
494. During 2008, the Commission will undertake a review of the functioning of the 
jurisdictional provisions  of the EC Merger Regulation, including the operation of the 
system of case referral between the Comm ission and Member States, with a view to 
submitting a Report to the Council of Ministers by 1 July 2009. 
C – STATE AID  
495. In 2008, the Commission will continue to im plement the State Aid Action Plan. The 
Commission will adopt, in particular, the new environmental State aid guidelines, the 
General Block Exemption Regulation and the new Communicati on on guarantees. 
The Commission will also ensure the eff ective implementation of these new texts, 
including in-depth assessment of major ca ses. As announced in the State Aid Action 
Plan, it will pursue the systematic recovery of incompatible aid in cooperation with 
Member States. 
496. In the field of Services of General Economic Interest, the Commission will 
contribute to improving predictability by re sponding to questions from stakeholders 
in the context of the interactive inform ation system announced in the Communication 
on services of general intere st adopted on 20 November 2007424. 
D – INTERNATIONAL ACTIVITIES  
497. DG Competition’s work with the candidate co untries, the Wester n Balkan countries 
and the Neighbourhood Policy countr ies will continue in 2008. 
498. DG Competition intends to further stre ngthen its cooperation with the Korean 
competition authority by concluding a dedicated intergovernmental cooperation agreement in the field of competition. 
499. The focus in 2008 will be on cooperation with emerging economies such as China 
and India. 
                                                
 
424 See the Commission Communication "Services of genera l interest, including social services of general 
interest: a new European commitment" (COM(2007 ) 725 final). The Communication accompanied the 
general Single Market Review Communication ("A single market for 21st century Europe") adopted on 
20 November 2007. 
 
EN 111   EN 500. The Commission will (continue to) negotiate  Free Trade Agreements with a number 
of countries, e.g. Korea and India and A ssociation Agreements with the Andean 
Community. DG Competition wi ll contribute to the negotiations on the competition 
provisions of these agreements aimed at  guaranteeing a level playing field for 
European companies. 
501. The annual conference of the Internati onal Competition Network will be held in 
Kyoto, Japan from 14 to 16 April 2008. DG Competition will attend and play an 
active role in this important international event. 
E – SECTOR DEVELOPMENTS  
1. E LECTRONIC COMMUNICATIONS  
502. The remedies imposed within the context of ex ante  regulation remain an issue where 
the Commission intends to achieve a gr eater harmonisation of the regulatory 
principles applied by the NRAs. The wide di screpancy of termination rates in the EU 
demonstrates the need to achieve real co st orientation. The Commission also believes 
that asymmetric rates between operators are only justified in the case of cost 
differences outside the contro l of the operators, and that such asymmetries should be 
phased out over time. The Commission will co operate with the European Regulators 
Group to propose a Commission Recommend ation on remedies in termination 
markets. It is planned to adopt  such a Recommendation by mid-2008. 
503. Moreover, access to next gene ration networks is  critically important for alternative 
network operators that have invested in infr astructure at the level of local exchanges. 
Effective remedies need to be devised which will address the issue of stranded investments while at the same time safeguard ing incentives to invest in those next 
generation networks. A Co mmission Recommendation on the regulation of next 
generation access networks is scheduled to be adopted towards the end of 2008. 
504. The Commission has started to review its Recommendation for the Article 7 
Framework Directive (FD)  notification procedure
425. Based on the e xperience gained 
with more than 750 notifi cations under Article 7 FD426, it seems possible to simplify 
the notification procedure and to clarify so me issues with the aim of streamlining 
existing administrative practices. Th e adoption of a new Procedural 
Recommendation is planned for Spring 2008. Th e Commission is required to report 
to Council and the European Parliament in 2008 on the functioning of the Regulation 
and in particular whether it  should be extended in duratio n and/or scope to include 
other services such as roaming SMS or data. 
                                                 
425 Commission Recommendation of 23 July 2003 on notif ications, time limits and consultations provided 
for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common 
regulatory framework for electronic communications networks and services (OJ L 190, 30.7.2003, 
p. 13). 
426 Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common 
regulatory framework for electroni c communications networks and serv ices (Framework Directive) (OJ 
L 108, 24.4.2002, pp. 33-50). 
 
EN 112   EN 505. While in the area of State aid the Comm ission expects further cases of broadband 
support in densely-populated and rural areas to be notified for approval, the move 
towards “next generation networks” is exp ected to lead to new patterns of public 
intervention. The Commission will continue to monitor these developments to ensure that public intervention is targeted at ge nuine market failures and does not crowd out 
private investment. In the area of mergers,  the Commission will continue to preserve 
the efficient competitive structure of  electronic communications markets. 
2. I
NFORMATION TECHNOLOGY  
506. The Commission will continue to monitor market developments closely and ensure 
that competition is not hindered, for ex ample through reduced interoperability and 
compatibility with open standards. Conti nued attention will also be given to the 
growing importance of intelle ctual property rights in st andards and the concomitant 
actions taken by standards-setting organisa tions to accommodate these rights. More 
broadly, it will continue to monitor developm ents in standard-setting bodies, so as to 
ensure that procedures within standard-s etting bodies are transparent and that they 
contribute to the achievement of pro-competitive outcomes. 
507. The Commission will, in particular, ensure  that existing markets remain open and 
that entry into new markets is not bl ocked through unilateral actions by dominant 
companies or through restrictive agreements. By removing and preventing anticompetitive barriers to innovation a nd market entry, DG Competition will 
contribute to investment and growth in ICT markets and thereby to the deepening 
and extension of the European knowledge economy as a whole. 
3. MEDIA 
508. Technological developments in the media mark ets will continue to  raise new issues 
for the Commission's enforcement activities. Priorities will be similar to those in 
2007. DG Competition will focus on ensuring th at scarce premium media content is 
made available in compliance with EU competition rules, and will monitor the transition from analogue to digital broad casting and maximise consumer benefits 
from new forms of distribution by fighti ng anti-competitive restrictions at both the 
collective rights management level and the distribution level. In addition, merger 
control will continue to preserve the efficient competitive structure of multimedia media markets. 
509. The Commission will continue to apply it s established policy concerning State aid 
for the digital switchover. As the target date approaches for the switchover from 
analogue to digital broadcasting, Member States are likely to propose further 
initiatives to facilitate the process. In assessing these initiatives, the Commission will pay particular attention to technological neutrality and to  the ultimate objective of 
ensuring wide consumer acce ss to digital broadcasting. 
 
EN 113   EN 510. The Commission initiated the review of the Broadcasting Communication by 
launching a broad consultation in early 2008427, giving Member States and 
stakeholders the opportunity to submit th eir views on the various aspects of the 
public funding of public service broadcasti ng, including the scope of public service 
activities in the new media environment.  After having analysed the submissions 
received, the Commission will come forwar d – where appropriate – with a proposal 
for a revised Broadcasting Communication, possibly by mid-2008. 
511. The results of the Commissi on study into the economic and cultural effects of 
territorial conditions ap plied in film support schemes are expected in the first half of 
2008. Having extended the Cinema Communi cation until 31 December 2009 at the 
latest, the Commission will need to consid er the implications of the study for the 
Commission's future approach to State ai d for films, including whether or not to 
review the cinema communication. Any changes to the Cinema Communication 
would require a process of formal cons ultation with the Member States and 
interested parties. 
4. H EALTH -RELATED MARKETS  
512. In 2008 the work of DG Competition in the area of health-relate d markets will be 
largely determined by the inquiry into the pharmaceutical sector that was initiated on 
15 January 2008 428. The scope of the inquiry is defined as " the introduction of 
innovative and generic medicines fo r human consumption onto the market ". In the 
context of this inquiry, unannounced inspec tions were carried out at a number of 
pharmaceutical companies in Europe. The inqui ry is a response to indications that 
competition in pharmaceuticals markets in Europe may not be working properly: fewer new medicines are being brought to ma rket, and the entry of  generic medicines 
sometimes seems to be delayed. The inquiry  will therefore examine the reasons for 
this state of affairs. 
513. In particular, the inquiry will examine whether agreements between pharmaceutical 
companies, such as settlements in pate nt disputes, may infringe the Treaty's 
prohibition of restrictive busin ess practices (Article 81 EC).  It will also investigate 
whether companies may have created artificial barriers to  entry (through the misuse 
of patent rights, vexatious litigation or other means) a nd whether such practices may 
infringe the Treaty's prohibition of abuses  of dominant positions  (Article 82 EC). 
514. An interim report is due in the autumn of  2008 and final results are expected in the 
spring of 2009. The inquiry's findings will, if necessary, allow the Commission or the 
national competition authorities to focus any future action on the most serious competition concerns as well as to identify remedies to resolve the specific competition problems in individual cases. 
                                                
 
427 Further information is available on the website of DG Competition: 
http://ec.europa.eu/comm/competition/consultations/open.html 
428 For the press release and the Decisi on to open a sector inquiry, s ee EUROPA - European Commission - 
Competition. 
 
EN 114   EN 5. F INANCIAL SERVICES SECTOR  
515. The outlook of the financial services sector  for 2008 is to a large extent determined 
by the entry into force of the Single Euro Payments Area (SEPA). 
516. The SEPA framework for payment car ds was launched on 1 January 2008. An 
important milestone in the SEPA migrat ion process was reached on 28 January 2008 
when the first electronic payments for cr edit transfers in euro were made throughout 
the EU and in the neighbouring countries of Iceland, Liechtenstein, Norway and 
Switzerland429, using the new SEPA standards. Fo r technical and legal reasons the 
launch of the SEPA payment instruments for direct debits will take place 
subsequently430, but should not occur later th an 1 November 2009. For card 
payments, the SEPA Cards Framework431 has been in force since 1 January 2008. 
517. The creation of a Single Euro Payments Area is expected to enhance competition by 
removing national barriers, thereby increasing competition between banks. If properly implemented, it is likely that the creation of a Single Euro Payments Area 
will – in whole or in part - remove the barriers to competition which were identified in the Financial Sector Inquiry Report
432. 
518. However, the design and implementation of the SEPA project is led by the EPC, 
which is an association of undertakings. SEPA thus consists of agreements and 
cooperation between competing undertakings . It therefore merits close competition 
scrutiny to assess whether the co-operation produces foreclosure effects which might 
amount to a restriction of competition (Art icle 81 EC). DG Competition's assessment 
takes into account the fact that the success of SEPA depends first and foremost on 
the proactive engagement and co-operati on of the European payments industry. 
Nevertheless, restrictions on competition need to be justified: i.e. the undertakings 
need to demonstrate that their co-operation leads to increased efficiencies which not 
only benefit the industry but ar e also be passed on to cons umers (Article 81(3) EC). 
519. DG Competition is following the process of SEPA migration in close collaboration 
with DG Internal Market, the ECB and the EPC. 
520. The possibility cannot be excluded that the instability and volatility which affected 
markets towards the end of  2007 will continue well  into 2008. Against this 
background it is possible that banks may suff er significant losses, for example as a 
result of mortgage payment defaults or  mortgage asset devaluation, in their 2007 
                                                 
429 SEPA is currently defined as the area consisting of the 27 Member States plus Iceland, Lichtenstein, 
Norway and Switzerland. 
430 In order to allow for smooth SEPA direct debit implementation, the Payment Services Directive (PSD), 
as the necessary legal basis, needs to be transposed  into national law of each Member State first by 1 
November 2009. 
431
 http://www.europeanpaymentscouncil.eu/doc uments/SEPA%20Cardsframework_027_05_Vers
ion2%200.pdf 
432 For example, the SEPA Cards Framework (SCF) ob liges payment card schemes to allow participation 
on the basis of transparent and non-discriminatory criteria, prevents discrimination according to 
nationality, imposes SEPA-wide, transparent pricing structures for payment card schemes and imposes 
unbundling of card scheme governance and management from infrastructure. 
 
EN 115   EN accounts. The possibility cannot be ruled out  that other banks may need additional 
capital or State support in order to overcome the ongoing crisis. 
6. P OSTAL SERVICES  
521. In 2008, while the adoption of the Postal Directive is e xpected to happen swiftly, 
most EU Member States will still mainta in monopoly rights to USPs. However, some 
Member States (Finland, Sweden, Un ited Kingdom and, as of 1 January 2008, 
Germany) have abolished the reserved ar ea, while others have a more reduced 
reserved area than is allowed under the Dire ctive. This means that a significant share 
of EU letter post volumes is expected to be completely open to competition even ahead of the original 2009 deadline proposed by the Commission. 
522. Irrespective of de jure  market opening, the fact remains that, for most market 
segments and services, USPs in each Member State will retain a predominant position, as the need for an own network a nd strict industry requirements keep the 
barriers to entry in several Member States high. 
523. The operators' focus on business segments is expected to continue because business 
products (unaddressed and addressed dir ect mail in particular) are showing 
substantially higher rates of growth than traditional letter mail. 
524. In 2008, EU competition rules, in particul ar Articles 81-82 and 86 EC, will thus 
continue to apply in a context in which mo st USPs in the EU w ill still have legal 
monopolies or positions of unparalleled st rength and in which the most dynamic 
segments of the market are exist alongs ide such monopolies. The preparation for a 
more competitive environment by 2011 create s the risk of unlawful attempts by 
USPs to diversify and expa nd their operations and, possibl y, leverage their market 
power in service or geographic markets neighbouring their m onopoly, e.g. direct or 
express mail and business segments. Preserving residual or nascent competition in service markets adjacent to the monopoly w ill thus continue to be a key concern. 
525. From an anti-trust point of view, the Commi ssion will thus continue to give priority 
to investigations which concern EU-wide or  cross-border issues, to address barriers 
to competition set up as a result of State measures or by attempts to unlawfully leverage market power and to set legal or economic precedents. 
526. From a State aid viewpoint, the Commission will continue to ensure that Member 
States do not over-compensate postal operators  entrusted with Services of General 
Economic Interest (SGEI) and that commerci al activities outside the SGEI are not 
cross-subsidised. The Commission will also check that Member States do not grant other types of State aids to  postal providers or to th eir subsidiaries, such as 
guarantees or funding which do not satis fy the "market investor" conditions. 
527. Pending the final vote of the European Parliament on the new Postal Directive, the 
Commission will continue to prepare for market opening from 2011. In its current 
form the Directive mandates the Commi ssion to provide assistance to Member 
States, in particular regarding the calcula tion of the net cost of the universal 
 
EN 116   EN service433. Accordingly the Commission has alread y started to examine the different 
methods for the calculation of the net cost of the universal service and will attach 
special importance to th is issue throughout 2008. 
VI – Interinstitutional cooperation 
528. The Commission continued its cooperation w ith the other Community institutions in 
accordance with the respective agreement or protocols entered into by the relevant 
institutions434. 
1. E UROPEAN PARLIAMENT  
529. As is the case each year, the European Parl iament issued an own-initiative report on 
the Commission's Annual Report on Comp etition Policy of the previous year, 
following an exchange of views on th e issues raised in the report. 
530. The Commission also participated in discussi ons held in the European Parliament on 
Commission policy initiatives, such as on State aid reform (in particular on the 
environmental guidelines and on the proposal for a General Block Exemption Regulation) and the inquiry into the financial services sector. 
531. The Commissioner and/or the Director Ge neral responsible for Competition hold 
regular exchanges of views with the responsible Parliamentary committees on the subject of competition policy. In 2007, there were four exchanges of views were held with the Economic and Monetary Affair s Committee and one meeting with the 
Internal Market and Consumer Protecti on Committee. Issues of major importance 
during these 2007 meetings included the en ergy sector inquiry and its follow-up, 
implementation of the State Aid Action Pla n, the report on the retail banking sector 
inquiry, the business insurance inquiry and the continued efforts to combat illegal 
cartels. Outside the framework of these more formalised meetings, cooperation with the European Parliament may also take the form of bilateral meetings with individual 
Members of Parliament on specific topics of interest to them. 
532. The Committee on Economic and Monetary Affairs also receive s regular lists of 
pending cases in the public domain, as we ll as information on the main policy 
initiatives in the field of competition. 
533. Finally, the Commission also cooperate s closely both with the European 
Ombudsman and Members of the European Pa rliament by replying to Parliamentary 
Questions and Petitions. In 2007, th e Commission responded to 530 written 
                                                
 
433 See Article 23a and Annex I of the Common pos ition adopted by the Council with a view to the 
adoption of a Directive of the Eu ropean Parliament and of the Council amending Directive 97/67/CE 
with regard to the full accomplishment of the internal market of Community postal services.  
434 Framework Agreement of 26 May 2005 on relati ons between the European Parliament and the 
Commission; Protocol of Cooperation between the European Commission and the European Economic 
and Social Committee of 7 November 2005; Protoc ol on the Cooperation Arrangements between the 
European Commission and the Committee of the Regions of 17 November 2005. 
 
EN 117   EN questions, 77 oral questions and 39 pe titions involving matters of competition 
policy435. 
2. C OUNCIL  
534. The Commission also cooperates closely with  the Council, informing it of important 
policy initiatives in the fiel d of competition, such as on the State aid reform and the 
energy and financial services sector inquiries; the Commi ssion also attends meetings 
of Council working groups dealing with competition policy matters, and maintains 
close links with the respective Presidenci es. Depending on the case, the cooperation 
may also consist in participation in inform al Council formations or contributions to 
meetings of the European Council. In 2007, the Commission made  contributions on 
competition policy mainly in respect of c onclusions adopted in the Competitiveness 
Council (such as on the Lisbon strategy, I ndustrial policy and SME policy), the 
Transport, Telecommunications and En ergy Council (Internal Energy Market 
Legislative Package) and Ec ofin Council formations (Single Market Review, Single 
Euro Payments Area and risk capital). 
3. E UROPEAN ECONOMIC AND SOCIAL COMMITTEE AND COMMITTEE OF THE 
REGIONS  
535. The Commission also informs the European Economic and Social Committee and the 
Committee of the Regions about major policy initiatives and partic ipates in debates 
that may be held at the respective Committ ee, for instance in the case of the adoption 
of the annual report by the European Economic and Social Committee on the Commission's Annual Report on Compe tition Policy. In 2007, the Commissioner 
responsible for Competition met with the Section of the EESC responsible for Single 
Market, Production and Consumption to have  an exchange of views on major policy 
developments, in areas such as State aid, financial sector inquiries and the fight 
against cartels. 
                                                
 
435 Of these the Commissioner in charge of Competition directly responded to 161 written questions, 14 
oral questions and 14 petitions.